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P3T3RIS

XRapid ONLY uses XRP as counter currency

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1 hour ago, Tinyaccount said:

Huh?  You are the one making the extraordinary claim...  the burden of proof is on you my friend.

Also are you saying that there is no way you could be wrong?

May I remind us all of the famous quote by Laurence J. Peter:

An economist is an expert who will know tomorrow why the things he predicted yesterday didn't happen today.

I like this argument. With empirical evidence of instability from the 2008 crisis, where the LOLR function prevented collapse, we turn the whole thing around by ignoring that information, and claiming it is not "us" who needs to prove the system stable, it is "you" who needs to prove the system is unstable! 

Tiny, it is not I who needs to prove you are idiot, it is you who needs to prove to us that you aren't. :connie_hooked:

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1 hour ago, Julian_Williams said:

This thread worries me; it confirms that if Ripple XRP goes ahead I will get richer and richer but it also confirms that unless there is some solution to this problem of inelastic supply I am getting rich because I am first a mover in a bubble scheme that will destroy the financial system on which every economy in the world depends.

I would like someone to correct my my amateur analysis please

That is essentially the case, as I currently understand it. 

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14 minutes ago, Wandering_Dog said:

Tiny, it is not I who needs to prove you are idiot, it is you who needs to prove to us that you aren't.

Oh I’m definitely an idiot.  I prove it most days...   :) 

But you seem to be conflating the world economy and XRP.

15 minutes ago, Wandering_Dog said:

With empirical evidence of instability from the 2008 crisis, where the LOLR function prevented collapse, we turn the whole thing around by ignoring that information,

You are trying to say that because our flawed economic systems are built on shaky foundations and have threatened to totally collapse until saved by a particular influx of credit suited to the fiat system,  that implies that the XRP system will also.

And that therefore the extraordinary claim needing proof is that ‘XRP won’t be a disaster’.  I think it’s the other way around.

Fair enough.  We have diametrically opposed views, and you are certain of your expertise,  whereas I’m just saying that economics seems to be one part witchcraft.  We won’t agree...    so I will leave it here.

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29 minutes ago, Wandering_Dog said:

I like this argument. With empirical evidence of instability from the 2008 crisis, where the LOLR function prevented collapse, we turn the whole thing around by ignoring that information, and claiming it is not "us" who needs to prove the system stable, it is "you" who needs to prove the system is unstable! 

Tiny, it is not I who needs to prove you are idiot, it is you who needs to prove to us that you aren't. :connie_hooked:

 

 

5 minutes ago, Tinyaccount said:

Oh I’m definitely an idiot.  I prove it most days...   :) 

But you seem to be conflating the world economy and XRP.

You are trying to say that because our flawed economic systems are built on shaky foundations and have threatened to totally collapse until saved by a particular influx of credit suited to the fiat system,  that implies that the XRP system will also.

And that therefore the extraordinary claim needing proof is that ‘XRP won’t be a disaster’.  I think it’s the other way around.

Fair enough.  We have diametrically opposed views, and you are certain of your expertise,  whereas I’m just saying that economics seems to be one part witchcraft.  We won’t agree...    so I will leave it here.

@KarmaCoverage @P3T3RIS Have you a third opinion to add here please? 

Edited by Julian_Williams

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8 hours ago, BrownBear said:

When you buy one currency you automatically sell another.

You can't 'automatically sell' the same thing that you're buying, because you don't have it. Hence the need to 'buy' in the first place. 

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2 hours ago, Julian_Williams said:

 

@KarmaCoverage @P3T3RIS Have you a third opinion to add here please? 

First of all I think there is still yet to be some amount of discovery here. So the real answer is we dont know yet. However part of the real answer is we have seen economic systems before and have a pretty good understanding of them, so it's not like we have no clue at all.

The only thing I can thing to add, aside from this link to another thread where I need to reply to something on this same topic.

In this graphic  I made up what I think a domestic monetary system will look like after CBDC is being issued by Central Banks. On the left side is the "Fractional Reserve Banking" system, on the right side is the CBDC "Narrow Banking" system.

1152462108_CBDCmarket.thumb.png.77e2faf1c9d1683ee5816c03c63df777.png

The key difference being that narrow banks business model does not lend out client deposits, so... not fractional reserve, and 100% of the deposits are kept on deposit. The narrow banking model fits Crypto, because it is very hard to lend out crypto due the practical lack of enforce-ability on the collection side of things.

At the top of the chart is the Central Bank "CB", and in the fractional reserve system, each bank holds some amount of that CB's currency on deposit at the CB in a "reserve account". That is the fractional base, from which the commercial bank can determine how many loans they can make. Meaning that the amount of their reserves determines how big their balance sheet can be. 

