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Wandering_Dog

Yanis describes an XRP-like clearing asset

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29:50 -> https://www.wincott.co.uk/lectures/Wincottanniv.mp3

"A new Bretton Woods, that restricts financial flows, legislates global curbs on tax havens, and last but not least denominates cross border trade and finance in a digital IMF-issued transnational accounting unit that allows us at long last to implement Keynes' brilliant idea of an International Clearing Union and financing, using those instruments, the Green New Deal that the world, humanity, nature, needs."

Yanis is describing a fully flexible clearing system, XRP is fixed quantity. Neoliberals know the needed solution, and its as though they are seeking to disrupt it already to retain control, such as through an XRP-like solution, which is unstable, regardless of the consequences.   

The solution will be flexible, the nodes operated by state institutions. 

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1 hour ago, Wandering_Dog said:

flexible clearing system, XRP is fixed quantity. 

XRP is not static. Codebase can be changed to make it flexible in terms of quantity, however, quantity is only one facet. The floating price can account for the static supply. Maybe we can have an agreement in terms of XRP between Keynesian and Neo-liberals at last.😂

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4 hours ago, lll_lll said:

XRP is not static. Codebase can be changed to make it flexible in terms of quantity, however, quantity is only one facet. The floating price can account for the static supply. Maybe we can have an agreement in terms of XRP between Keynesian and Neo-liberals at last.😂

Price adjustment does not resolve any issues associated with supply. 

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Why so? XRP is divisible up to 6th decimal. So as price rises, you can subdivide.

Also like I said above, is push comes to shove, the codebase can be changed to allow inflation.

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4 hours ago, xrphilosophy said:

Just posted this in marketplace, but will add it here again since the discussion revolves around global clearing, settlement, and liquidity solutions.

https://www.cls-group.com/news-insights/liquidity-challenges-for-banks/?channel=website&campaign=liquidity

That 3:26 minute video pretty much makes the case for ODL ;)

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5 hours ago, Wandering_Dog said:

Price adjustment does not resolve any issues associated with supply. 

For those of us without the deep learning in Economics...   can you please outline those issues and perhaps why price doesn’t mitigate?

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20 hours ago, lll_lll said:

Why so? XRP is divisible up to 6th decimal. So as price rises, you can subdivide.

Also like I said above, is push comes to shove, the codebase can be changed to allow inflation.

This isn't about decimal places or inflation. Any entity that requires certain XRP denominated cashflows over time to meet its liabilities requires XRP, self explanatory. If you have 5 XRP, and I need 5 XRP in order to pay a liability, there is nothing anyone can do if you won't lend it to me or buy something I own. I can offer you 10XRP tomorrow, given some market participants recently agreed to 6 XRP tomorrow, this has nothing to do with you choosing to lend me 5 XRP. In fact, if I would agree to pay you 10 XRP tomorrow, you will see that as a signal of distress, and would be even less likely to lend me XRP.  

Lending behaviour determines asset prices. Increasing interest rates are a sign of system distress. You are saying that a sudden spike in XRP interest rates would increase the propensity to lend XRP. The data shows the exact opposite--during large swings in prices and rates, lending is or has been frozen. 

Say that XRP:USD is rising, you can buy more USD with less XRP tomorrow. People borrow and make real productive or unproductive investment decisions given increasing prices for XRP. Over time a structure of debt is created, like a web connecting balance sheets, demanding that XRP exists in certain accounts at certain times to make liability payments. If payments fail, defaults increase, assets are sold, prices decrease. In any cycle, people borrow money, invest, and they fail. These portions of the web vanish suddenly, the associated balances sheets go bankrupt, their assets divided and disbursed at fractions of their original price. As this occurs, other balance sheets, holders of those bad assets, have lost revenue streams, putting pressure on them to borrow more or sell other assets. We see interest rates rising and prices falling. The only way to prevent this from destroying the entire web of liabilities is to inject XRP to accounts that need it without any expectation of getting it back--this means the balance sheet doing the lending must be incapable of insolvency in terms of the currency being injected, it must be the creator of that currency. 

In the total economy, all XRP is held by someone, and there are other people who need XRP to settle a liability today and their true net worth is negative . Failing to get those people XRP will lead to asset firesales driving the prices of everything to 0. But will the holders of XRP think it's a wise choice to give up XRP for assets worth nothing? No. The behaviour of the individuals leads to a system dynamic that is unstable. XRP price at time t or t+1 has nothing to do with resolving this instability.

