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Wandering_Dog

The impossibility of liquidity in xrp

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28 minutes ago, Wandering_Dog said:

Everyone, anyone, first XRPL is an open ledger, and second all clearing, being completed by XRP as a standard, will necessarily make all contracts clearable by XRP balances, hence all off balance sheet contracts issued by anyone and everyone. Jesus, don't you run an exchange? If xrp is the settlement layer, its the base of everything. 

If you issue an XRPL IOU it has no value to anyone unless person trusts that this IOU has real value backing it. You can not issue XRP on XRPL, but everything else can be issued (tokenised).

If you issue an off-ledger contract in XRP, the risk for not being able to clear it as agreed is purely your risk and has nothing to do with the asset used for clearing.

XRP is the counter currency for everything but not the settlement of everything. Settlement is done with something else.

I still feel all this now discussed is problem that does not currently exist and therefore there is no need to find a solution for it.

Are you talking about IOU’s or what you mean with settlement layer? XRP itself?

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33 minutes ago, lucky said:

The numbers don't support your story. Last 5 years, half a trillion dollars (+38%) have been brought into circulation. Even if you look at the 30 year chart, nothing exponential going on, just gradual increase. Could you address my point in that same post you reply to, why an elastic money supply system should only expand, never retract?

chart1.jpg

https://www.investopedia.com/ask/answers/052715/how-big-derivatives-market.asp

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56 minutes ago, lucky said:

You keep ignoring the fact that money is nothing more than a credit accounting system. Having money means society (the network of people that accept the asset as a payment) owes you stuff. Spending money means society owes you less, and instead society owes the person you buy from. A purchase means trading the debt by society for goods and services. Therefore, credit expressed in money is a commodity.

http://www.redmarketer.com/?p=2331

I specialize in credit money financial macroeconomics--Lucky, I literally read thousands of pages of information about credit dynamics from all disciplines. You are essentially telling a gardener: "Yeah, but plants, man." 

Edited by Wandering_Dog

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6 minutes ago, Wandering_Dog said:

All the time i thought you were talking about the comparison of a gradually increasing money supply (the US dollar) versus a fixed supply system (XRP and bitcoin). So you're talking about a system that is built on top of the basic money supply.

Could you please explain why that derivatives market could not be built on XRP as a base unit of account?

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Just now, lucky said:

All the time i thought you were talking about the comparison of a gradually increasing money supply (the US dollar) versus a fixed supply system (XRP and bitcoin). So you're talking about a system that is built on top of the basic money supply.

Could you please explain why that derivatives market could not be built on XRP as a base unit of account?

It would be.

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Just now, Wandering_Dog said:

It would be.

So your argument is that it does hardly matter, whether dollars or XRP are being used as a base unit of account? Because the system that is built on top of it is a magnitude bigger than the actual supply on which it depends?

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1 minute ago, lucky said:

So your argument is that it does hardly matter, whether dollars or XRP are being used as a base unit of account? Because the system that is built on top of it is a magnitude bigger than the actual supply on which it depends?

If you use XRP as a base, it means that a contract denominated in USD can be settled in XRP, everything is denominated in XRP implicitly.

The debt that is built upon some unit of account, such as the USD or XRP, is magnitudes larger than the base layer of USD_reserves at the Fed or the base amount of XRP on XRPL. No fixed amount of some unit of account will ever be sufficient to resolve a global liquidity crisis of all assets, and price adjustment is meaningless is this situation, as we are interested in specific accounts requiring specific transfers at specific times in order to prevent calamitous consequences for society that far outweigh the consequences of selective intervention. 

 

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35 minutes ago, lucky said:

So your argument is that it does hardly matter, whether dollars or XRP are being used as a base unit of account? Because the system that is built on top of it is a magnitude bigger than the actual supply on which it depends?

The potential difference I see, is due to How the leverage creation is done.

1. Fractional reserve banking, via loans, and expanding bank balance sheets.

2. Narrow Banking (no fractional reserve loans) - no loans, means the system will have to create leverage via market orderbooks.

Shorting requires borrowing crypto, but the loans are issued by Exchanges, not using fractional reserve methods, but fully collaterallized positions, subject to an immediate margin call execution. We see this method with some of the Stable Coins.

Various types of Derivatives, can also be tied to crypto assets, creating more leverage in the system. My concern is that the underlying asset will be trading in market conditions which are being primed for an automatic smart contract executed crash. With an asymmetric probability of the same outcome on the bull run, up side.

These methods of creating credit / leverage differ from bank loans. Yes the Exchange narrow bank balance sheets can expand, just like a Commercial Bank. However a loan being called due can be renegotiated, and has other work out options... options that an Exchange/ narrow bank does not have avaliable to offer their clients, because everything is fully collaterallized.

I'm curious what monetary folks like @Wandering_Dog and @tar think of the difference between the macro systemic risks this architecture creates.

Like a compare and contrast, between a liquidity crisis moving through a well known and understood fractional reserve system, with a CB and supply elasticity ..vs.. this new system, which is based upon fixed supply crypto ledgers and market orderbook mechanisms, not existing within a domestic jurisdiction, economy, fiat system.

Edited by KarmaCoverage

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1 minute ago, Wandering_Dog said:

If you use XRP as a base, it means that a contract denominated in USD can be settled in XRP, everything is denominated in XRP implicitly.

The debt that is built upon some unit of account, such as the USD or XRP, is magnitudes larger than the base layer of USD_reserves at the Fed or the base amount of XRP on XRPL. No fixed amount of some unit of account will ever be sufficient to resolve a global liquidity crisis of all assets, and price adjustment is meaningless is this situation, as we are interested in specific accounts requiring specific transfers at specific times in order to prevent calamitous consequences for society that far outweigh the consequences of selective intervention. 

Yet there is a fixed amount of US dollars in circulation (printed), which gradually increases. See chart earlier. Your story just does not add up. There is no reason XRP could not be injected at specific accounts at specific times to prevent the calamities that you describe.

28 minutes ago, Wandering_Dog said:

You are essentially telling a gardener: "Yeah, but plants, man." 

Or perhaps the gardener is too much focused on details (trees) and misses the big picture (forest).

I'd still like to hear your answer why your preferred elastic supply money system should only expand, not retract.

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1 minute ago, lucky said:

Or perhaps the gardener is too much focused on details (trees) and misses the big picture (forest).

Always a possibility. 

1 minute ago, lucky said:

I'd still like to hear your answer why your preferred elastic supply money system should only expand, not retract.

It does both. The expansion of the Fed balance sheet was rapidly reversed during the crisis, its end state was larger than before the crisis. It's like a muscle, it's built to absorb and emit energy.   

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2 minutes ago, Wandering_Dog said:

It does both. The expansion of the Fed balance sheet was rapidly reversed during the crisis, its end state was larger than before the crisis. It's like a muscle, it's built to absorb and emit energy.

That makes me think Ripple's intention of holding half the supply by 2021 is to be that muscle. Or enable the IMF to play this role.

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1 hour ago, Wandering_Dog said:

I'd disagree with the Germans here (natürlich). The point of the CB is that it can absorb any losses, and people's brains may melt when the CB's balance sheet is A:0 | L: unendlichkeit, especially the Germans. The CB is does not obey account convention, and rules thereto are self inflicted wounds. 

Haha, but a balance sheet without equity  makes even a CB incapable of acting -> show me one CB that has no foreign debts.

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