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15 minutes ago, Hodor said:

TIL about "Apricot" comptuers!  https://en.wikipedia.org/wiki/Apricot_Computers

I agree with this analogy; I'm hopeful (I don't know the inner workings however) that Ripple is making their product line as easy and low-cost as possible without sacrificing profits. 

IMO the Apple model is to place 'awesome design' ahead of innovation or even utility.  If it saves banks money they will use it, yes, but if it's easy to use and maintain it will take over at an incredible speed. 

Love the analogy @Julian_Williams - once again you are writing some poetry there. 

 

 

Interesting link to Apricot computers.  They were a good innovative company in many ways ahead of IBM but that did not help them.

Ripple are a much more considered long term land grab than the IBM Microsoft partnership which was not preplanned over a number of years.  Apple and games machines were both niches not served by the IBM DOS partnership and this was the only reason they survived,

If we look at the position of Etherium smart contract software it looks to me like one of those Amstrad computers, it is not going to link in easily with industry standard software and its role is covered by Codius.  Stellar peer to peer software may be clever but it is only a matter of time before there will be Stellar like programs on offer on the ripplenet ILP platform from Ripple and Coil.  To me, as a long term trader who does not day trade, this makes these two projects uninvestable.

By the way you are welcome to develop any analogies  I create.   I have no plans to blog them myself.

Edited by Julian_Williams

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Very informative as usual Hodor, thank you. Absolutely mind-boggling to see how much the purchasing power of the US dollar has decreased over the past 100 years. Perhaps the biggest theft in history.

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1 hour ago, Danny said:

Very informative as usual Hodor, thank you. Absolutely mind-boggling to see how much the purchasing power of the US dollar has decreased over the past 100 years. Perhaps the biggest theft in history.

It is really apparent when you look at that diagram; I think when the Federal Reserve abandoned the gold standard, I believe it was the beginning of the end for fiat currency. 

If that had never happened, and our currency was always redeemable for a certain quantity of precious metal, the demand for USD would never have declined globally, and there would be much less incentive for citizens to trade their fiat currency for digital assets. 

Thanks for the comment!

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2 hours ago, Julian_Williams said:

Apple and games machines were both niches not served by the IBM DOS partnership and this was the only reason they survived,

Apple focused on its 'core use cases' to survive and then thrive.  It's a great example of the importance of having a product that truly provides value.

The interesting chasm in the analogy for me is determining what businesses and people are 'purchasing' when it comes to cryptocurrency.  Is it the value in the cryptocurrencies themselves, or is it the true utility of the digital asset?  Because even though Bitcoin and Ethereum have very little utility, they are still traded at levels above XRP. 

To me, that's a failure of understanding by the majority of crypto day traders / long term traders.  They've been sold on 'products' that are obviously inferior to us.  Not only should XRP in the #1 spot, it should be in the stratosphere compared to other cryptos.  It will happen eventually, but its curious to see how many crypto traders haven't really done any research, and are just buying what their friends / or popular social media personalities are recommending. 

Re: your analogy - I love it and who knows?  I might take you up on the offer at some point.  However, the way you write in your own flow-of-thought is probably far more powerful than I could do it justice.  It's not just me - I think there are many fans that would love to read your content.  Anyway - I won't be pushy about it, but you've obviously got some skill.  :yes3:

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49 minutes ago, Hodor said:

Apple focused on its 'core use cases' to survive and then thrive.  It's a great example of the importance of having a product that truly provides value.

The interesting chasm in the analogy for me is determining what businesses and people are 'purchasing' when it comes to cryptocurrency.  Is it the value in the cryptocurrencies themselves, or is it the true utility of the digital asset?  Because even though Bitcoin and Ethereum have very little utility, they are still traded at levels above XRP. 