Edited by Wandering_Dog

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7 hours ago, Wandering_Dog said:

If you have 5 XRP, and I need 5 XRP in order to pay a liability, there is nothing anyone can do if you won't lend it to me or buy something I own.

Let me prefix by saying that I think you know a lot about economics,  and I know next to nothing.  So I realise I might be an idiot arguing with a professor.  Having said that...  I think there is an assumption in your statement that actually doesn’t hold true in a new system with XRP as a global bridge.

An assumption in your statement above is that you can ONLY be paid in XRP.  The rest of your argument in that post seems to hang on that assumption.  However that’s not true in this new, perhaps fantasy, system we are discussing.  The debt web can still be supported by relevant national fiat currency.  The countries central bank can still do its easing in its national fiat with a resulting drop in their fiat/XRP ratio.

Happy to hear why that can not be so,

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15 hours ago, Tinyaccount said:

Let me prefix by saying that I think you know a lot about economics,  and I know next to nothing.  So I realise I might be an idiot arguing with a professor.  Having said that...  I think there is an assumption in your statement that actually doesn’t hold true in a new system with XRP as a global bridge.

An assumption in your statement above is that you can ONLY be paid in XRP.  The rest of your argument in that post seems to hang on that assumption.  However that’s not true in this new, perhaps fantasy, system we are discussing.  The debt web can still be supported by relevant national fiat currency.  The countries central bank can still do its easing in its national fiat with a resulting drop in their fiat/XRP ratio.

Happy to hear why that can not be so,

This is equivalent to saying that liabilities denominated in dollars can be paid for with danish krone, which of course has two major problems. A contract denominated in USD has no use for DKK. More importantly, assuming DKK was accepted, further USD liabilities on that balance sheet can't be paid for with that DKK--you haven't solved the problem of getting USD. The USD is the global settlement asset, you want to replace it with XRP. If you did replace it, you won't accept DKK for liabilities denominated in XRP, because that's not how settlement works. Movie theaters don't accept tickets issued by someone else, grocery stores don't accept your IOU's for milk. 

We can test this. Let's write a contract, you and I, that you will give me XRP today, and I'll give you XRP*1.2 tomorrow. Tomorrow, however, I'll offer you Wandering Dog Dollars not XRP--are you still interested in this contract? They are both located on the same ledger. 

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6 hours ago, Wandering_Dog said:

This is equivalent to saying that liabilities denominated in dollars can be paid for with danish krone

Thank you for your reply.  “Is equivalent“ is always a tricky thing in discussions.  I think you accidentally did a bait and switch.

You are saying XRP cannot replace the USD as the global settlement asset because of it’s finite supply.  That the web of liabilities built on the asset means the asset needs the capacity to inflate to meet a global liquidity crises.  So we were not talking about one particular contract which is what you suddenly switched to.

So let’s say there was a Greek crisis and Greece couldn’t meet its XRP liabilities to the EU.  Three possibilities,  they are either bailed out, the debt forgiven, or they default.  How does the inflated USD come into that in the current situation?  It doesn’t does it?  So why would XRP need to inflate to resolve that?

Let’s assume your concern comes true and that default of Greece triggers a series of defaults in other vulnerable countries.  How would inflating USD resolve that today and why does XRP need to inflate if it was the reserve?

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16 hours ago, Tinyaccount said:

Thank you for your reply.  “Is equivalent“ is always a tricky thing in discussions.  I think you accidentally did a bait and switch.

You are saying XRP cannot replace the USD as the global settlement asset because of it’s finite supply.  

Tiny. Think about what you are saying. The USD-DKK statement stands on its own, if you honestly think you can pay for contracts denominated in reserve currencies using any currency, then I suggest you do some more reading about the global settlement hierarchy as you are revealing a fundamental misunderstanding about how your financial system actually functions. 

Anything "can" replace the USD, the world "can" come to an agreement about anything--what they won't do, shouldn't do, is replace a flexible system with an inflexible system.

16 hours ago, Tinyaccount said:

That the web of liabilities built on the asset means the asset needs the capacity to inflate to meet a global liquidity crises.  So we were not talking about one particular contract which is what you suddenly switched to.

