Do you see Bitcoin as money gradually superseding the "debt money system" due to efficiency (if not destroying it entirely)?
Gold, Bitcoin, salt anything that is a Uniform, single commodity given its Value by its Scarcity (or abundance) can become debt money. People will have to issue their own credit.
Wouldn't the free market decide the value of these tokens in Bitcoin?
Its not a free market issue. Check out Moneyasdebt.net to understand better.
Debt money contracts are bank notes. Good luck getting someone to accept a Bitcoin bank note, when it offers no more convenience over using BTC. People wouldn't trust it.
Think a loan, a promise to pay BTC in this amount of time. Its not money, but it is DEBT. They did not print anything but created 1 BTC worth of debt through the loan.
I see. Do you agree that Crypto has the possibility to be a positive asset, and not just be "good for all debts, public and private"?
Bitcoin as money wont break the bankers debt money system, Tokens ontop of bitcoin will through self issued credit.
Without spending, the BTC can pass back up the chain of debt. With spending, the BTC to repay the debt must come from elsewhere.
True but once that BTC hits a savings account or the bank doesnt lend it out, Its no longer available to service the Debt contracts payable only in BTC.
And then when depositors withdrew the money proper, bye-bye bank.
No, the bank would collect Charlie and Bob Houses from the default on the 1 BTC. They didn't print money, they created Debt money contracts. They did this with Gold for centurys.
Banks would have to print notes (which no one would trust) that say they are worth one BTC.
And if a depositor at the bank tried to withdraw the one BTC, the bank would be insolvent.
This is simple lending. :) John lends to charlie then charlie lends to bob. 1 BTC has created 2 BTC's worth of Debt Contracts that need to be paid on time. This is Debt money.
Who in their right mind would loan money that can't be recouped via law?
Exactly the point. The real value is the collateral, not the money. :) If you can restrict the money circulating via loans, you can collect collateral.
A correction, it is not possible to do do fractional reserve lending with Bitcoin as in lending out more Bitcoin directly than you have. You need to give IOUs with Bitcoin as reserve.
Banker understand this. The single BTC can be re-loaned multiple times. John to charlie to mike then frank. 1 BTC passed hands in the loan but created 3 BTCs worth of Debt.
You are describing fractional reserve banking, which can be done with anything in theory. But there is no Bitcoin press in case of a run on the banks.
It can be done with full reserves. I lend 1 BTC, you lend 1 BTC, then they lend 1 BTC. Now there is 3 BTC worth of debt on real goods, and 1 BTC to pay them. Default is inevitable.
Isn't untokenized Bitcoin already redeemable in goods or services only? Or are you talking about making a gift-card esque economy where spending is restricted to specific applications?
http://www.moneyasdebt.net/ - Self issued credit is explained better here. Bitcoin as a single uniform commodity money will fall into perpetual debt, just as gold did.
So, what you are saying is we need to eliminate debt?
Bitcoin with tokens is the solution. So business can color tokens redeemable in goods or services only. They become self issuers of credit.
But, this model is broken too, since this example hinges on the lenders and debtors owing the entire supply of the currency, which simply does not occur IRL.
Its nor broken. Its the failure of the gold standard. Doesn't matter the amount of BTC in existence, It can grow infinitely in DEBTS it has to pay. I could loan 1 BTC to 10 BTC of debt
Well, ideally it should work like this:
1 BTC is lent by Alice to John
John re-lends it to Joe
Joe pays back john 1 BTC, who then settles his debt with Alice with that same 1 BTC.
Luis saves the 1 BTC. Now John and Joe Are screwed, they created 2 BTCs worth of debt, and its in luis savings. John and Joe lose their shirts.
Well, ideally it should work like this:
1 BTC is lent by Alice to John
John re-lends it to Joe
Joe pays back john 1 BTC, who then settles his debt with Alice with that same 1 BTC.
Alice to John then to Joe, but why would Joe borrow just to return the 1 BTC in existence? He wants to buy something. He buys a car, from luis. Luis saves the BTC.....
You can't loan more Bitcoin collectively than exists. And you can't print more to make up for it. The lending pool runs dry, it stays dry.
You dont have to print it up. You loan me 1 BTC then i loan it again for 1 BTC. Now there is 2 BTC worth of DEBT in the system with only 1 BTC worth of money. Bankers revel in this.
Not being able to have daddy Federal Reserve print you money when you fail may make banks more responsible when using bitcoin. That might make them not too quick to adopt it.
Doesn't matter what type money it is. Once you loan it out, it becomes debt. That money can then be reloaned again, making more debt. Please read the article posted.
Banker's will weld bitcoin just as strongly as fiat. Bitcoin once loaned, becomes debt money. It makes no difference.
