FTX

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Grumble
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Re: FTX

Post by Grumble » Wed Nov 23, 2022 7:23 am

I think you’re needlessly quibbling over what intrinsic means.
A bit churlish

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Re: FTX

Post by EACLucifer » Wed Nov 23, 2022 7:30 am

Millennie Al wrote:
Wed Nov 23, 2022 1:42 am
For example, copper is owned by people who have no personal use for it. They own it because it is useful to other people so the holders expect that they can profit from its value to those other people. This extends through chains of value to one person based on value to the next. So someone holding copper values it because someone will use it to make a saucepan, but the make of the saucepan has no use for it - they only value it as something that a chef is about to buy. But the chef has no use for it except to prepare food for other people to eat - food that would get thrown out if the intended consumers fail to eat it. And so on.
But that value still stems from the fact that it is required to make good saucepans, electrical wiring, and so on, even if it is a few steps down the line from the final usage.

I mean, even gold has the advantage that it makes jewellery that lasts for potentially thousands of years without tarnishing, meaning its value is unlikely to be radically altered by pure faddishness (and even if it weren't for the cultural cache, it's an exceptional conductor, glass colourant and so on)

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Re: FTX

Post by IvanV » Wed Nov 23, 2022 9:28 am

Millennie Al wrote:
Wed Nov 23, 2022 1:42 am
IvanV wrote:
Tue Nov 22, 2022 1:24 pm
Normally assets have either some intrinsic value (eg land, copper) or produce an income (eg corporate bonds).
There's no such thing as an intrinsic value. All value is relative and almost all value in modern society is based on a thing's worth to people other than the holder of the asset. For example, copper is owned by people who have no personal use for it. They own it because it is useful to other people so the holders expect that they can profit from its value to those other people. This extends through chains of value to one person based on value to the next. So someone holding copper values it because someone will use it to make a saucepan, but the make of the saucepan has no use for it - they only value it as something that a chef is about to buy. But the chef has no use for it except to prepare food for other people to eat - food that would get thrown out if the intended consumers fail to eat it. And so on.

Land (and housing in general) is a partial exception in that people who own their own housing hold it for its value to them personally.
We are not disagreeing, we are differing over what precise meaning one gives to a word in a particular context.

I borrowed someone else's word, because they were using it, and I wanted to debate the point with them, rather than tell them they were wrong for the vacuous reason of misuse of terminology. To do that, I needed to give the word a meaning consistent with how they were using it. You are giving it a different meaning, that is at odds with how the original user was trying to use it. Maybe that's how more people use it, I don't know.

In my definition, for those limited purpose of that debate, copper is defined as having "intrinsic value" in the sense that someone can make stuff out of it that is useful. So you can sell it for money's worth. The magnitude of that value may vary, considerably.

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Re: FTX

Post by Bewildered » Wed Nov 23, 2022 10:24 am

IvanV wrote:
Tue Nov 22, 2022 1:24 pm
Woodchopper wrote:
Tue Nov 22, 2022 12:18 pm
Ivan appeared to be arguing that crypto is different because it has no intrinsic use. But I don't agree, crypto has intrinsic uses.
So when your bitcoin is only worth $0.00001, what are you going to do with it? You can't eat it. You can't hang it on the wall as a decoration. You can't make pipes out of it. That's what I mean when I say it has no intrinsic use.

You are saying it has intrinsic value as money. Central bank paper money has no intrinsic use either, by the way I meant it, but it has value as money. It is much better money than crypto, for legal purposes. It is legal tender, it is backed by the tax-raising power of the state, etc. Whereas crypto is is volatile, the transactions costs are high, and it is not widely accepted. In fact, it lacks any of the three properties that are desirable for something called money. It is probably better called an asset, rather than money. What it does have a use as is for criminal transactions, money laundering and tax evasion, as it has some advantages over methods used to do that.

Normally assets have either some intrinsic value (eg land, copper) or produce an income (eg corporate bonds). But crypto doesn't do that. So by comparison with normal assets, it is not very good at that.

