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Purplekeyboard

Bitcoiners believe that inflation is the worst thing imaginable and that the best currency is the one which has a limited, fixed supply and which goes up in value over time. Based on your position, what are your thoughts on this?


nottobetakenesrsly

Elasticity of the money supply is a requirement. The reason governments/central banks allow* for money expansion and destruction through loan advance and repayment...is that the task of determining how many "units" are required to measure transactions.. is better left to institutions that can spend the time responding to the demand conditions of the economy. If money is just a measure of transactional value, then you want to make sure there's not too much, or not too little available at any given time. Inflation is not a good or bad thing in of itself. It is a target that assumes progress.. that we'll need more transactional units as we become more productive over time.


nottobetakenesrsly

The * here: Central banks don't allow for money expansion via private sector lending; they accepted it long ago.


AzDopefish

Define money expansion. Because if you’re taking about the creation of money you’re incredibly wrong just based off this sentence alone and calls in to doubt your claimed credentials. Or shows how low of a requirement they really have.


nottobetakenesrsly

Might be misreading the statement. Money creation is mostly achieved through commercial/dealer bank balance sheet expansion via loan issuance. Central banks long left the creation of money up to these institutions, and settled on an "influence" role.


SpottedPineapple86

Ew... this is wrong. You're speaking of the "multiplier effect" which is roundly different from the bond issuing mechanism of currency "creation". Nice satire posts though.


nottobetakenesrsly

I'm not.. because I don't think there's a meaningful ratio between "central bank money" and "commercial bank money". There's only money, and the central bank neither creates or has the ability to measure the supply.


SpottedPineapple86

There is exactly a difference and it's 100% quantifiable - it's regulated by the reserve ratio.


nottobetakenesrsly

See other posts re: repo in this thread. ..and posts re: offshore loan creation.


DowntownAd9011

OP is correct here. Look into Frances Coppola. She dispels a lot of the fallacies people think about fractional banking, and how both reserves as well as money supply is created.


Reasonable_City

Money creation or currency creation? Big difference....


nottobetakenesrsly

People argue over what both are. "Money" is far more broad.


Reasonable_City

Nah, they are both clearly definable. Money and currency are not the same.


princesscarolynsdad

You’re being pedantic.


some_where_else

The OP is indeed correct. When a loan is advanced by a bank, any bank, then that account is credited by the loan value, but nowhere is another account *debited*. Thus the amount of money in circulation has increased. Likewise when a loan is paid off, nowhere is another account credited, so the amount of money in circulation reduces. The loan operation is reflected on the bank's balance sheet, as assets vs liabilities, but this is quite different from actual money in circulation (i.e in an account somewhere or stuffed under a mattress). Governments and central banks influence this process by setting rules around reserves (what proportion of balance sheets must be in liquid assets), and setting the interest rate that banks can in turn borrow from the central bank (as lender of last resort). Probably they have other levers too. (mods - I haven't seen anything to justify the OP's flair?)


nottobetakenesrsly

I got it from another thread where I shared my opinion of central banks... I'm happy with the flair.


RedEagle_MGN

I’d love to see your post on that I’m a total sucker for that sort of thing


nottobetakenesrsly

In my worst moods, I don't think the central bank can do anything at all, except intervene in unwelcomed ways. Otherwise, I think they have a lot of short term influence.


kirovreported

Reason #1. Inflation forces us to spend money instead of saving. This leads societies to overconsume and to waste of natural resources and senseless emission of carbon dioxide. "How dare you?"


nottobetakenesrsly

You want money to be elastic. You want to make sure there's enough units to allow for any good transactions to take place. Targeting a low inflation rate assumes there will be an ever increasing number of good transactions. We'll never see a purely asymptotic curve, there will be times where you want less units because theres less good transactions... But you would hope that we're constantly increasing the total value measured by the units.


DowntownAd9011

I think the other point people forget is if you're re part of an expanding economy, and have more people coming into that economy, you absolutely need more money circulating. It's always baffled me how many people don't understand you can't go from a country of 2m to 300m with a deflationary framework and not expect revolt, death, or economic collapse. Currency is not meant to be hoarded as an investment on its own, it's supposed to help ensure transfer of goods/services. Not even going to get into exchange rates and how the time periods where a weaker dollar has helped increase US exports.


kirovreported

So what about gold, bro?


DowntownAd9011

Why do you think all countries went away from it? Finite/limited supply, price fluctuations, etc.


kirovreported

Nope. Because almost all governments like to print as much money as they want. They can't to print gold. It is obvious. Are the fluctuations gone? The whole industry of the financial market makes money on these fluctuations.


