Quote from: RHorning on August 05, 2010, 03:44:36 AM

Quote from: Bitcoiner on August 05, 2010, 12:34:21 AM

Given that I actually agree with you up to that point, how is my line of reasoning bunk? My point still stands. The supply if Bitcoins is limited: The banking system in aggregate cannot find enough Bitcoins if it loans its on demand deposits out! Why should the depositor accept quasi-bitcoins in the form of banking credit instead of the actual thing? On demand deposits simply cannot be loaned out if a banking system is to ultimately remain stable. Sure, some banks can try to do it, but then they better not call them "on demand deposits". Some might get away with it, but sooner or later, someone will find themselves between a rock and a hard place. Deposits can be loaned out, but not with a guarantee of redemption. That is simply impossible as Bitcoins cannot be created out of thin air.

I see two kinds of "deposits" into a bank: "Investments" in the form of perhaps even a stock purchase into the bank itself, and "certificates of deposit" or some other time-based "bond" that has a defined expiration date and guaranteed rate of return. Both could conceivably create the initial pool of money that could then be used for making loans.

The traditional "on demand" bank deposits with Bitcoins seems to be something that has all of the disadvantages of a conventional bank and none of the advantages. Mainly, you are dealing with an extra level of bureaucracy and people telling you that you can't necessarily have access to your funds and sources of embezzlement and fraud. Normally the advantage a bank offers is the ability to carry on transactions electronically or in a "light-weight" arrangement where you don't have to cart around a briefcase full of money (or gold). That is something which isn't even remotely a problem with Bitcoins.

If most "depositors" in a bank were actually shareholders, it would also put an interesting twist into the relationship between the customer and the banker. In theory this already happens with credit unions in America, but I've never seen it put into a formal relationship in terms of actual shares of the bank itself. This is why "checks" are called "share drafts" by credit unions, as you are in theory giving away shares of the company when you purchase items from your account in that manner.... but that is more of a ruse than anything legitimate. It would be interesting, however, if you could make corporate shares fungible as a sort of alternative currency in and of themselves with their own exchange rate.

I agree with you here, RHorning. There would be less of a case for actual on demand deposits within a Bitcoin economy. A banking system based on shares and time deposits (i.e. bonds) would be honest.