If we take away its advantages to criminals, money launderers and tax evaders, as we must do, or at least try to, is it still useful enough to have any competitive advantage over normal money in any situations? Such that anyone would use it? If not, its value will fall to zero or near zero. My suspicion is has no value when you take that advantage not. But I don't know for sure. Maybe I haven't thought of why people would still have value for an asset that produces no income and money that is exceedingly inconvenient as money.

Currently there is this clever trick that the transactions costs are covered by miners, who get rewarded by being paid in the coin itself, which dilutes the value to everyone else, but that has generally been concealed by growth in value. It has been said there is a limit to that. Eventually the users will have to cover the cost, or the end to mining was a lie.

So, what is that intrinsic use as money, that is good enough for it to exist alongside much better assets and much better money, that can give crypto a value once we stop it being useful for crime, money laundering and tax evasion?
I think I agree with everything in this post. But what I find strange is regarding “Normally assets have either some intrinsic value (eg land, copper)” Bitcoin and most crypto is not this and was not ever intended to be this, nor this “produce an income (eg corporate bonds)” though I have seen some stable coins advertised this way and certainly there’s a lot of ridiculous thinking around.

But I think if you want to trash an idea properly you should attack the strongest defense. Bitcoin was intended to be a currency, and the perceived value in it that led to the bubble, as fas as I understand, was people believing it would take over the world and become the global currency. So I feel like that’s the argument that should be challenged, ie whether bitcoin can be a currency. So in other words this part
“You are saying it has intrinsic value as money. Central bank paper money has no intrinsic use either, by the way I meant it, but it has value as money. It is much better money than crypto, for legal purposes. It is legal tender, it is backed by the tax-raising power of the state, etc. Whereas crypto is is volatile, the transactions costs are high, and it is not widely accepted. In fact, it lacks any of the three properties that are desirable for something called money. It is probably better called an asset, rather than money. What it does have a use as is for criminal transactions, money laundering and tax evasion, as it has some advantages over methods used to do that.”
seems like the real argument to me. You think it has no value as money because you think it’s a poor choice as currency and will not be used as currency, right? That value may go to zero very soon or eventually, but that depends crucially on your arguments here about it being a crap currency, doesn’t it? So I don’t understand why so many critics instead seem to talk about it as a ponzi scheme etc and ignore this part.

Also while I agree it’s a poor choice, servicing the people who want to use it as a currency is the value of it. So there’s woodchopper’s argument that it’s being used illicitly that way for rational reasons and then there’s the possibility there are people who believe in it using it, however irrationally. Maybe the latter just isn’t happening and that’s why woodchopper ignores that possibilities but I think many of the people speculating on it are doing so because they really believe in it as a currency and think (or maybe hope because it’s also partly idealogical) that they will use it in the future as a currency once (they think) the value stabilises.

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Re: FTX

Post by jimbob » Wed Nov 23, 2022 10:30 am

dyqik wrote:
Tue Nov 22, 2022 2:07 pm
I don't think the price of Bitcoin is driven by its utility, even for illegal transfers. It's much more about the "get rich quick" ideal and bubble.

The people making actual money from it are chip manufacturers and electricity suppliers, etc, as well as the scammers who manage to extract real money from it, whether that's from small investors or venture capitalists.
I've seen it claimed that those who sold kit for prospector ls Inthe gold rushed tended to make money too
Have you considered stupidity as an explanation

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Re: FTX

Post by dyqik » Wed Nov 23, 2022 12:03 pm

EACLucifer wrote:
Wed Nov 23, 2022 7:30 am
Millennie Al wrote:
Wed Nov 23, 2022 1:42 am
For example, copper is owned by people who have no personal use for it. They own it because it is useful to other people so the holders expect that they can profit from its value to those other people. This extends through chains of value to one person based on value to the next. So someone holding copper values it because someone will use it to make a saucepan, but the make of the saucepan has no use for it - they only value it as something that a chef is about to buy. But the chef has no use for it except to prepare food for other people to eat - food that would get thrown out if the intended consumers fail to eat it. And so on.
But that value still stems from the fact that it is required to make good saucepans, electrical wiring, and so on, even if it is a few steps down the line from the final usage.