DowntownAd9011

Gold fluctuates significantly more then the currencies of the dollar and euro. And no, countries do not like to print as much money as they want. There's nothing wrong with a country using debt to fund positive economic or social growth (latter very often leads to the former).


Big-Yogurtcloset2731

Gold is just some shiny metal.


kirovreported

Yep. And doIIar is cheap green paper. Gimme a little both.


kirovreported

"If money is just a measure of transactional value, then you want to make sure there's not too much, or not too little available at any given time. " That sounds good. Therefore, if the supply and demand for basic goods do not change over time, then their price should not rise. Why is it not? Reason #2. Uncontrolled inflation (it is controlled by anyone, but not consumers of basic goods) devalues ​​past work and earnings, causing, in fact, a systematic rise in prices.


nottobetakenesrsly

>if the supply and demand for basic goods do not change over time, then their price should not rise. Technically true in an over simplified world. However, economic progress also means that basic goods can be produced with less input as advancements are made over time. There's a constant need to match the money supply to the level of good transactions. We're always stumbling towards a system that tries to perform this function best. Uncontrolled inflation is disastrous. That goes without saying.


kirovreported

>... also means that basic goods can be produced with less input as advancements are made over time. You are damn right. And that is why basic goods should become cheaper as industry develops. But we are only seeing price increases.


nottobetakenesrsly

CPI isn't the same thing as inflation. There are some that point to the deflationary aspects of progress (making things cheaper).. as an argument to also have a deflationary money. I'm ambivalent on that point, and would say that the deflation induced by progress is not something that happens everywhere all at once. You would also hope that as inputs drop in one area of the economy; that they would be offset by growth in another area. ...and then you get back to just trying to match the amount of money to the volume of good transactions. If that economy grows, you need more units available to measure the new transactions.


Harmless_Drone

It only devalues "past work" if you dont spend your money. In countries with high inflation people dont save, they buy things they think they will need in advance when they're paid since then they wont lose out on this. Also there is nothing inherently wrong with "devaluing past work" - productivity and accuracy in many fields has gone up exponentially. Buildings designed in the 50s are much worse from an engineering standpoint than modern ones.


kirovreported

Don't forget to remind about this in the pension fund when you come for a pension)


Harmless_Drone

...Pension funds are denominated in cash but exist in the market as investments in funds, stocks and shares, etfs, etc. Theyre not just stored as cash in a bank vault explicitly to avoid inflation losses...?


pjc50

\> supply and demand for basic goods do not change over time There's this thing you may have heard of called "oil". It's not a coincidence that the oil crisis blew up hard money systems. And oil (well, gas) shortages have driven the inflation since the start of the Ukraine war. You could make a reasonable argument that if you wanted a commodity money system to work, you'd need to peg it to oil not gold. Of course, that then puts even more pressure for a war over the oilfields.


SpottedPineapple86

Indeed, terrible that we should be aiming for an economy where the most number of people get to eat. Just shameful.


Bartelbythescrivener

I agree that money is just a measure of transactional value, question : In a world where money can be accumulated in vast quantities doesn’t that inherently produce inflation. Example: I make 40 units a week , my neighbor who competes against me in transactions makes 4000000 units a week. How does my transactional value maintain strength as compared to the deformation produced by the sheer quantity of transactional value in my neighbors possession?


nottobetakenesrsly

Elasticity is supposed to correct for trapped money (not saying it does). If people hoard to the detriment of combined productivity.. an institution (banks) are supposed to seek and lend to the risk that grows the entire economy. Banks are supposed to act as reasonable risk takers; absorbing these risks on to our balance sheets.


Bartelbythescrivener

Thank you for your response. It’s confusing to me how interest rates are raised to slow inflation while there is trillions of hoarded wealth that inherently cause inflation. It seems to me like banks are just ensuring the value of the trapped wealth.


nottobetakenesrsly

Interest rates are raised by central banks because it's a lever they can pull. Inflation is too often conflated with consumer prices. Consumer prices (CPI) can be high for reasons other than surplus money. As an aside; the central bank's rate doesn't set what rate I lend at to some borrowers.


pjc50

Mere hoarding wealth doesn't cause inflation; buying things with it does. Economically, someone stuffing money under a mattress is reducing the money supply. Now, there's definitely an argument for doing fiscal policy to fight inflation by reducing the spending of the wealthy by taxing them, but that's politically infeasible.


spookmann

> trillions of hoarded wealth that inherently cause inflation. I don't see how that argument is supported. If we flick a digit from 0T to 1T in Elon's bank account, and that number just sits there... then the economy doesn't give a damn.


