People will only go to a Bank to collect Interest, no Interest no Savings Bank, but will Banks be able to provide that or will they have Negative interest rates as FED is planing to? No Fractional Reserve -> No loans -> No Interest
So in my mind Saving Bank is a Non Entity, and that will mean that a lot of people (and capital) will be out of investment options
in private stashes.
Since bitcoin is already deflationary, there is no need for a savings account that pays a little interest. Investment Banks will be the only reason to actually invest for an interest return. So, people themselves will be the private stashes, looking to invest money directly, or will have a large stash that they will give their investment bank authority to invest for them. We'll go from many people with small amounts of money funding "savings" accounts, to few people with large amounts. I haven't bothered to consider the implications yet.
That would lead to a lot of capital (savings Bank) to be inactive, and lets face it not everyone has investor soul/skills.
This is what a savings bank actually does: hedges the risk among many wannabe/ignorant/fearfull investors
I don't think an economy can afford not to have a saving bank for the above reason.
Now on Investment Banks, which will capture only a handfull of capital, it will be risky bussiness.
My guess is that there will be many high profile scandals that will discredit and scare people away from banks,
sepecially if it is so easy to just Hodl and gain value.
I would hope that would be the case. Only people who know what they are doing, and have a personal vested interest in what's going on, should be investing. Imagine what the 2008 derivative market would have been if everyone actually questioned their bank about what it was doing with their money. Chances are such a market would have never materialized, or would at least have been properly insured.
While it maybe true that enterprises that are led by own money. and by their founders are outperforming enterprises with boards and borrowed money,
but it takes unique circumstances to coexist for that to happen: capital, skillset, opportunity etc, its a gamble, but not something which economy can rely on to happen often, so enter investment banks that can at least take capital out of the equation. There will be always projects too big, or too risky for savings bank, and we would rather not have goverment do their job
So Investment banks is not something you can't cross out easily
I think the problem starts when savings bank are not isolated by investment banks, either by loans, or as a shared capital pool.
-did I mention Paul Penfield has in MIT opencourseware, a course in Information and Entropy series which he discuses this from Information Theory POV-
Is there any recorded case of anyone lending out bitcoins? even as we speak, with bitcoin being currently inflating?
BTCJam has been doing it for over a year now. There were (and probably still are) tons of personal lending in this forum's lending section.
intresting i didnt know (only a week toying with BTC) we will need to see how those transactions play out, any experience/lessons out of it?
Regarding the Time constrains, for example Olive trees take decades to grow and start produce, so JITing food is easier said than done.
Farmers have a hard time even now, there are many risks that cannot be factored in the upfront investment to ensure timely returns, Oil and weather screw farmers systematicaly and increasingly, water is about to kick in (as real cost) as well as seeds. One would thought that Farmers beeing closer to the self-production model,positive "trade balance" making them winners in a deflative economy, but that would mean reverting to non-industrial farming, which cannot feed us all.
You're right, this may be a problem, but I think that it will actually push farming into more industrial rather than less. A large corporation will be able to track sales and demands, and handle risks, much better than small individual farmers. I guess things with long-term investment, like olives, will become way more expensive. At least for those newly planted. However, since we already have many things planted, and are transitioning from inflationary to deflationary economy, those olives, farms, and other produce is already there, and already producing every year. A new olive tree added to sustain the orchard will just be a cost of continuing to do business. (entrenched old money?)
Yes that may well be, as "Verticalization" taking place, but that way lies cartelization, and well food is not something you want to see cartelizied... EU for example has a standing policy of hostility against agricartural co-ops for that reason, EU wants Farmers to work at cost.
True, infrastructure exists, but in this thought-game we have to assume they dont, you cant use products of inflation in your argument
And what about future Industries?
In general though after bubbles rise and burst, and debts written off and a general mess, Infrastructure always grows and remains devalued yet, but a seed for future
going back to the stock problem, bussiness already keep the lowest stock possible (there are still costs to maintain a stock) Problem is that because of higher risk now, involved by a provider failing to provide on time, you need to stock *more* at higher cost.
That's one option. The other is to diversify the risk by having multiple contracts with multiple smaller producers. I think that will be a cheaper and better option than to stock more, especially in a deflationary economy. Makes me wonder if inflationary economy is what pushed for large stocking to begin with.
I don't think it will be a very competitive ecosystem with a multitude of providers, I think large vertical players will dominate, who will either try to sabotage/starve each other or cut the pie. I don't see healthy competition there...
Ok so a root argument lies on whether a loan driven deflationary economy can exist. I don't think the backward looking dynamics allow that to happen. In deflation you are not been driven by Prospect, rather than Need, so you are bound to rush into bad calls here.
A loan assisted deflationary economy can exist, but a loan driven can not, you are right. I think we are living in the results of loan driven economies, with countries and everyone else all straining under enormous debt. I don't know if that's a better alternative than a smaller economy not entirely propped up by debt. You can still be driven by prospect, though. You just have to be sure that your prospects will provide a higher return than the deflation rate. So yes, there will be less people taking extreme risks on new ideas.
