Quote from: db on July 18, 2010, 11:36:17 PM

Quote from: InterArmaEnimSil on July 17, 2010, 11:27:01 AM

My point with this entire thread was simply to dispel the false notion that printing presses are to blame for inflation. Loans are the real culprit, with no need to waste paper, ink, and electricity on printing. Taking today's economy lifting out dollars and dropping in bitcoins and continuing on would have the same loan rules, and thus would have the same inflation, minus only the very small percentage that is due to printing presses.

This is wrong. Loans multiply the printed money by a fixed factor but the root of inflation is the printing. Printed fiat money has inflation problems; the more money printed the greater the inflation. Gold does not, despite being lent and banked just like other kinds of money. This is simply because mining gold is hard while printing paper money is easy.

The Zimbabwean dollar is a very clear example. Was the huge inflation caused by people being really enthusiastic about lending and borrowing Z$? Or was it caused by the government printing 100 000 000 000 000-dollar bills?

Yes, most of the money in circulation is created through loans. No, that is not the cause of ongoing inflation.

The Zimbabwe case is different from the present US case. Was the money printed, causing inflation, or did the money get created by loans, and then get printed so that people could take the loans in cash? The order does not matter. In Zimbabwe, it was the first order. In the US, it is the second. Money is not printed to finance anything - its printed so that already-created liquidity from "magic loans" can be taken in the form of wallet-stuffing. In original fractional reserve banking, loans were only a fixed portion of the actual, printed money supply, which was limited only because the Treasury turned off the presses. You're right about that. That rate fell and fell, though, until it was last seen at 9% or so. At that point, as far as I know, the fractional reserve requirement rate was eliminated, at least for most kinds of organizational and government loans. Yes, your local bank that gives you a car loan is limited by law in how many car or house loans they can give, but the issuance of government bonds, the main driving force of inflation, is not. The money is printed only to supply people with technology-free access to the already-created liquidity. It does indeed inflate the economy, and in Zimbabwe it was the primary cause. In the US it is secondary to Fed loans which are "paper-ized" only later, when they are needed in wallets. Again, do you think that the loans given to F&F were all printed? They money didn't exist in paper form, yet the banks were still "propped up." Most of it has yet to be manifest in paper. Of course, this paper does inflate the economy - a digital loan is not "converted" to paper, simply, more paper, which is liquidity in its own right, is printed so that Joe Schmoe can take the dollar bills he wants. Still, though, non-cash inflation is a far larger problem in the developed world than paper inflation.

Regardless, this does not address the legal tender issue. If Q-BTC were legal tender, then the inflation-proof nature of BTC based on the limited ability to generate coins would be moot.