I mean, even gold has the advantage that it makes jewellery that lasts for potentially thousands of years without tarnishing, meaning its value is unlikely to be radically altered by pure faddishness (and even if it weren't for the cultural cache, it's an exceptional conductor, glass colourant and so on)
Gold is a pretty important industrial metal - I've been involved in ordering a 12" diameter, half inch thick disk of 6 9 pure gold for a vacuum deposition system, and most of the things I design are gold plated.

The non-tarnishing high conductivity of it makes it essential for contacts on most chips and microwave waveguides and circuits.

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Re: FTX

Post by dyqik » Wed Nov 23, 2022 12:13 pm

I'm not going to sort out the quotes above, but a "coin" only has value as a currency if the costs of using it are smaller than the benefits of the trade that it enables.

For most crypto coins, the true costs of transactions are high, and volatility and lack of backing makes it risky to hold. It's only when there's an extra imposed cost on carrying out the transaction with regular currency, due to the illegality of the transaction, that it makes any sense to use it. That same illegality usually means that transactions are high profit as well.

So most crypto coins can never become an efficient mainstream currency, subject to the same regulation as normal currency - which is part of the source of volatility. And it is being regulated now - crypto transactions have to be declared on US tax returns, for example.

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Re: FTX

Post by Millennie Al » Fri Nov 25, 2022 1:51 am

IvanV wrote:
Wed Nov 23, 2022 9:28 am
We are not disagreeing, we are differing over what precise meaning one gives to a word in a particular context.
...
In my definition, for those limited purpose of that debate, copper is defined as having "intrinsic value" in the sense that someone can make stuff out of it that is useful. So you can sell it for money's worth. The magnitude of that value may vary, considerably.
I don't see any difference between a thing having value because you can make it into something else and a thing having value as it is. A lump of copper may have value due to the possibility of being made into a frying pan, but I would say the frying pan has the same kind of value. And that value is very much relative and contingent. If you have no need for a frying pan yourself, its value to you depends on there being somone else who values it thereby enabling you to trade it for something else. This is no different from a ten pound note, a gold coin, or an entirely virtual figure in a bank's computer which represents some of your money. There is a spectrum from a major reserve currency to one issued by a small, poor state with poor government. But it's not that they are different kinds of things - just at different levels of trust. A crypto currency could be more or less trusted than a traditional currency issued in note and specie, but it's the same kind of thing.

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Re: FTX

Post by plodder » Fri Nov 25, 2022 3:32 am

dyqik wrote:
Wed Nov 23, 2022 12:13 pm
I'm not going to sort out the quotes above, but a "coin" only has value as a currency if the costs of using it are smaller than the benefits of the trade that it enables.

For most crypto coins, the true costs of transactions are high, and volatility and lack of backing makes it risky to hold. It's only when there's an extra imposed cost on carrying out the transaction with regular currency, due to the illegality of the transaction, that it makes any sense to use it. That same illegality usually means that transactions are high profit as well.

So most crypto coins can never become an efficient mainstream currency, subject to the same regulation as normal currency - which is part of the source of volatility. And it is being regulated now - crypto transactions have to be declared on US tax returns, for example.
There are also costs associated with bank transactions though. Anything to do with chiseling bankers, for one. But traditional currencies are also expensive to use, it's just we're used to the costs. Interest rates, fees, commissions, charges etc all add up to some lovely fat bonuses for our chums in the city.

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Re: FTX

Post by lpm » Fri Nov 25, 2022 8:17 am

Nonsense. When British Gas collects your direct debit, the bank charge is something like 0.05p. International transfers cost pennies. Modern clearing banks are astonishingly efficient in a competitive environment. Hence millions of people get free banking.