Crazies will always be there driving the world forward I guess, I just fear for their leverage
It will be an environvent with too much entropy, the players will start rely on increasingly fewer providers (insourcing production).
It well may end like Japan, with large Vertical "Corpotations" actually more like Feuds, btw is japan's economy in truth deflative? is Japan's Model stable in isolation?
I, unfortunatey, have not studied Japan's recent economic situation as much as I should have, so can't comment. With regards to entropy and insourcing, maybe. Maybe we will have a lot of diversification, too, with much more reliance on production being kept to higher standards. Then there's the whole 3D printing thing on the horizon that may change business dynamics entirely...
Corporation organization/ownership is stuck in the middle ages, I believe there is much room there for improvement and democratization within.
3d printing will definetly help the Selfproducer paradigm but that can seriously disrupt capitalism also making our conversation irrelevant...
In a world where anyone can JIT create anything, too much sci-fi here propably, and people work for "hobby", yes a deflatory economy could work but i think by then even the notion money will be long forgoten
Contracts for delivery? Basically internal barter exchange, I give you so much steel, you give me so much coal. Besides, there will still be lending in a deflationary economy. It will just be shorter term, and for products that produce good economic value. So there will still be a buffer, but it will just be smaller.
Well contracts mean shit in bussiness, if a provider cant provide no contract can make him, you'll just swallow the delay and be wiser next time. And come on we just created freaking cryptocurrencies only to go back to barter economy? not arguing that it cannot work I can argue that it will be the way economy will respond. but that will reduce bitcoin to catch22.
Heh, good point. Another option is to add discounting to the future purchase at the rate of deflation (somewhat being done now already). I have a contract where you will provide me a ton of steel 30 days from now for $1,000. If you take 45 days, I will only pay you $900. Pretty much the opposite of I sent you $1,000 worth of steel, and you have 30 days to repay me, or will repay $1,100 if you pay in 45 days. Though I guess this will delay production considerably in a JIT system, and would mainly work with established production flow.
Sure clauses are an option they are used even now, but it adds too much communication, negotiations, predictions in short red tape, But we are assuming here that all parties will try their best, but a single accident down the chain can propagate aggregating costs along the chain (more like tree actually) and bring all parties to a halt, and the resulting blame game will not help much.
A lot of how our economy functions will have to change, though if the rate of deflation is only 1% to 3%, it may not have to be by much.
Habits are the ones you should fear most, it may take 2 generations to either begin stabilizing if at all. You will not have much tollerance either, at the first sign of bad news people will want the good old model that worked back, yesterday.
Just watching the news: unemployment this month 27,9%,
Nevermind it's a spiral... deflation -> lower GPD -> Higher Debt/GPD ratio -> More austerity -> deflation
I see it as the steps by which a debt-based economy inevitably unwinds itself as it finds itself no longer able to borrow. Greece should be a warning to all the other countries who are rapidly getting to the point where they can't print and borrow any more to sustain themselves.
this is how the unwind should be done inflation->GPD up -> lower Debt/GPD -> austerity -> deflation -> public investment -> inflation
with funds from austerity not diverted to debt repayment but to public investment aiming at restructuring and imbalances, easier said than done maybe
It's seems that once you are in this hole you can't dig yourself up again, you need external help, you need a Marshal Plan...
Or you wait until you get to the actual economic rate of your country, not one propped up by debt, and start from there. Iceland had similar issues, and somewhat cut their suffering short by repudiating their debt, and starting over with much more strict limits on government borrowing and austerity. It has worked fairly well for them, even if a lot of people lost out on the debt. Countries with close knit communities and families will be able to survive this much better than countries with "rugged individualism" (looking at you, USA).
In Iceland they are Gods, If I ever decide to skip Greece, thats the only place I would go, if only for the climate. but it was easier to repudiate their debt because it was privately owned, so they simply killed their bad banks and voila!, while in greece it is not easy to kill the state
.
On the other hand if we were a State in US, I bet FED would had done just that, and fuck the goverment directly afterwards.
That's somewhat what has actually been happeming. The FED is inflating like crazy, and the cities and counties that ended up with too much debt are getting fucked directly by having their governments replaced with state appointed unelected "emergency" leaders, who's job is typically to sell off everything the towns had and GTFO before the locals get too restless.
If we had our own currency I don't think we would be in this mess, we would had a more sustainable and consolidated growth.
If Greece kept borrowing and paying out in austerity more than it received from taxes or generated economicaly, you would have a more sustainable growth right up to the point where your borrowing matched your interest payments, at which point no one would lend you any more, and you would either have to hyperinflate, or be in the same situation you are in now. You can't have economic growth without the actual underlying economy. If you are growing through inflation and debt, someone, somewhere, will have to pay for that everntually
The gamble here is that you hope that will never happen, as it really is the debt/gpd ratio that matters, as long as you have the denominator rising you can have it under control, (not that i am overenthousiastic about that notion). Still you will be left with the infrastructure in case you default
- For example in 1893 Greece defaulted but was left with a railroad system and a ship canal- And inflation will let you change your trade balance.
