Quote from: HZPyR8eVk on August 01, 2010, 03:33:54 PM

Quote from: em3rgentOrdr on August 01, 2010, 02:42:21 PM

it's not possible to "create credit BitCoin out of thin air". One must consume significant processing power to find a (previously undiscovered) large number whose SHA-256 hash is below the current target.

You're thinking "BitCoin", but I said "credit BitCoin", like "credit dollars" which don't require printing dollars, just accounting.

Did you even read my entire post? The rest of my entire post was dealing with credit BitCoin, whereby I explained that under a free banking system, reserve ratios will tend towards 100%. Your above critique is irrelevant.

Quote from: HZPyR8eVk on August 01, 2010, 03:33:54 PM

Quote from: em3rgentOrdr on August 01, 2010, 02:42:21 PM

In a free banking system (which bitcoin is, since there is no central authority), competition amongst bitcoin banks will lend itself towards 100 percent reserve banking.

There is no free banking system, nor will there be (as long as people have a physical presence) because of the ultimate centralization point: the state. The state (/ banks) has replaced gold with paper. If a digital distributed currency becomes important in the world's economy, the state would want its cut. But if the currency is able to increase its supply as the entire network decides, the state can no longer substitute cash needs with credit.

You are ignoring something very different about cryptographic virtual currency (BitCoin) that separates it from physical currency (gold). See my comment below...

Quote from: HZPyR8eVk on August 01, 2010, 03:33:54 PM

Quote from: em3rgentOrdr on August 01, 2010, 02:42:21 PM

So there is no serious need to deposit your money at some bank

I have not thought for a moment about people depositing their BitCoin so that banks could lend it further. I have only thought about the state creating the laws which would allow banks to create credit BitCoin. Thusly, the state creates the inflation. This is my point. Rather than having the state do it, create the mechanisms for the peers to do it as they see fit so that they can as a whole self-correct themselves.

Sure, The State can create laws to allow banks to create credit BitCoin and thereby creating inflation. But no one needs to use or accept inflation-ridden credit BitCoin for transactions, since people are free to use raw non-inflatable BitCoins for transactions. And it doesn't matter if The State makes a law declaring that BitCoins are illegal. In fact, BitCoin is currently technically illegal to trade (as I assume BitCoiners are not paying taxes on transactions:), but people can still use BitCoins without being caught due to its pseudonymous properties if they are careful to not reveal their real identity.

The State can make whatever laws it pleases. Whether those laws can be enforced is the real question. Only an extreme totalitarian regime could prevent its populace from using raw BitCoins (since it would have to prohibit use of cryptology by regular folk, or would allow police force to enter people's homes at random to inspect people's computers, be able to extract people's passwords at force, or simply disconnect their internet). And history has proven that extreme totalitarian regimes do not last long, because they must cripple the economy to enforce their laws (see history of USSR), and thus have too weak of a tax base to function.