The most expensive element is handling physical cash, which needs armoured vans and security guards due to the risk of crime. And guess what, it's the risk of crime that makes crypto even more expensive to transact.
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Re: FTX

Post by IvanV » Fri Nov 25, 2022 8:32 am

Millennie Al wrote:
Fri Nov 25, 2022 1:51 am
If you have no need for a frying pan yourself, its value to you depends on there being somone else who values it thereby enabling you to trade it for something else. This is no different from a ten pound note, a gold coin, or an entirely virtual figure in a bank's computer which represents some of your money.
The difference is that we can pretty sure that someone, somewhere, has a practical use for a frying pan, or more generally, copper. And that practical use is closely related to what it is worth. But no one anywhere has a practical use for a piece of paper with a picture of a ruler on it, except as money. That is it's only value. It is not backed up by there being a practical use for it. Well, in the specific case of paper money, there are some very minor uses such as snorting coke and lighting fires. But these are small uses usually of great disparity to the value of it. That's not why anyone attributes that value to it.

To me, that's a big difference.

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Re: FTX

Post by plodder » Fri Nov 25, 2022 8:40 am

lpm wrote:
Fri Nov 25, 2022 8:17 am
Nonsense. When British Gas collects your direct debit, the bank charge is something like 0.05p. International transfers cost pennies. Modern clearing banks are astonishingly efficient in a competitive environment. Hence millions of people get free banking.

The most expensive element is handling physical cash, which needs armoured vans and security guards due to the risk of crime. And guess what, it's the risk of crime that makes crypto even more expensive to transact.
You’re only talking about transaction costs. I mentioned a number of other costs. Proponents of crypto like to talk about these. How much interest are you paying on your mortgage? What do you get in return for that interest? (For example)

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Re: FTX

Post by lpm » Fri Nov 25, 2022 8:58 am

I pay 2.49% p.a. on my mortgage and in return for that interest I get time shifting of cash flows. How does crypto move cash flows around in time?

I pay fees on my pension and in return I get a managed and balanced portfolio of investments appropriate for my age and risk appetite. How does crypto provide this service?

On my cash deposits at the bank I get free insurance protecting up to £85,000. Does crypto provide this protection against bankruptcy of institutions?
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Re: FTX

Post by EACLucifer » Fri Nov 25, 2022 9:04 am

lpm wrote:
Fri Nov 25, 2022 8:58 am
I pay 2.49% p.a. on my mortgage and in return for that interest I get time shifting of cash flows. How does crypto move cash flows around in time?

I pay fees on my pension and in return I get a managed and balanced portfolio of investments appropriate for my age and risk appetite. How does crypto provide this service?

On my cash deposits at the bank I get free insurance protecting up to £85,000. Does crypto provide this protection against bankruptcy of institutions?
One thing crypto has done is demonstrate just why we have the kind of regulations we do on banking, and protections for customers and controls on what is done with deposits and so on.

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Re: FTX

Post by plodder » Fri Nov 25, 2022 10:08 am

lpm wrote:
Fri Nov 25, 2022 8:58 am
I pay 2.49% p.a. on my mortgage and in return for that interest I get time shifting of cash flows. How does crypto move cash flows around in time?

I pay fees on my pension and in return I get a managed and balanced portfolio of investments appropriate for my age and risk appetite. How does crypto provide this service?

On my cash deposits at the bank I get free insurance protecting up to £85,000. Does crypto provide this protection against bankruptcy of institutions?
We're not talking about pensions or insurance.

Could you expand on what you mean by "time shifting of cash flows" in return for the interest you pay?

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Re: FTX

Post by EACLucifer » Fri Nov 25, 2022 10:16 am

plodder wrote:
Fri Nov 25, 2022 10:08 am
lpm wrote:
Fri Nov 25, 2022 8:58 am
I pay 2.49% p.a. on my mortgage and in return for that interest I get time shifting of cash flows. How does crypto move cash flows around in time?

I pay fees on my pension and in return I get a managed and balanced portfolio of investments appropriate for my age and risk appetite. How does crypto provide this service?

On my cash deposits at the bank I get free insurance protecting up to £85,000. Does crypto provide this protection against bankruptcy of institutions?
We're not talking about pensions or insurance.