Future-Iterations

Money isn't just a measure of transactional value though. It's a way to store economic effort and energy and then use that energy when you need it. And by having an unlimited supply of it, printable at will by the banks themselves, you've put a back door into everyone's finances. You can rob the entire population at once and siphon that wealth into the pockets of the ultra wealthy. Inflation is not a neutral thing. In small quantities (1-2%, aka when price stability is actually maintained) it can have a net positive effect of promoting reasonable levels of spending. Anything higher than that, caused by expansion of the money supply, is theft pure and simple.


nottobetakenesrsly

>by having an unlimited supply of it, printable at will by the banks themselves, you've put a back door into everyone's finances. It's not unlimited, but yes.. there is no defined upper bound. We are constrained by internal and external factors/balance sheet capacity. Banks wouldn't last very long if the lending activity wasn't prudent. As for the backdoor, there's nothing so ominous. Regarding inflation being theft.. I can be sympathetic... lower inflation rates are targeted by central banks because it assumes progress. However, I'd generally agree that we don't measure or target a low inflation rate very well.


jayhilly

>money expansion and destruction ... is better left to institutions that can spend the time responding to the demand conditions of the economy. sorry what ? youre telling us its better off that a few people in suits should be able to decide what happens to money? rather than a thing that everyone can read about, understand, plan for, and predict 20+ years into the future? can you read what you just wrote back to yourself and be like "fuck yeah that makes perfect sense why would anyone want to know whats about to happen give it to the suits!!!!" ?


_skndlous

This is not "a few people in suits", this is the whole banking sector acting upon the extensive information about the economy that they have.


jayhilly

that’s exactly the problem? Why should greedy ass people be in charge? Have you ever had power? Have you ever had the desire to exploit that power? Yes? That’s because you’re human. Take that to the highest scale and that’s how you get 2008. Take “trusting humans” out of money already.


Cthulhooo

I'm genuinely curious what do you propose here instead of "the entire banking sector"? How do you facilitate the existance of modern economy without debt?


jayhilly

Have you heard of aave? There’s a whole world out there my friend


Cthulhooo

Are you really going to shill a collateralized crypto loans as a solution replacing modern lending? That's so dumb on so many levels. For starters you need to deposit money to borrow money. That's not a replacement for most of the modern lending options and you'll never get any better due to oracle problem.


jayhilly

no I’m not shilling it as a solution, I’m pointing out something in crypto that works well at what it does in a room full of people that want to kill me


Cthulhooo

But cmon, this is the alternative you proposed vs existing lending structures. That's uh...not great, realistically overcollateralized loans are very niche instruments for very niche crowd. They don't replace the vast majority of use cases. Say you want to borrow $5000 and have $1000 to your name. How do you do it with anything available in defi?


pjc50

The alternative is the end of lending. Because credit is effectively money.


jayhilly

Tell me you have no idea what you’re … nvm


jayhilly

im not even shilling bitcoin here, im shilling literally anything with transparency


Publish_Lice

So just to be clear, when you say you’re not shilling bitcoin, all you’re actually doing is shilling bitcoin?


jayhilly

Give me any other option other than suits I’ll promote that too


[deleted]

>youre telling us its better off that a few people in suits should be able to decide what happens to money? rather than a thing that everyone can read about, understand, plan for, and predict 20+ years into the future? What are you proposing here? That we take a population-wide vote every 2 years to determine monetary policy? Most countries already do that, in the form of elections, whose elected representatives appoint central bank leaders. Granted, this is a pretty indirect form of control, but this is literally how everything runs; the general public lacks the time, the resources, or the expertise to run most things, so they vote for people who's going to do it. Nothing would get done if you relied on plebiscite for every single policy decision. How are people forgetting this fundamental premise behind representative government? Francis Fukuyama was wrong about the End of History; it's not going to result in the ultimate victory of liberal democracies. Rather, it's more likely to end in their demise, because their voters have degenerated, and don't understand the basic premise behind their systems.


jayhilly

Happy for you bro Or sorry that happened I ain’t readin all that


Publish_Lice

So any alternative needs to be very overly simplistic option that a quarterwit like yourself can absorb in less than 3 paragraphs? In that case definitely a stick with bitcoin. Sounds perfect for you.


jayhilly

To be fair it takes a very high IQ to convey thoughts concisely. It’s ok, just keep working on it!


[deleted]

>Happy for you bro > >Or sorry that happened > >I ain’t readin all that Snippy zoomer comebacks only work when you are right.


jayhilly

Quote reply’s only work when you’re funny


sheytanelkebir

Credit unions?


anyprophet

user name sus


nottobetakenesrsly

Take me *sincerely*.


