Why not just adopt Bitcoin itself as a main currency? You could even set up a fractional banking system based on top Bitcoin. The first government to do this is going to have a huge economic advantage for the rest of this century.
You know, it's REALLY difficult to do FRB with Bitcoin, since you are REALLY relying on having more people funneling in Bitcoins. And guess what happens when some-one wants to withdraw? Either you start funneling Bitcoins out of other's accounts, and they're left with the IOUs. And what happens when they want to withdraw, etc. It's possible, but difficult.That's why wallets were made, so people can be their own bank. And not have to go through the bureaucracy that comes with banks. And they can't be left with IOUs, ever. Either a Bitcoin is there or it's not.
If you can do FRB w gold you can do it w bitcoins. The difference is if people have wallets then they dont need to keep their deposits in a bank.
But loans would still exist and credit money would still exist. Banks dont really need deposit accounts these days to create loans.
For example if you lease a car, the leasing bank creates credit without any deposit accounts
To do this (that is create credit without a deposit), banks need a governing body called a central bank which works behind them actually creating new money on behalf of a lending bank. Without a CB, banks could only issue their own "private" money. Now guess what happens if this money is Bitcoin (that is there is no central bank).
I just showed example where credit is created w out Central Bank. Most if not all car companies has financial services. If they didn't youd have to go to commercial bank which then is connected to the Central Bank. But surely BMWFS dont have deposit accounts.
You can't create credit in national currency (emitted by a central bank under whatever name) without the central bank. I don't understand how car companies are related to all of this.
Because 50% of money exist as credit in shadow banking. Too lazy to post a chart. But its on the Fed Reserve website. Someone said its difficult to do FRB w bitcoin bc reserves. I said it isn't. The point about car companies is to illustrate a bank that creates credit w/o deposit accounts or reserves. They create credit using assets (cars)
My view of money comes from Modern Monetary Theory so if a little hard to understand if you don't know the theory. You are correct that base money comes from Central Bank. BTW, I think Central Banks are necessary but also their policies are ineffective in crisis
My point is that bitcoiners mistake bitcoin as a solution when its not. Bitcoin is based on a 20th century understanding of banking not modern banking
There is no such economic theory as "Modern Monetary Theory". What goes under this name, are just a few assertions, one of them being that the banks can create credit without having deposits prior to. But this has long been known before and refers primarily to accounting rules in banks. To make things simple, just think that the deposits are already there in the Central Bank (since it can emit any required amount of money). And don't point to Federal Reserve, if you talk about creating money without a central bank, since Fed IS a central bank.
And I still don't understand your analogy with cars. Care to expand more on this more?
No what im trying to get you to do is expand what you think is money. To understand the financialized economy you have to grasp credit money and shadow banking
Read this about shadow banks:
http://www.stlouisfed.org/publications/re/articles/?id=2165
http://www.newyorkfed.org/research/staff_reports/sr458.html
Car finance is just an example of where a bank can create credit w/o deposits. I just picked that because people are familiar with it. You go to BMW to lease a car. BMWFS creates a loan to itself out of thin air. BMW buys the car then rents the car to you. Then They pack these leases together as an asset backed security and these papers are used as money. No deposits required
Any securitized instrument can also be used as money. Residential Mortgage Backed Securities are an example. Theres other things like repos, money market mutual funds, asset backed commercial paper, etc..