Whoopsie, Bitcoin

[bazookaman]

Paul F. wrote:
I have a few examples in my collection of what happens when the value of currency destabilizes....

[freeradical]

N-OS X-tasy! wrote:
[quote=ztirffritz]
In a sense, the interesting thing about bitcoin is it forces one to think about currency differently. Why do we value little green pieces of paper? They only hold value because we all collectively agree that they have a value. If we lose faith in that universal value, then its utility as currency disappears and it becomes just a piece of paper.

I think about that quite frequently.

Most people do not understand what money is, or how it's created. When we say that money should be something that holds it's value, we're really describing a function of money.

Money is debt. This is the most important thing to get about it. Most money in circulation is not created by government printing presses, but by banks when people borrow money. When someone borrows money from a bank, the bank credits their account with money that they create out of thin air. The bank is not lending you money that they have in their vault. They simply and magically create it. If you fail to make your payments, the bank will repossess your car or your house and try to sell it to balance the books. If that asset is worth less than the loan balance - oops. However, the bank in theory has collateral.

So, my $64,000 question is this:

What sort of collateral does bitcoin have to back up the "money" that they create out of thin air?

[Mike Johnson]

This sort of thing was common throughout most of banking history. American banks are tightly regulated, and Americans' deposits insured by the FDIC, but that's a new development.

[Rick-o]

Wish I had me a Hundred Trillion Dollars. I'd know how to spend it! miley-excited001:

bazookaman wrote:
[quote=Paul F.]
I have a few examples in my collection of what happens when the value of currency destabilizes....

[Dennis S]

Rick-o wrote:
Wish I had me a Hundred Trillion Dollars. I'd know how to spend it! miley-excited001:

Try to get whole wheat if you can. It's healthier.

[deckeda]

Can't answer your question about Bitcoin, but bank loans are fractionaly buoyed by demand deposits, not entirely "thin air." Other funding for new loans comes from profits made on previous loans/fees.

freeradical wrote:
[quote=N-OS X-tasy!]
[quote=ztirffritz]
In a sense, the interesting thing about bitcoin is it forces one to think about currency differently. Why do we value little green pieces of paper? They only hold value because we all collectively agree that they have a value. If we lose faith in that universal value, then its utility as currency disappears and it becomes just a piece of paper.

I think about that quite frequently.

Most people do not understand what money is, or how it's created. When we say that money should be something that holds it's value, we're really describing a function of money.

Money is debt. This is the most important thing to get about it. Most money in circulation is not created by government printing presses, but by banks when people borrow money. When someone borrows money from a bank, the bank credits their account with money that they create out of thin air. The bank is not lending you money that they have in their vault. They simply and magically create it. If you fail to make your payments, the bank will repossess your car or your house and try to sell it to balance the books. If that asset is worth less than the loan balance - oops. However, the bank in theory has collateral.

So, my $64,000 question is this:

What sort of collateral does bitcoin have to back up the "money" that they create out of thin air?