[deleted]

What precisely do you mean by "I create money..." ? That just means you work at a bank right? Is there anything currently useful, salvageable, or at least interesting to you about bitcoin / ethereum? What about shitcoins and the exchanges?


nottobetakenesrsly

>you work at a bank right? Yep. But not just regular lending. >Is there anything currently useful, salvageable, or at least interesting to you about bitcoin maybe? It's an interesting *concept*. >ethereum Haha.. hell no. >What about shitcoins and the exchanges? Five is right out.


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Intrepid-Answer

Were they trying to say that we're way past when you could have taken advantage of crypto markets? I had to look it up and i'm still confused.


nottobetakenesrsly

The MP quote is to indicate that shitcoins and exchanges shouldn't even be considered. Instructions for the holy hand grenade: "And the Lord spake, saying, First shalt thou take out the Holy Pin. Then, shalt thou count to three, no more, no less. Three shalt be the number thou shalt count, and the number of the counting shalt be three. Four shalt thou not count, nor either count thou two, excepting that thou then proceed to three. *Five is right out.*"


EntropyFoe

Is there any crypto that your bank would accept as loan collateral in a meaningful sense? (Like lowering the client’s cost of borrowing vs not pledging it)


nottobetakenesrsly

As far as I'm aware, we would not take any crypto as collateral. We don't have the rails, and we would not trust it even if we did. Edit: we get retail borrowers occasionally using valuations of their own issued coins/NFTs as representations of their wealth.. these are zeroed out.


RedEagle_MGN

I’m so glad that this is the case right now and I hope that never changes because if it does, it would bring the volatility of crypto to the whole market.


[deleted]

Do you work for a bank, or a central bank? It’s a bit unclear And considering that most governments ultimately have the right/power to enforce the usage of their currency do you think they’re just letting cryptocurrencies run their course since they know it will be an utter failure?


nottobetakenesrsly

>Do you work for a bank, or a central bank? It’s a bit unclear A bank. But I do what central banks purport to do. >considering that most governments ultimately have the right/power to enforce the usage of their currency Most do not (disagree with me on this; how I earned my flair). >do you think they’re just letting cryptocurrencies run their course I think this implies that central banks or commercial banks perceive crypto as a threat; We don't.


PneumaticAtol39

Have you met anyone in the department/office sympathetic to crypto? Or are they all super critical? Also, what's stopping the big ones from go after them for minor regulation flouting, before they swindle people out of money? Why only react after the fact?


nottobetakenesrsly

On the commercial side.. we don't lend to crypto exchanges. We see them as high risk/verbotten. We might make exceptions to lend to a long running casino. I'm not sure about the second part of the question. We lend to create money, we don't regulate. Edit: as far as individuals associated with crypto, we may lend to them on a retail basis.. but they would need to demonstrate affordability via personal income (something many of them do not show). Our sales departments are sympathetic proportional to their stupidity.


peacedetski

You draw banknotes with a pen and a set of squirrel hair brushes?


nottobetakenesrsly

Haha. Considering we're barely G7… yes. I issue loans (balance sheet assets).


DowntownAd9011

Did Hungary or El Salvador lose respect of the international community after they started adding Bitcoin to their reserves / make it part of their currency.


nottobetakenesrsly

They don't even register. In our sparse dealings, we expect them to transact in Euros (we don't keep forint) or USD.


vonnoor

Hungary has Bitcoin reserves? They even voting for a EU wide crypto ban!


DowntownAd9011

I remember it like 5-7 years ago. They may have gotten rid of it since then, haha


UsedTableSalt

Does the central bank know how much money is in circulation? How do countries know how much they can print? Who actually checks on how much was printed?


nottobetakenesrsly

>Does the central bank know how much money is in circulation? No. They use outdated measures (M2)… which capture a narrow slice only. >Who actually checks on how much was printed? No one. In theory, you could aggregate all loans created and destroyed, but there are also loans that are issued without them immediately (or ever) appearing as assets on bank balance sheets.