Argentina and Venezuela were always under the shadow control of US, I tend to blame US policy (over the years) for that mess over there.
They are quite socialist, which is quite different from what US policy claims to promote. Maybe US meddling caused them to rebel and pushed them further into socialism?
Well Venezuela could well be a latin america Saudi Arabia, why has that not happen? seems that Oil is more than a curse than a blessing.
Deflation (price deflation) is economic growth being higher than the money supply. Less money to go around in a growing economy, more deflation. ...Deflation, or rather fixed money supply, at most pots a damper on economy, making it grow at a normal pace, instead of debt-inflated artificial pace.
I strongly disagree on growth, all dynamics lead to shrinking, If the economy has an any intend to grow it will hit the deflec(a)tory wall and bounce back, just as a recessing economy if inflated will bounce up.
Yeah, that's kind of the point I was making. Growth in an economy, or more specifically investment growth, is limited by the highest interest return of the lowest risk asset. It doesn't really matter what it is. If bitcoin is not that asset, but, say, oil will give you the highest return for the lowest risk, then people would only invest in businesses that provide a higher return than oil does. Oil would end up being that deflectory wall that bounces the economy back. The problem with inflationary dollars is that they provide a very low wall, but at the expense of future debt. So the deflectory bounce back is basically being pushed further and further into the future, until it can't be sustained or paid for any more.
Honestly, I'm too distracted to juggle all the economic variables in my head right now, with regards to the effects of this on inflationary and deflationary economies, so I'll leave that up to you.
Why I am thinking of Hausdorf metric now? Anyway why impose an artificial wall (bitcoin) and not let "true" assets determine where the economy goes, at least this way people will try looking for workarounds. Land is expensive -> Go up, Oil is short -> go green/nuclear, Food is low ->
Healthy bussinesses have standing staff, producing products, before a customer even dreams he needs them.
in a deflation Bussinesses hire staff in time in order to produce what the customer asked them.
Not if the product has a chance of providing higher returns than the deflationary currency. Our tech sector operates under the threat of their investments becoming worthless due to competitors and obsolescence all the time.
Still the IT industry is in a bad short sighted shape imho, all innovation lately is about another picture sharing service...
most ideas are at least a decade old. I still wait for my holodeck, my robotic AI maid, my flying car...
Also Staff is propably underqualified because who would invest in education?
The staff themselves, I hope. Not through loans, but by paying their way through education.
studends should only have one job: studying, anything else is a distraction.
I am being sarcastic, at the notion that the poor can ever get to survive much less save
If credit cards are not available to them, they won't have much of a choice.
The poor will/need to raise their standard of living first, save second. Inflation/Deflation doesnot touch them, They don't give a fuck about bank accounts. All the poor care about is Jobs.
I believe part of what keeps the poor poor is debt. Credit cards, dependence on social programs, etc. Inflation also makes their wages constantly depreciate. Under deflation, they would get an automatic slow growth in income. Plus, if they want anything like a TV, they would have to save for it, too. China has a lot of poor people, almost no social programs, and a huge culture of savings, even among the very poor, because they know there won't be anyone to come save them if they get in trouble. This also leads to more closely knit communities with interdependence. I think that is better than what we have now, with everyone being very individualistic, with little empathy for others.
Credit cards just help the poor survive waiting better days, hope is the greatest of all evils according to the myth of Pandora.
They wouldnt need the debt if they had an equal starting chance as others, bitcoin follows that meme too early/late adopters.
So purge sins through suffering? Agreed a strong ancient meme that works, but there must be a better way.
Also, FYI, favelas aren't the result of a free market or a deflationary economy. On the contrary, Brazil has both regulatory and corruption issues, AND money issues.
you know corruption takes 2 to tango, how many US firms have paid off officials in 3rd worlds countries? how many corrupt officials had CIA installed?
Which, again, is why I'm an anarcho-capitalist. Remove the power of the state to give handouts, and there won't be a reasin for firms to bribe officials.
anarcho-capitalism ? Hagbard Celine nailed it "It's the privilege", as long as there are privileged players you can never have free-market.
EDIT: apologies of quoting mayhem
Likewise
BTW, very impressed that you know so much at such a high level of understanding. It's refreshing to be so challanged and be forced to think so hard in a debate (especially on this forum
)
Debates for me is the only way to test ones arguments, and move closer to the truth
otherwise it's just autism, like many Hodling Parots here
, thank you for indulging me
Lol sure after the crisis everyone in Greece focused on "WTF just happened" and all started to talk about economy, I wouldn be surprised if something similar with Japans post-hiroshima tech-obsession happens here ok maybe wishfull thinking now.
