Post
Topic
Board Economics
Re: Why Bitcoin is ultimately doomed to fail (not today or tomorrow)
by
deisik
on 30/01/2014, 15:31:44 UTC
A central bank is not incidentally called a lender of last resort. I intentionally stressed 'last' here which means there other lenders that a bank can appeal for help to. In case there is a bank-run, the bank can either directly borrow insufficient funds from other banks through interbank market or sell its loans (probably with discount) to anyone willing to buy them (usually other banks or the government) to fill a cash gap (cash deficiency). In either case, there is no money printing...

Also, we can't forbid banks from lending more than they have since they just can't lend more than they actually have. If you think otherwise, I'm all ears!

If there's no money printing, then what's the problem with Bitcoin?

They do lend more than they have, under the fractional reserve system, which could be done also using Bitcoin. They just print bank notes or add the new money to accounts.

I don't quite understand what problem you are referring to (with Bitcoin)

No, this was possible to do in the 19th century when they (banks) did actually issue more bank notes than they had gold as reserve. Today, you can't create assets ("just print bank notes or add the new money to accounts") without first balancing them with corresponding liabilities (claims, i.e. money lent to a bank). If you still think otherwise, please tell precisely how new money is added to an account and what happens to the balance

It seems that we are going for the second round with what was explained previously in much detail here