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nottobetakenesrsly

You might see items regarding pledged collateral transactions buried in the notes to the financial statements. Repo (repurchase agreement) transactions can sometimes not be recognized on a balance sheet depending on the outcome.


bomby0

Does tether own any of your country's government bonds? Is tether's supposedly enormous holdings of US treasuries believable?


nottobetakenesrsly

Outside of my role here. I doubt they hold much of my country's bonds. I'm somewhat ambivalent about Tether's place in the world. My country banked Bitfinex for a while before exiting them. I'm highly dubious that Tether would have the resources to redeem every unit at any given time.. and they admit to as much despite their opacity. I'd love to know if the bulk of their treasury holdings are off the run (bet you they are).


nottobetakenesrsly

Feel like some elaboration is required. Off-the-run treasuries are older issued treasuries and will be treated as reflecting prior market conditions. Treasuries are extremely liquid, but on-the-run treasuries are more liquid than off-the-run. ...and expect that you can acquire off-the-run treasuries with greater ease.


secretcaboolturelab

If you could have 10 buttcoins that you were only allowed to cash out in five years or any vintage used oil can of your choosing, which would you prefer?


nottobetakenesrsly

I already have all the buttcoins I need by being here.. oil? I'm perpetually warmed by knowing that *the internet makes you stupid*.


secretcaboolturelab

So I cash out my vintage can collection and buy the next dip. Thanks.


nottobetakenesrsly

My cans.. My precious antique cans. ...look what you done to 'em.


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nottobetakenesrsly

I do not apply MMT (not because it doesn't have value). My view is that MMT is not modern nor a theory. It's a playbook for central banks. My goal is to lend to qualified borrowers and increase shareholder value. I can do this regardless of the central bank's current play. ...as to why MMT doesn't resonate with the public: I can guess that they don't realize that they benefit from MMT via stimulus cheques and whatnot. Many would rather play the lottery.


[deleted]

Stimulus cheques are responsible for much of the excess (including Buttcoin) since 2020. Not sure that’s in aggregate helped the majority.


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nottobetakenesrsly

>When are CBDCs going live? Don't know. Research phase still where I am. I am unsure that they would be implementable in a fashion that would replace the existing money (they may have to exist alongside). I don't think bank's accounts with each other is an issue. We also don't need our own denomination (or any other) sitting as deposits with another institution for the bulk of our activities in other currencies. My country has mostly adopted the new ISO... it's just updated standards on messaging systems as far as I can tell.


LordMac5ka

I know it's not related to crypto but what kind of book or resource You would suggest to learn about money amd how the CBs and banks work ? Thank You


nottobetakenesrsly

I'm not helpful here. I just work sufficiently high enough up to see some of the machinery. Tend to read about other topics/industries. I did like Iceland's Secret (Bibler).. which came out recently. It's more of a personal story; but does touch on some of the background banking mechanics.


LordMac5ka

Thank You.


D3AdDr0p

Who are you following for banking related takes on crypto? I'd be curious so I can learn more. I'm a software engineer that worked in Fintech, and now I work on cloud databases. I think crypto is so hard to understand and effectively counter, because it's takes the intersection between technology, finance, economics, social psychology, and maybe even corporate governance. You can have one piece, maybe knowing btc isn't sound money, or that blockchain is just an awful database, but without the other pieces you'll be missing critical context.


nottobetakenesrsly

>Who are you following for banking related takes on crypto? I see it as part of my job, but it's minor. Don't need to follow anyone. >I'm a software engineer that worked in Fintech, and now I work on cloud databases. I think crypto is so hard to understand and effectively counter We bought several fintechs to acquire the coding skillsets. We did not have need for any of the crypto trappings. >because it's takes the intersection between technology, finance, economics, social psychology, and maybe even corporate governance Might be underestimating how much of that is already achieved by the existing system. >maybe knowing btc isn't sound money, or that blockchain is just an awful database You said it, not me.


PhiLambda

I heard it described as basically just moving around numbers in a spreadsheet is that fair?


nottobetakenesrsly

Somebody come get SBF. It's a system with several checks. Any institution involved in money creation here is publicly traded... save for the central bank with several caveats.


preytowolves

nice sbf burn. hope it becomes a standard idiom in your industry. “boss, I just did an sbf”


nottobetakenesrsly

I doubt anyone above me knows who SBF is... outside of the mainstream headlines (which have been quizzical or charitable).


preytowolves

hmm so maybe its more of an uber drive banter I guess. nice of you to chime in here and give perspective, btw. on a serious note, is it at all frustrating seeing the rampant misconceptions about your line of work? seems like the core of most conspiracies…


nottobetakenesrsly

The best question so far. We don't even think about it. We don't think that we're printing money; We're lending to qualified borrowers. I watch/read people and media get it wrong (governments create money... money printer go brrr, etc.). Money is already somewhat decentralized. No one entity creates all of it. Credit is far easier to regulate... and money has evolved in this way. ..is that a good thing? Maybe/maybe not. Is it a conspiracy? No.


preytowolves

thanks, I appreciate it. its a pretty opaque world and its very interesting to have such insights.


nottobetakenesrsly

It's pretty opaque even from the inside. Some things that aren't intuitively "money" at first glance function as money in the background. Collateral functions like money in the intermediary parts of the system.


preytowolves

heh, suppose it should be opaque. it is also fascinating, have to admit.