When a fractional reserve banking system has a financial crisis.... shrinking commercial bank balance sheets > less lending > less business activity > shrinking commercial bank balance sheets > .... Negative feedback loop

The only way the vicious cycle can be broken is by the CB expanding it's balance sheet, and in doing so re-inflating or re-strengthening (backing up) the commercial bank's balance sheets. This can be done in many tactical ways, of which we saw some new ones this go around with QE 1&2.

In fact that one economist that was focused on flows, made the assertion that the Fed did not tactically act as a LOLR, but rather as a Market Maker or "Dealer of Last Resort" when the Fed expanded it's balance sheet this go around with QE.

---

All that to say that what @Wandering_Dog is saying applies to the left side of the chart and what he is saying is accurate, sound, and well understood. It can be argued that those same principals would apply to the right side of the chart.

However I would personally pause and think about it before applying those same principals, to take some time to appreciate the difference in leverage creation that happens on the right side with narrow banking, and how that is different than the left side with fractional reserve banking.

This is where we enter somewhat uncharted territory, yet "the more things change, the more they stay the same" can be applied. On the right side things operate much more like the stock exchanges with brokers and dealers, none of who use fractional reserve business models.

So the leverage (ie loans and credit creation) are based upon a percentage of the collateral (rather than CB reserve account balances). Lets go with a 50% coverage ratio for easy math examples.

Client A deposits $1000 crypto at an Exchange/Narrow bank who offers loans against crypto collateral. So Client A deposits the $1000 crypto and gets a loan for $500 fiat. We just created $500 new supply of fiat.

People start doing economic activity based upon this new supply of fiat, and everything is just going swell... more people follow and buy crypto, it goes up, they take loans out, and everything is going swell... Positive feedback loop.

"Aww shucks", time for a crypto market crash. That original $1000 is now worth only $800, so Client A needs to pay back $100 of his loan. He does not have the fiat cash, so the exchange sells his crypto deposits on the open market, this drives the market price down, making other clients B, C & D who all have loans get a margin call, and they have to post more collateral, or sell some of their deposits to get back to the 50% ratio. Now that they have sold the price is even lower, and Client A needs to sell more.... Negative feedback loop.

On the left side the CB can create more reserves by expanding it's balance sheet in an attempt to break the negative feedback loops, and can constrain lending to break a positive feedback loops. 

On the right side, with crypto (not necessarily CBDC, just fixed supply crypto) there is not a CB who can expand it's balance sheet and the amount of "base units" to break the negative feedback loops, so when one sets in, the system will be in for one hell of a crash.

I think we should be able to observe this with bitcoin at some point in the next couple of years, like back down to under the "mining is profitable" threashold, which will cause the network to have an existential crisis. 

With XRPLedger, Ripple has the potential capacity with their XRP in escrow to act in the same manner as a CB.... but this is uncharted territory so we dont know what they would or would not do, time will tell.

Edited by KarmaCoverage

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3 hours ago, Wandering_Dog said:

like this argument. With empirical evidence of instability from the 2008 crisis, where the LOLR function prevented collapse, we turn the whole thing around by ignoring that information, and claiming it is not "us" who needs to prove the system stable, it is "you" who needs to prove the system is unstable! 

 Tiny, it is not I who needs to prove you are idiot, it is you who needs to prove to us that you aren't. 

No, this is nonsense. Making predictions or statements about a future state of a system, even “ fact-based” predictions, lays the burden of proof on the “ prophet” and not the ones he’s adressing. 

Anyway: macro economics is about complex systems, even if something has played out in the past, if just one parameter has changed ( and believe me: many parameters are different now than in 2008) the outcome can be 100% different. Predictions based on Macro Modelling isn’t science :  falsification isn’t possible until the actual event happens and even reconstruction ( to repeat the “ experiment”) is impossible. Educated guesses, that’s what they are. 

Edited by Ripple-Stiltskin

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Just because something has limited supply doesn’t mean the entire ******* world economy is going to collapse. You’d have to be actually stupid to believe that.

Beanie Babies.

Gold.

Limited Edition Sneakers.

Small-Run Vinyl Records.

Your mom.

All these things have limited supply (with some flexibility in the case of gold. Pretty sure they stopped making Beanie Babies.)

Call me when these things collapse the global economy. You people are daft. 

LOLR is and always will be the central banks. It’s kind of their job. Ripple may lend from their stash eventually as well, as Miguel Vias has stated.

Edited by ADingoAteMyXRP

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2 hours ago, KarmaCoverage said:

First of all I think there is still yet to be some amount of discovery here. So the real answer is we dont know yet. However part of the real answer is we have seen economic systems before and have a pretty good understanding of them, so it's not like we have no clue at all.

The only thing I can thing to add, aside from this link to another thread where I need to reply to something on this same topic.