To me, that's a failure of understanding by the majority of crypto day traders / long term traders.  They've been sold on 'products' that are obviously inferior to us.  Not only should XRP in the #1 spot, it should be in the stratosphere compared to other cryptos.  It will happen eventually, but its curious to see how many crypto traders haven't really done any research, and are just buying what their friends / or popular social media personalities are recommending. 

Re: your analogy - I love it and who knows?  I might take you up on the offer at some point.  However, the way you write in your own flow-of-thought is probably far more powerful than I could do it justice.  It's not just me - I think there are many fans that would love to read your content.  Anyway - I won't be pushy about it, but you've obviously got some skill.  :yes3:

Yes it is puzzling how experts take up these fixed positions and are not open to new ideas and new knowledge, but the behaviour is a very common phenomenon.  As Max Plank said "A new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die, and a new generation grows up that is familiar with it."  This is as true in politics, religion, morals, cultural preferences, investment as it is in science.

The crypto community, and the people they have indoctrinated, will never re-evaluate their positions.  Such conversions are very rare.  How many serious Christians become Muslims and and how many serious Muslims become Christians?    It does not happen.   The change will come from a new generation of investors who do not carry the baggage of preconceived viewpoints.

That said I am an optimist.  I think the relationship between modernisation of banking practices and opportunities provided by Ripple will push this through.  The investment will not come from the sort of people that are involved with supporting Bitcoin, they are already too stuck in their ways.  All the money sloshing around at present is old crypto money, it does not belong to us.

XRP is building a very strong community of its own.  It is interesting how mixing the Bitcoin community with the XRP community is as hard as mixing oil with water.

 

 

Edited by Julian_Williams

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1 hour ago, Hodor said:

It is really apparent when you look at that diagram; I think when the Federal Reserve abandoned the gold standard, I believe it was the beginning of the end for fiat currency. 

If that had never happened, and our currency was always redeemable for a certain quantity of precious metal, the demand for USD would never have declined globally, and there would be much less incentive for citizens to trade their fiat currency for digital assets. 

Thanks for the comment!

Great article @Hodor  I'd like to jump in on both comments to add some additional insights.  Danny, though the dollar has lost a lot of purchasing power over the last 100 years, the difference has been captured in wage increases which have more-or-less matched the inflation associated with the expansion of the dollars money supply.  The inflation rate and purchasing power, over wage increases, hasn't been consistent across economic and industry sectors, but for the most part, it's a zero-sum game.  Some areas, such as the medical industry, have seen larger gaps develop.  Real estate is another area which has been disproportionate to the norm.  

Hodor, I agree that the closing of the gold window by Nixon in 1971 was the beginning of the end.  I remember my father always saying that in the early 1970's everything changed but he couldn't figure out what it was.  To your point, the demand for dollars exploded after this as OPEC anchored to the USD for global energy sales and foreign exchange reserve accumulation picked up steam.  In fact, global demand for dollars has almost reached hysterical proportions across the decades since 1971.  That has contributed to the large global imbalances which are now needed to be unwound or reversed.

XRP will never replace the full international reserve function of the dollar because this function will be fragmented into different accountabilities.  XRP will take over one of the existing key functions of the dollar, which is to facilitate international payments clearing.  The demand, or even need, for reserve accumulation, will be addressed through different measures and services.  The goal is to eliminate reserve accumulation altogether.  XRP adoption will indirectly assist in this goal, but the direct influence will come from central bank monetary policy and how long it can maintain the fractional banking methodology.   

XRP will also create and provide whole new services and opportunities which the dollar never could.  

Sorry for jumping in on your thread.  Just having a blast with this whole process and love sharing with the community.  Thanks for another fantastic article. 

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3 hours ago, JCCollins said:

how long it can maintain the fractional banking methodology. 

This statement resulted in a type of light-bulb moment for me

  1. A number of analysts attribute Bitcoin's sudden rise in value in the fourth quarter of last year to the supply of Tether. 
  2. These same analysts I've heard say that Tether is based on fractional reserve, but that it serves the purpose of a constant pegged currency, thereby artificially increasing the supply of fiat going 'into' crypto markets. 