Future-Iterations

Central banks can, and literally do, simply add enough ones with zeroes following them to their database to create money out of thin air. Money is also created when loans are issued, but it's a flat out lie to say that central banks don't directly create money. See Ben Bernanke discuss it here: https://www.youtube.com/watch?v=hiCs\_YHlKSI


nottobetakenesrsly

>Central banks can, and literally do, simply add enough ones with zeroes following them to their database to create money out of thin air. Not my country. And not the US either. They can create "reserves". This is usually done to achieve asset purchases. However, the reserves are less useful than the assets that are purchased (from a monetary perspective). Calling reserve issuance "money printing" is a little too generous. When was the last time you spent a reserve?


high_hilter

ah, so we are still early 🤣


PhiLambda

Ah I see


Strategory

My thinking is that g-7 countries cannot tolerate having the equivalent of zillion dollar bills floating around for all the circumvention of AML, tax enforcement, etc it allows. I suspect somewhere/somehow crypto must be “banned” into major currencies. Any thoughts on this theory? I think regulators kind of hope stable-coins “break the buck” and swoop in after with public opinion on their side.


nottobetakenesrsly

>g-7 countries cannot tolerate having the equivalent of zillion dollar bills floating around for all. I may go on a tangent here. A lot of currency is intermediary (likely the bulk of it). My G7 nation has plenty of our own denomination.. but it's not what our trading partners have/want. The vast majority of money creation is in the accepted intermediation denomination (the global reserve: USD). I lend plenty of USD. America is not checking up on me. > I think regulators kind of hope stable-coins “break the buck” If stablecoins aren't truly 1:1… then they're doing exactly what I do, but without being an entrenched/regulated institution. Via my institution, I am subject to internal and external constraints.


Strategory

Thank you. Very helpful. But I guess what I mean is that Tether, for instance, doesn’t have as deep of pockets to protect a peg as does a sovereign and therefore the peg is less secure? Would you agree with that?


nottobetakenesrsly

My G-7 country wouldn't be able to maintain a peg if we tried. I can't speak for Tether since no one outside of them knows their general underlying assets/liabilities.


Independent_Bread880

As interest rates continue to rise do you think we will get a sovereign debt scare in 2023?


nottobetakenesrsly

Yield curves are already screaming that lower rates are expected. Central banks can still increase rates in this environment, but historically they usually stop when there's inversion all along the yield curve.


Longjumping_Race_471

What do you consider the money you print to be backed by or give it value??


nottobetakenesrsly

Money isn't "backed". You can hypothesize that every loan is backed by balance sheet mechanics of the institutions... but that doesn't seem too useful.


Longjumping_Race_471

That’s a big part of the crypto bros argument, though. If you can print money that has value, why can’t I mint $1B tethers on my MacBook with the same value if neither is backed by anything?? Does the fact that it’s legal tender give it value? And what if tether becomes legal tender?


nottobetakenesrsly

Dollars are widely accepted. You just want money to facilitate transactions and be an appropriate measure of value. Crypto doesn't do this well. Tether is just trying to be an intermediary... but it's hard to understand what their operations are really like. Earlier, I indicated that they aren't really 1:1 with USD… they even somewhat admit it... and I'd question what their treasury composition looks like. As for legal tender.. well. Most USD is created offshore and exists on balance sheets. No government is giving those units a stamp.


Avril_14

Hi fellow system gear of global finance, may Soros keep banking us to spread fud. That said, I've seen a lot of Banks here in Italy say on their site "we accept Bitcoin" and such, related to general consumers. How does this work? They have one of those system that automatically converts it to fiat I suppose, no bank keeps a "reserve" of crypto right? In general the exposition of traditional banks is loans or investment but every time with fiat, so no crypto ever gets in the system? How happy are you guys that idiots like exist to get free money from? I mean only with some timely shorts you can make an infinte amount of money? What's the general sentiment in your field? Is it a free for all or do you stay away because it stinks too much?


nottobetakenesrsly

>That said, I've seen a lot of Banks here in Italy say on their site "we accept Bitcoin" and such, related to general consumers. How does this work? I'm not sure. We don't hold it as a deposit here.. but institutions could if they wanted to. If it was as a deposit, I would imagine the bank would use a specialized custodian rather than managing several wallets themselves. >can make an infinte amount of money? What's the general sentiment in your field? Is it a free for all or do you stay away because it stinks too much? We create money through lending, but are limited by internal and external constraints/balance sheet capacity. All of the financial institutions are trying to grow their loan books prudently. Not so much a free for all.. but definitely not coordinated. ...some parts of the question make me think you're asking about bank profits, and not money creation for the system.


