New answers tagged

-1

Don't have a load of time so I'll just post the basic money model. With fractional reserve banking banks (retail) must keep a proportion of deposits as reserves (dictated by central banks). Say 20%. This means 80% can be lent out. This money lent out finds it's way back into the banking sector again (either the money is spent and consequently ends up in the ...


1

Let me begin by saying 1Muflon1's answer should be accepted. It is correct. The only reason that I am answering is that there appears to be some confusion by others about how this would work. In addition, there is a fascinating implication to your question that seems to have been missed. Let us also dispose of Bitcoin as a currency and replace it with ...


2

As pointed out by James Wattam, it is possible to interpret price level falls 10% in 2019 as $$ \frac{P_{2018}}{P_{2019}} = 100\% + 10\%. $$ I agree with you that the interpretation $$ \frac{P_{2019}}{P_{2018}} = 100\%-10\% $$ makes more sense. The question comes down to what the writer of the text considers the base year.


2

Liabilities in 2018: \$90 million Liabilities in 2019: \$90 million Price level falls 10% from 2018 to 2019, implies 1 2019 dollar is worth 1.1 2018 dollars. "exchange rate": 1.1 2018D/2019D \$90 million 2019D * \$1.1 2018D/2019D = \$99 million 2018D


-4

The answer is yes. If someone wanted to borrow say 0.1BTC from bank A, then the bank would freshly create an IOU of 0.1BTC and add that to your account. This IOU would be spendable (this may require government decree). So now the Bitcoin money supply has grown by 0.1BTC. If you used the IOU of 0.1BTC to buy a car from someone than had an account at bank B, ...


1

They cannot create more tokens because number of Bitcoins is limited by the code (only 21 million of bitcoins can be ever mined). However, they can increase money supply of bitcoins via lending. For example, if someone deposits 100 Bitcoins in a private bank and a bank is not forced by regulation or market self-regulation to keep 100% reserve, then they ...


1

Looking at the numbers again plan B is simply worse (assuming a non-negative interest rate). In any specific month you look at, you have to pay no less under plan B than under plan A.


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