Assuming you agree with that point:

  1. Banks in the United States are allowed to borrow money that they don't actually have.  They are also allowed to invest deposits up to a certain extent. 
  2. This means that the supply of value is artificially increased through this 'fractional reserve' system just like how Tether kept the demand for Bitcoin propped up. 

I'm sure I'm getting one or more of these concepts mistaken, but I'm thinking that cryptocurrency isn't the only asset that benefits from artificial demand - I think fiat monetary policy is aimed at influencing the economy and creating a nice, increasing level of demand through various policies.  Lower interest rates is the 'public-facing' part of that explanation that is normally communicated, but I think it goes much deeper than that.  

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Hodor, you are ridiculously invaluable to the XRP community.  I've been reading your blogs since day 1 and your insight, knowledge and intellectual writing/typing skills are amazing.  I can only hope that everything you theorize comes to fruition.  "Hold the door."

Secondary shot out to Julian_Williams.  Wow, great comparisons - spot on!

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Can you guys give an example of "fractional reserve banking"?

I think I'm hearing the money multiplier model, but I thought I'd ask for clarification. Just to make sure, the financial system doesn't require banks to hold a fraction of their reserves. Most central banks don't have a reserve requirement, either in practice, or no RR is legally stipulated at all.

https://www.boeckler.de/pdf/v_2015_10_24_lavoie.pdf 

 

Edited by Wandering_Dog

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53 minutes ago, Wandering_Dog said:

Can you guys give an example of "fractional reserve banking"?

I think I'm hearing the money multiplier model, but I thought I'd ask for clarification. Just to make sure, the financial system doesn't require banks to hold a fraction of their reserves. Most central banks don't have a reserve requirement, either in practice, or no RR is legally stipulated at all.

https://www.boeckler.de/pdf/v_2015_10_24_lavoie.pdf 

 

It has been called the money multiplier model.  Basel 3 regulations from the BIS have stipulated reserve increases by banks.  The liquidity in the Nostro/Vostro accounts can easily provide these reserves and much more.

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1 hour ago, JCCollins said:

Thanks for the deeper engagement on this topic @Hodor  I wouldn't state that I'm an expert on the Tether (USDT) issue but from what I have read its obvious that there is a connection between USDT and Bitcoin for the purpose of price manipulation or false price discovery.  There is much which isn't known about Tether and the mechanism which expands the supply of USDT.  Contrast this against Ripple and the openness of its senior management team or the visibility of the XRP ledger. 

Since the First Bank of Amsterdam started piloting the central bank and fractional banking method in 1603, and the Bank of England went live on a massive scale in 1693, the method of expanding global liquidity was tethered to the need to have an ever-increasing money supply.  The money supply expands under low-interest rates and liquidity keeps growing and providing the value needed to fund everything from the industrial revolution to the movement of empire and all its associated support columns, such as banking, academia, industry, politics, etc.. 

The fractional methodology is engineered, as you stated, to be manipulated by interest rate movements.  Money becomes cheap under low-interest rates and the money supply expands.  Money becomes expensive under high-interest rates and the money supply contracts leaving little liquidity to fund development and support industry and fund capital markets.  This is what happened during the Great Depression.  

As an interesting side note, higher interest rates cause deflationary pressure in the domestic economy but creates increased global demand as higher interest rates provide better yields on Treasury bonds.  This is called the Triffin Paradox and is the fundamental reason why domestic national currencies can no longer be used in a global capacity.  But because of the nature of fractional banking and fiat currencies, the money supply will always need to keep expanding overall.  This expanding money supply needs products to both funnel and hold liquidity.  Futures, stocks, derivatives, and assumably Tether and Bitocin, have all served as slaves to the fractional/fiat dynamic. 