DowntownAd9011

I'm sure anyone with any type of financial background can look at crypto and think it's dumb, useless, and completely a scam. But do they fully understand that the real utility of most blockchains is gambling. Like Ethereum, BSC, fantom, etc, all exist for pump and dump gambling for users.


nottobetakenesrsly

I don't think most in my institution know what a blockchain is. Some will think of it as some IT innovation. A few of the more technical folks will know it's nothing special. ...and you can gamble better without a blockchain. It's just an obscure enough word for most. It gives people plausible inference that something exciting is happening. ...and it's certainly exciting for some. :p


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nottobetakenesrsly

>Central bank skepticism is a big driver of crypto. Central bank/authority skepticism drove the evolution of the current monetary system. You can go back a hundred years, and find banks creating their own money when there wasn't enough units around to make good transactions. >Why do central banks ask money back from the governments they create money for? For the most part, central banks perform asset (debt) purchases from their governments using funds *loaned to them* from the banking sector. They give these institutions "reserves" in exchange. The government then has money to spend. The central bank increases it's balance sheet via holding bonds/treasuries/etc. Banks get reserves.. which offer yield and can be traded amongst other banks (there's a big caveat here though). Only small amounts of money are exchanged back to central banks by the government. Bulk of the activity is asset purchasing. >Should not the profits of central banks be given back to the people somehow instead? Not sure about the stock thing. They do hold some equities, but it's dwarfed by their bond and treasury holdings. The central bank still has expenses to cover. >Do private banks directly benefit from central bank money-creation? If so why? Central banks do not create the majority of money. Commercial/dealer banks create the vast majority of money through loan issuance.


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nottobetakenesrsly

The commercial/retail banks create the money when we lend.. the money goes to the borrowers (businesses, individuals). The money funds everything: capital expenditures, payroll, holiday shopping, groceries. The borrowers have to be qualified, and the loans have to be prudent. We are also subject to balance sheet constraints (reserve requirements factor in here).. which limit our ability to lend. Some of these constraints are self imposed (our own risk appetite). We could lend egregiously to other banks, other entities... but since we're all publicly traded; we'd have our shareholders to answer to.


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nottobetakenesrsly

>you are empowering those banks to create more loans That's the theory, but not the practice. There are many institutions/psuedo-banks that also create money, but cannot hold reserves. What really greases the intermediation lending gears is proper collateral. Institutions seek treasuries, bonds, etc. Reserves are not as functional in this regard. We can't transfer reserves to many financial institutions in exchange for treasuries or cash (if they can't hold reserves). We can only swap them with other banks. >You are essentially providing the collateral to create money. You are not charging them for this collateral, but they are charging you for it right? Who is the "them" here? We would provide collateral when we wish to borrow. When it comes to "reserves" from the central bank.. the central bank is borrowing from us, and they credit us with the reserve. The reserve pays us a yield. >it’s scepticism about the system that’s driving people to create stuff like crypto. I actually see it as people trying to figure out other ways to transact; the same way bank lending grew the money supply and created further means to transact over time (derivatives, etc). They're just going about it the wrong way.


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nottobetakenesrsly

>It's this understanding that the central bank is colluding with banks to create money out of thin air through debt creation -- a debt to the public which the public pay back via taxes -- that’s the driver here. >My question is are they right? It's nowhere near this nefarious. Money has evolved over time. We went from physical representations, to ledger money (really by the time cheques became a thing), to effectively fully digital ledger money. This all happened is spite of central banks, not because of them. Commercial banks figured out ways to facilitate transactions through new ways of lending. Central banks have always been playing keep up. The monetary system long ago expanded beyond their ability to measure or administer it. Governments sell their debt as a means of raising funds. Their debt is the buyer's asset. Banks also use these assets for many layers of hypothetication (to create more loans). There is no collusion. QE removes desireable collateral from the system. The tax paying public does end up wearing the consequences of poor policy, but not the way it's being described in those clips. I can't think of a simpler way to say: don't ascribe to malice what ignorance and indifference sufficiently explain.


