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If USD was limited to currency in circulation then it would not be nearly as inflationary as it is. Once an established lending system based on bitcoins is est

by fleitz 14y ago

If USD was limited to currency in circulation then it would not be nearly as inflationary as it is. Once an established lending system based on bitcoins is established it will have the same problems as our current currencies. It wasn't printing money that caused the real estate bubble, it was the way to banking system has the power to expand credit and the systemic risk that expansion of credit causes. Once there are fractional reserve bitcoin banks it will no longer be a deflationary currency.

wintersFright 14y ago
Will people want to borrow in defalationary biased currency though? Better to borrow in Bernanke Bucks where there is an unstoppable torrent being emitted monthly. IMHO the Real estate bubble was from the Fed bailing the prior tech bubble by suppressing interest rates - which encourages borrowing. When loans are paid back, the currency created by taking the loan is extinguished but they have been juicing the system by continually suppressing rates via QE/bond purchases and not letting the real market decide the risk (ie: price of bonds). Now that interest rates have hit the floor - the next bubble to pop is the USD itself.
- fleitz 14y ago
  If the USD pops then BTC may be less deflationary. The bubble did not pop because mortgages were paid back. Loans are generally repaid in currency, paying back a loan creates even more currency as the additional currency created by the interest becomes an asset against which loans can be issued.
  - XorNot 14y ago
    The idea the USD is going to collapse is farcical. It would be a global catastrophe of a scale not yet seen, but also not threatened. Meanwhile, BTC gains and loses 50 - 80% of its value in a single day. I wonder which is more stable.
    - wintersFright 14y ago
      Agree BTC is way too unstable but being the the best nag in the glue factory doesn't mean much. USD collapse would certainly be a far reaching global event but that doesn't mean it will not happen. I'm sure all prior entities with reserve status also thought their position unasailable. http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2013/03/Reserve%20Currency%20Status.png http://www.zerohedge.com/sites/default/files/images/user5/im... Global support for it is waning. China is doing direct currency swap deals and is no longer supporting USD by stacking treasuries at the rate it was. Russia is dishoarding treasuries too. The current trade deficit is propped up by the Fed buying USG bonds and suppressing interest rates. USD is not long for this world in its current form.
      - XorNot 14y ago
        Plenty of currencies exist without being de facto global currencies and survive just fine. The question is what makes the USD likely to collapse as a currency altogether - rather then simply behave more like the normal internal currency of a sovereign nation? People don't go around predicting the decline and fall of the Australian dollar for example.
        wintersFright 14y ago
        The USD is the global reserve - therefore it is needed in vastly greater quantities to lubricate global trade than would otherwise be needed internally. To buy oil, France needs to export to the US in order to obtain USD to purchase off oil off Saudi Arabia. The US gets to print off (and spend) a lot of currency that would have otherwise caused inflation domestically but instead is mopped up by the need for global trade lubrication. Central Banks also absorb USD for reserves - for now. The USGovt is now addicted to its budget deficit that has been enabled by this reserve status but it gives the USA an exhorbitant privelige against other nations - this is starting to unwind - CB's no longer trust the debt of other sovereigns. There is a glut of USD in existence - vulnerable to a change in other nations willingness to hold them. The military is powered by oil and goods and services bought on USD. The USD enables the military, not the other way around.
  - wintersFright 14y ago
    I see your point - the principal is repaid but the interest stays in circulation. Agree mortgages didn't pop due to being paid back.

by fleitz 14y ago

wintersFright 14y ago

Will people want to borrow in defalationary biased currency though? Better to borrow in Bernanke Bucks where there is an unstoppable torrent being emitted monthly. IMHO the Real estate bubble was from the Fed bailing the prior tech bubble by suppressing interest rates - which encourages borrowing. When loans are paid back, the currency created by taking the loan is extinguished but they have been juicing the system by continually suppressing rates via QE/bond purchases and not letting the real market decide the risk (ie: price of bonds). Now that interest rates have hit the floor - the next bubble to pop is the USD itself.

fleitz 14y ago
If the USD pops then BTC may be less deflationary. The bubble did not pop because mortgages were paid back. Loans are generally repaid in currency, paying back a loan creates even more currency as the additional currency created by the interest becomes an asset against which loans can be issued.
- XorNot 14y ago
  The idea the USD is going to collapse is farcical. It would be a global catastrophe of a scale not yet seen, but also not threatened. Meanwhile, BTC gains and loses 50 - 80% of its value in a single day. I wonder which is more stable.
  - wintersFright 14y ago
    Agree BTC is way too unstable but being the the best nag in the glue factory doesn't mean much. USD collapse would certainly be a far reaching global event but that doesn't mean it will not happen. I'm sure all prior entities with reserve status also thought their position unasailable. http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2013/03/Reserve%20Currency%20Status.png http://www.zerohedge.com/sites/default/files/images/user5/im... Global support for it is waning. China is doing direct currency swap deals and is no longer supporting USD by stacking treasuries at the rate it was. Russia is dishoarding treasuries too. The current trade deficit is propped up by the Fed buying USG bonds and suppressing interest rates. USD is not long for this world in its current form.
    - XorNot 14y ago
      Plenty of currencies exist without being de facto global currencies and survive just fine. The question is what makes the USD likely to collapse as a currency altogether - rather then simply behave more like the normal internal currency of a sovereign nation? People don't go around predicting the decline and fall of the Australian dollar for example.
      - wintersFright 14y ago
        The USD is the global reserve - therefore it is needed in vastly greater quantities to lubricate global trade than would otherwise be needed internally. To buy oil, France needs to export to the US in order to obtain USD to purchase off oil off Saudi Arabia. The US gets to print off (and spend) a lot of currency that would have otherwise caused inflation domestically but instead is mopped up by the need for global trade lubrication. Central Banks also absorb USD for reserves - for now. The USGovt is now addicted to its budget deficit that has been enabled by this reserve status but it gives the USA an exhorbitant privelige against other nations - this is starting to unwind - CB's no longer trust the debt of other sovereigns. There is a glut of USD in existence - vulnerable to a change in other nations willingness to hold them. The military is powered by oil and goods and services bought on USD. The USD enables the military, not the other way around.
- wintersFright 14y ago
  I see your point - the principal is repaid but the interest stays in circulation. Agree mortgages didn't pop due to being paid back.