In this graphic  I made up what I think a domestic monetary system will look like after CBDC is being issued by Central Banks. On the left side is the "Fractional Reserve Banking" system, on the right side is the CBDC "Narrow Banking" system.

1152462108_CBDCmarket.thumb.png.77e2faf1c9d1683ee5816c03c63df777.png

The key difference being that narrow banks business model does not lend out client deposits, so... not fractional reserve, and 100% of the deposits are kept on deposit. The narrow banking model fits Crypto, because it is very hard to lend out crypto due the practical lack of enforce-ability on the collection side of things.

At the top of the chart is the Central Bank "CB", and in the fractional reserve system, each bank holds some amount of that CB's currency on deposit at the CB in a "reserve account". That is the fractional base, from which the commercial bank can determine how many loans they can make. Meaning that the amount of their reserves determines how big their balance sheet can be. 

When a fractional reserve banking system has a financial crisis.... shrinking commercial bank balance sheets > less lending > less business activity > shrinking commercial bank balance sheets > .... Negative feedback loop

The only way the vicious cycle can be broken is by the CB expanding it's balance sheet, and in doing so re-inflating or re-strengthening (backing up) the commercial bank's balance sheets. This can be done in many tactical ways, of which we saw some new ones this go around with QE 1&2.

In fact that one economist that was focused on flows, made the assertion that the Fed did not tactically act as a LOLR, but rather as a Market Maker or "Dealer of Last Resort" when the Fed expanded it's balance sheet this go around with QE.

---

All that to say that what @Wandering_Dog is saying applies to the left side of the chart and what he is saying is accurate, sound, and well understood. It can be argued that those same principals would apply to the right side of the chart.

However I would personally pause and think about it before applying those same principals, to take some time to appreciate the difference in leverage creation that happens on the right side with narrow banking, and how that is different than the left side with fractional reserve banking.

This is where we enter somewhat uncharted territory, yet "the more things change, the more they stay the same" can be applied. On the right side things operate much more like the stock exchanges with brokers and dealers, none of who use fractional reserve business models.

So the leverage (ie loans and credit creation) are based upon a percentage of the collateral (rather than CB reserve account balances). Lets go with a 50% coverage ratio for easy math examples.

Client A deposits $1000 crypto at an Exchange/Narrow bank who offers loans against crypto collateral. So Client A deposits the $1000 crypto and gets a loan for $500 fiat. We just created $500 new supply of fiat.

People start doing economic activity based upon this new supply of fiat, and everything is just going swell... more people follow and buy crypto, it goes up, they take loans out, and everything is going swell... Positive feedback loop.

"Aww shucks", time for a crypto market crash. That original $1000 is now worth only $800, so Client A needs to pay back $100 of his loan. He does not have the fiat cash, so the exchange sells his crypto deposits on the open market, this drives the market price down, making other clients B, C & D who all have loans get a margin call, and they have to post more collateral, or sell some of their deposits to get back to the 50% ratio. Now that they have sold the price is even lower, and Client A needs to sell more.... Negative feedback loop.

On the left side the CB can create more reserves by expanding it's balance sheet in an attempt to break the negative feedback loops, and can constrain lending to break a positive feedback loops. 

On the right side, with crypto (not necessarily CBDC, just fixed supply crypto) there is not a CB who can expand it's balance sheet and the amount of "base units" to break the negative feedback loops, so when one sets in, the system will be in for one hell of a crash.

I think we should be able to observe this with bitcoin at some point in the next couple of years, like back down to under the "mining is profitable" threashold, which will cause the network to have an existential crisis. 

With XRPLedger, Ripple has the potential capacity with their XRP in escrow to act in the same manner as a CB.... but this is uncharted territory so we dont know what they would or would not do, time will tell.

Thanks Karmacoverage - there is a lot I can understand (some is above my head)

The critical bits are summarised in your last four sentences (orange)  I take this to mean the CBDC's are not such a big worry. 

The worry is with the private DA's like XRP could easily get caught in negative feedback loops that would end in huge crashes (Bitcoin might already be due for one).  The remedy would be in the hands of the issuer or the stakeholders,  for instance Ripple might be responsible for keeping track of XRP (because it has this huge reserve of XRP in escrow).  This is bizarre and unacceptable because Ripple are a private company that has handed over control of managing XRP to the XRP ecosystem.

XRP is very attractive for numerous reasons, it is likely to become a world bridging asset and could be valued in tens of trillions of dollars.  It should must be under the control of democratic institutions like the World bank.  The escrowed supply owned by Ripple will eventually run out.  The body responsible for managing XRP would need the tools to elasticate the XRP supply, but these tools will be under the control of the nodes which are privately operated.

It seems there is a lot to discuss

 

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