Could you expand on what you mean by "time shifting of cash flows" in return for the interest you pay?
It transfers an immediate payment now (ie cash up front) into a number of payments spread out over time, thus shifting those parts of the payment in time.

The advantage of this is that the purchaser of a dwellinghouse can then gain the advantages of having that dwellinghouse (living in it and thus not having to pay rent on a dwelling) before they are able to save up sufficient money to pay upfront. As without the mortgage they would have to rent somewhere to live while saving up to purchase a home outright and the cost of this might prevent them from being able to save up enough at all, and even if it does not, it can still result in a significant interest in their costs. For a lot of homebuyers, the interest they pay on the mortgage is a reasonable tradeoff compared to the advantage gained by moving some of the payment in time.

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Re: FTX

Post by plodder » Fri Nov 25, 2022 10:43 am

Thanks for explaining what a loan is EAC, it's clear you have a firm grasp of this subject. What is the interest for exactly? Where does it come from? What does it do? Where does it go? Feel free to use baby talk if that helps.

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Re: FTX

Post by jimbob » Fri Nov 25, 2022 11:02 am

plodder wrote:
Fri Nov 25, 2022 10:43 am
Thanks for explaining what a loan is EAC, it's clear you have a firm grasp of this subject. What is the interest for exactly? Where does it come from? What does it do? Where does it go? Feel free to use baby talk if that helps.
Is this some attempt at a Socratic dialogue? Otherwise I don't understand why you are asking this
Have you considered stupidity as an explanation

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Re: FTX

Post by lpm » Fri Nov 25, 2022 11:09 am

I suspect we need to explain the concept of time.
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Re: FTX

Post by plodder » Fri Nov 25, 2022 11:18 am

jimbob wrote:
Fri Nov 25, 2022 11:02 am
plodder wrote:
Fri Nov 25, 2022 10:43 am
Thanks for explaining what a loan is EAC, it's clear you have a firm grasp of this subject. What is the interest for exactly? Where does it come from? What does it do? Where does it go? Feel free to use baby talk if that helps.
Is this some attempt at a Socratic dialogue? Otherwise I don't understand why you are asking this
Don't you think they're interesting questions? I'm trying to tease out why people don't understand the theoretical benefits of a distributed ledger system of finance / currency as opposed to something controlled, manipulated and exploited by central and retail banks. Given the standard of posts on this thread so far I'm trying to establish a baseline.

Essentially I'm trying to help us move beyond "but what is money anyway? <confused emoji>", "hurr de hurr obvious scam is obvious <clown emoji>" and "listen moron I'm going to break down things every three year old knows <aubergine emoji>"

eta: to me this is an interesting question as I perceive the current system to be at the root of a lot of problems we see (as well as being helpful in terms of liquidity etc). I don't profess any great expertise but I would like to have a sensible conversation about what is a thorny and potentially interesting topic.

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Re: FTX

Post by lpm » Fri Nov 25, 2022 11:42 am

They are pretty obvious questions, plods. It is always the case that people want to shift assets, or money, in time. The neanderthals shifted things in time, by using up a stockpile of flint before heading off to the best flint area in the spring, or storing food for the winter.

Money is a way to avoid barter and removes the need to match up individuals for a mutual time shift. Interest provides the lubricant that lets transactions flow between strangers or via institutions as intermediaries. There's also friction that needs to be overcome, crime being a major one but also everything else like bureaucracy costs.

How do you think crypto helps? It has no interest so that incentive doesn't exist. It has far greater risk of crime, higher transaction costs etc. What does it add to the global system, other than avoidance of the controls and regulation that protect us and reduce crime?
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Re: FTX

Post by plodder » Fri Nov 25, 2022 12:00 pm

lpm wrote:
Fri Nov 25, 2022 11:42 am
They are pretty obvious questions, plods. It is always the case that people want to shift assets, or money, in time. The neanderthals shifted things in time, by using up a stockpile of flint before heading off to the best flint area in the spring, or storing food for the winter.