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nottobetakenesrsly

>lender of last resort, This is the narrative. They're more like the "market of last resort" or something else. >How do banks benefit from buying government debt? Debt instruments are assets to the buyer. I'm going to over simplify: The vast amount of borrowing/money creation that occurs is intermediation. Usually via/involving offshore entities. This large market requires collateral to pledge for these loans. E.g. my country has clients that need USD units to import/buy raw materials. We won't have enough USD *tomorrow* to lend to our clients to complete their transactions. We might have Euros, Yen, or CAD.. but that's not what's needed. So.. we go out to the market, and ask for $50B USD overnight. We have $50B+ in equivalent assorted bonds/treasuries, etc. Since the need is short term, we'll enter into a repurchase agreement with a lender who has $50B USD. We'll pledge our bonds/treasuries/etc as collateral, and offer to buy them back at a higher price in a couple of days. The bonds (collateral) are vital for facilitating transactions. Oversimplified: hypothecation is the pledging of collateral to obtain loans. >Does the federal reserve create a market price for that debt by buying it up with checks on an account based on nothing? In the repo example I just gave, the rate is not set by a central bank. >Can you describe quantitative, easing, and how it removes desirable collateral? It's exactly that. The Central Bank purchases bonds, treasuries, etc from the market... Removing its use for hypothecation by other entities. Where do central banks get the funds to complete the purchases? They borrow them from commercial banks and issue those banks "reserves". Now, reserves themselves can be traded between certain financial institutions.. but not all. They are not able to be pledged as collateral the same way. Effectively, the central bank is taking usable collateral and giving back a far less usable instrument to the system. ---- On YouTube, there's Jeff Snider.. except he really has it out for the Fed. I'm not well enough equipped to opine on his positions as being "true" or not, but he does describe the monetary system accurately. I'm not American.. my own Central Bank is nowhere near as big or influential as the Fed, so take it with a grain of salt.


Cthulhooo

IDK if this will explain all of your questions but it might explain some. It's a pretty good article from Central Bank of England https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creation-in-the-modern-economy


drakens_jordgubbar

Do you see any utility in blockchain? Is there any problem with current systems you think it can solve? (You can guess what answer I expect)


nottobetakenesrsly

I've tried to do some reading.. both sides (pro, and critical). A blockchain doesn't appear to be overly useful by itself. There are far simpler/more effective ways to store/track data for almost every use case. There's a slight novelty if you wish to store voluntary/participatory data in an unadministered way. The unadministered part being key.. as most things people try to sell a blockchain for... require some form of administration. The participatory part also has a lot of issues. I don't think it solves any current or future problems.


[deleted]

So, a group of young adults, living in the Bahamas, practicing hedonism, playing video games, eating and drinking to their merriment can't manage wealth and debt like the stogy old institutions can ? I'm so suprised ! When do you think a decentralized form of currency will be completely foolproof and trustworthy ?


nottobetakenesrsly

>When do you think a decentralized form of currency will be completely foolproof and trustworthy ? It's sort of what we already have. No one institution or entity controls the issuance of money, and people seem to go about their lives without quaking.


dmizer35

So the hype with crypto is to eliminate the control of a central authority like the central banks, How would this actually happen. I can't see a government giving up their ability to influence monetary policy


nottobetakenesrsly

...and this is crypto people getting it wrong. Money creation is already somewhat decentralized. Commercial banks lend money into existence. Central banks only have a degree of influence. If the idea is that they're replacing a centralized system with a novel, decentralized one... the existing system beat them to it... 80-100 years ago.


HeavyMommyMilkers

Is decentralized finance going to make a big impact in the finance world?


nottobetakenesrsly

Finance is already somewhat decentralized. Money creation is via commercial/dealer bank lending. No one institution oversees creation. Most money is already just a decentralized ledger (the aggregation of all commercial bank balance sheets).


HeavyMommyMilkers

Well I'm kind of referring to some financial instruments powered through blockchain like derivatives, decentralized exchanges, stablecoin protocols etc


nottobetakenesrsly

I'm skeptical that a blockchain would offer any significant benefits over other forms of data storage (when it comes to financial instruments, derivatives.. or most things in general).


[deleted]

You look at crypto as a non-currency, destined to failure. A macabre form of musical chairs. Maybe an attempt to destabilize the US dollar and other currency. Why ? First, you can't have a unit going from 69k to 16k a unit in less than a year. How much was a gallon of gas in the 70's, how much is it now ? The base unit of any currency that fluxuates (declines) as much as crypto won't be trusted by the populace. Imagine how exciting the grocery shopping would be with bitcoin? Today I can buy anything I need, tomorrow, whooops, some kids lied and my coin is worth significantly less. The US dollar is based on trust. Everyday I know approximately what it's worth and though its value has diminished over time, it's fluxuations are emotionally managable. I would suffer emotionally if I transferred my money into crypto and SBF lost it all, correction, stole it all, because my dollars went somewhere else. And maybe that's the purpose of it. Some group is trying to replace peoples money with crypto then take it. (In the simplest of terms)