Stop thinking about the world in real terms. "The web of liabilities built on the asset", liabilities are just the opposite side of assets. The web is always equal part liability and equal part asset. The web is not built on gold, or real things, multiplied up or traded around. It's just entries on balance sheets. The entries do not depend on a real asset. The entries increase and decrease according to the interests of people who interact with one another over time. Stop using the word inflation. Try using several words or a different word, it is not aiding your thought process. Liabilities--and their corresponding assets--are all contracts or stem from contracts. A piece of land is a contract, specifically a deed with rights ascribed by the law as to what you can do with it. That piece of land considered over time is a series of contracts, and before the contracts its nothing because no capitalist society exists there--its a place for hunter gatherers or feudal farmers where money and prices have little resemblance to today. The cash in your wallet--it exists because someone else took out a loan contract at some point in the past. Your bank deposits are the same. Your stock shares, treasuries, corporate debt--all contracts. The real goods and services, all produced based on contracts, those contracts all have associated "prices" or values, and they all, always, add up to ZERO, because the liabilities and assets are always everywhere equal to one another. 

   

16 hours ago, Tinyaccount said:

So let’s say there was a Greek crisis and Greece couldn’t meet its XRP liabilities to the EU.  Three possibilities,  they are either bailed out, the debt forgiven, or they default.  How does the inflated USD come into that in the current situation?  It doesn’t does it?  So why would XRP need to inflate to resolve that?

Let’s assume your concern comes true and that default of Greece triggers a series of defaults in other vulnerable countries.  How would inflating USD resolve that today and why does XRP need to inflate if it was the reserve?

Right. You don't know much about the Euro crisis. So we may not benefit by blending a discussion of financial system operations with ideological narrative. I'm happy to discuss both, but it would be best to understand each in their own right before combining them. Once you understand how the financial system works, you can walk through the Euro crisis and understand what actually happened, and then you can compare that with the narratives that played out and research why those narratives existed. To point out the obvious, you just restated what I said above, assuming XRP is the settlement currency: (1) people who want XRP won't accept some other currency in its place. (2) if Greek balance sheets can't get XRP a portion of the web collapses. (3) XRP FX price adjustment doesn't create lenders of XRP. 

Stockhammer:

The Greek debt crisis is often presented as a result of lack of fiscal discipline. However, from a macroeconomic point of view, German export surpluses are a critical part of the story. A basic macroeconomic account identity states that the sum of public sector balance, the (domestic) private sector balance and the current account deficit (or equivalently: the capital inflows) has to add up to zero. By implication in a country that has a current account deficit either the private sector or the public sector has to run a deficit. Germany has pursued a policy of aggressive wage restraint resulting in large current account surpluses. German gains in competitiveness (since EMU) have not been founded on superior technological performance, but on more effective wage suppression. Germany's current account surpluses are some other countries‟ current account deficits (and capital inflows). In other words, in some countries (indeed most of this is going on within the Euro zone) some economic sectors have to increase their obligations to Germany: in Greece that was primarily the public sector, whereas in Spain it was the household sector. Simply put, German wage suppression rather than fiscal profligacy is at root of the crisis of the Euro system (see Lapavitsas 2010a, 2010b for similar analysis). Europe needs a set of economic institutions and policy rules that address such imbalances and their underlying mechanisms.

Balance sheet mechanics. How do transactions actually take place in a global system with multiple currencies. Do Mehrling's course: 

 

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6 hours ago, Wandering_Dog said:

if you honestly think you can pay for contracts denominated in reserve currencies using any currency

Of course not.  But if you are bailed out then you have the currency (or the capacity to get it) required.  I think you are still hung up on the single contract thing.  Your argument seems to be a mix of the wildly abstract...   all contracts add up to ZERO...   and the too-specific...  this damn contract must be paid in this specific currency.

I can’t decide if you are a truly knowledgeable expert,  or one of those people I see in fields (that I do understand fairly well and so can judge) that have some arcane bits of knowledge but no deep understanding.  They latch on to one or two technical aspects and get the balance all wrong.  Those types do have a tendency to throw a wall of technobabble at anything that they can’t really answer.  So in my own economic ignorance I can’t decide which of these categories you fall into.