Money is a way to avoid barter and removes the need to match up individuals for a mutual time shift. Interest provides the lubricant that lets transactions flow between strangers or via institutions as intermediaries. There's also friction that needs to be overcome, crime being a major one but also everything else like bureaucracy costs.

How do you think crypto helps? It has no interest so that incentive doesn't exist. It has far greater risk of crime, higher transaction costs etc. What does it add to the global system, other than avoidance of the controls and regulation that protect us and reduce crime?
plodder wrote:
Fri Nov 25, 2022 11:18 am
jimbob wrote:
Fri Nov 25, 2022 11:02 am
plodder wrote:
Fri Nov 25, 2022 10:43 am
Thanks for explaining what a loan is EAC, it's clear you have a firm grasp of this subject. What is the interest for exactly? Where does it come from? What does it do? Where does it go? Feel free to use baby talk if that helps.
Is this some attempt at a Socratic dialogue? Otherwise I don't understand why you are asking this
Don't you think they're interesting questions? I'm trying to tease out why people don't understand the theoretical benefits of a distributed ledger system of finance / currency as opposed to something controlled, manipulated and exploited by central and retail banks. Given the standard of posts on this thread so far I'm trying to establish a baseline.

Essentially I'm trying to help us move beyond "but what is money anyway? <confused emoji>", "hurr de hurr obvious scam is obvious <clown emoji>" and "listen moron I'm going to break down things every three year old knows <aubergine emoji>"

eta: to me this is an interesting question as I perceive the current system to be at the root of a lot of problems we see (as well as being helpful in terms of liquidity etc). I don't profess any great expertise but I would like to have a sensible conversation about what is a thorny and potentially interesting topic.
Does this help lpm?

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Re: FTX

Post by lpm » Fri Nov 25, 2022 12:14 pm

To put it in baby talk, I don't trust you Plodder. I might have money I don't need for 10 years and you might want money now to repay in 10 years, but we aren't going to come to an arrangement. Because you might be a thief, might die or might be unable to repay.

But under a tightly controlled structure with regulation and laws and prisons, we will be able to come to an arrangement. We'll use a regulated intermediary and we'll both pay a small commission to that institution and we'll mutually benefit from our exchange of cash flow timings.

We want something controlled, manipulated and exploited by central and retail banks. We pay an extremely modest cost to them and get huge benefits in return.
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Re: FTX

Post by plodder » Fri Nov 25, 2022 12:22 pm

There's nothing modest about bank profits and nothing in what you've said that theoretically couldn't be done by a distributed ledger, cutting out the spivs.

There's also the important question of interest rates, where they come from and what they are for - you keep ignoring this?

There are other important questions about how banks get the money they then charge people for borrowing, and whether that's an optimal system and whether distributed ledgers offer a viable alternative.

You're a big fan of spotting the Ponzi scheme lpm, surely you're a teensy bit interested in discussing the impacts of the ever increasing supply of artificially cheap credit over the last generation or so. Perhaps you have kids who want to get on the property ladder?

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Re: FTX

Post by plodder » Fri Nov 25, 2022 12:31 pm

lpm wrote:
Fri Nov 25, 2022 12:14 pm
To put it in baby talk, I don't trust you Plodder. I might have money I don't need for 10 years and you might want money now to repay in 10 years, but we aren't going to come to an arrangement. Because you might be a thief, might die or might be unable to repay.

But under a tightly controlled structure with regulation and laws and prisons, we will be able to come to an arrangement. We'll use a regulated intermediary and we'll both pay a small commission to that institution and we'll mutually benefit from our exchange of cash flow timings.

We want something controlled, manipulated and exploited by central and retail banks. We pay an extremely modest cost to them and get huge benefits in return.
This is not how bank loans work. You surely know that they loan many multiples of their holdings and simply create the extra money they lend.

You'll note that digital currencies are seen by some as a way round the inherent house of cards bit of this approach e.g. https://www.thebalancemoney.com/what-is ... ng-4590236

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