When we consider that the supply of XRP was initially set at 100 billion and will decrease as demand and adoption increases, and contrast that against a fiat money supply that expands with artificial demand, the inverse value relationship between fiat and XRP becomes obvious.  The purchasing power of XRP will increase at a steady pace over time while fiat requires all sorts of financial and economic adjustments to maintain purchasing power, such as wage increases, the consumer price index, upward valuations of securities, futures, derivatives, exchange rate arrangements, etc.., all to make the central bank fractional system function and be sustainable.

But now this system is no longer sustainable and cannot continue providing the liquidity needed by the global economy without causing a further crisis and more pronounced imbalances. Bitcoin, and all others cryptos, have benefited from the artificial demand which has spilled over from the traditional fractional/fiat system.  To this old system, crypto is just another product which can be used to expand the fiat money supply.  The relationship between Bitcoin and Tether you referenced is the perfect example of this. 

But what isn't widely understood by most is that XRP will flip all of this over as the XRP money supply will always be contracting as adoption and demand increases. It is the complete opposite of the fractional/fiat arrangement.  Some of the large banks and global institutions understand this and are positioning themselves for the inevitable flipping of the international system.  In the meantime, there will be those who fight the change, as humans do, and there will be those who attempt to drain as much out of the old system and into the new system as they can before the fundamental pieces of the transition have been implemented. 

It is my position that crypto regulation will start this phase of the transition and Bitcoin will not survive it.  It is likely that Bitcoin has been a fiat tool from the beginning.  XRP can chug away building its architecture and the Bitcoin manipulators can continue draining away artificial value.  But when the flip happens it will be fast and then the rest of us can set back and watch as real value builds on top of the XRP ledger.   

 

WOW!!

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47 minutes ago, JCCollins said:

It has been called the money multiplier model.  Basel 3 regulations from the BIS have stipulated reserve increases by banks.  The liquidity in the Nostro/Vostro accounts can easily provide these reserves and much more.

Ok, I have to point out then, as politely as can done, that the money multiplier model is incorrect. This isn't to say that your argument is invalid, because while that premise is untrue, the reality supports a very similar conclusion, credit requires no pre-existing money and this system is causing very serious issues regarding "sustainability". We would need to define sustainability here, of course, because it was actually the sustainability of fiat currency systems that led to their adoption in the first place--we are talking about how those systems are being executed currently--that is, the outcomes being generated are unsustainable. But technically they can be executed in a fashion that leads to more sustainable outcomes--this is a political issue. Anyway, I think it's worth adding to the discussion, but I don't mean to sidetrack things. Its always great to read both your and Hodor's contributions, I look forward to both of them. 

The Basel 3 regs sought to increase liquidity during a future crisis, and implemented several measures in order to accomplish that, such as the LCR, a change to cap requirements, etc--each change assumes the money multiplier model to be correct and treats money as a commodity, which is a mistake. The predominant economic theory, the "Neoclassical Synthesis", has a number of structural flaws, each of which contributed to our being here today. Whether or not the BIS can clean up the monetary theory foundations for its future regulation is a question we all have, especially when we see so many recent publications from them with a distinctly heterodox (credit-based, or chartalist) approach to money. 

Edited by Wandering_Dog

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On ‎6‎/‎19‎/‎2018 at 7:50 AM, Hodor said:

:hi:

The search for real value in blockchain technology is afoot!  We've all been there; searching through any evidence for a good investment, trying to separate online hype from reality.

In this blog, I describe some of the recent progress Ripple has made with their banking clients & cover some recently-released videos, including on in which David Schwartz sits down for a joint interview.

On the community front, there are a couple high-profile events to discuss as well, with the main one being the new symbol for XRP!

Hope you enjoy the read & please leave any feedback below.  Also, feel free to share my blog with a friend or on any other platform - and thank you for doing so!    :thank_you2:

Hey @Hodor it's difficult to read your last article. The beginning and end words are all cut off on my screen.

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