I’m not going to explore the economic world because it doesn’t interest me.  Instead of directing me to study chakra lines and geomancy why not try answering the concrete questions I asked?

 

On 12/11/2019 at 5:28 AM, Tinyaccount said:

So let’s say there was a Greek crisis and Greece couldn’t meet its XRP liabilities to the EU.  Three possibilities,  they are either bailed out, the debt forgiven, or they default.  How does the inflated USD come into that in the current situation?  It doesn’t does it?  So why would XRP need to inflate to resolve that?

 

 

 

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15 hours ago, Tinyaccount said:

Of course not.  But if you are bailed out then you have the currency (or the capacity to get it) required.  I think you are still hung up on the single contract thing.  Your argument seems to be a mix of the wildly abstract...   all contracts add up to ZERO...   and the too-specific...  this damn contract must be paid in this specific currency.

I can’t decide if you are a truly knowledgeable expert,  or one of those people I see in fields (that I do understand fairly well and so can judge) that have some arcane bits of knowledge but no deep understanding.  They latch on to one or two technical aspects and get the balance all wrong.  Those types do have a tendency to throw a wall of technobabble at anything that they can’t really answer.  So in my own economic ignorance I can’t decide which of these categories you fall into.

I’m not going to explore the economic world because it doesn’t interest me.  Instead of directing me to study chakra lines and geomancy why not try answering the concrete questions I asked?

 

 

 

 

Right, to answer your question:

"So let’s say there was a Greek crisis and Greece couldn’t meet its XRP liabilities to the EU.  Three possibilities,  they are either bailed out, the debt forgiven, or they default.  How does the inflated USD come into that in the current situation?  It doesn’t does it?  So why would XRP need to inflate to resolve that?"

 

Let's imagine that the EU has an account called "EU's account" and it's located on the balance sheet of the Bundesbank (not true). And that Greece's Treasury holds an account at the Bundesbank for making payments to the "EU" (not true), who is the holder of Greek government bonds (not true). Because the Greek government is either "unable" or desires not to pay their coupons to the "EU's" account at the Bundesbank (not true) they have 3 choices : 

1) They are "bailed out"--here we'll define being bailed out as a transfer of Euro's from the IMF's account at the Bundesbank to the Greek account which is then transferred to the "EU's" account. 

2) They are "forgiven"--here we'll define debt forgiveness as a deletion of the bond balances in the "EU's" account at the Bundesbank, which is a reduction of their total assets. And, a deletion of the loan balances in the Greek account at the Bundesbank, which is a reduction of their total liabilities. 

3) They "default"--here we'll define default as in (2) above, both balances are deleted.

The question is "How does USD come into that situation?". The answer is: The US Fed steps in and purchases the total amount of the Greek bonds in the "EU's" Bundesbank account by adding a corresponding amount of USD to the account of the "EU" at the Federal Reserve in New York. The Bundesbank deletes their assets, the NYFed adds assets to its ledger representing the Greek gov debt contracts, and adds reserve deposits (liabilities) to the "EU's" account. The US Fed then says to the Greek government, "This debt does not need to be repaid". Alternatively, Greece defaults on those bonds anyway, in either case, the Fed is unaffected. The net change to the total system is an increase in dollar balances at the Fed held by the "EU", which they can spend on goods and services denominated in USD, which will increase demand for providers of those goods and services--who may be located anywhere in the world, increasing demand for labor (jobs). Alternatively, the "EU" can then exchange these USD reserve deposits for financial assets, which will increase asset prices, assuming the distribution of those assets is already highly concentrated.  

A couple things. First, this isn't how it works, the "EU" clearing system (Target2) doesn't function in such a simplistic manner. Second, holders of Greek debt aren't "The EU", although the Germany private and public sector do hold the majority of Greek debt by accounting definition they must, given their surplus. Saying that a loose collection of states contractually obligated to use a foreign currency in all exchange holds the debt of one of the member states misunderstands who holds that debt. More importantly however, it misunderstands  why that debt exists in the first place, which is because Germany desires to hold positive balances on the rest of the world (a surplus). So long as DE wants it surplus, someone MUST be in deficit, and endogenous financial shocks resulting from the credit cycle will lead to short term decreases in tax revenue for deficit states, which will lead to default, by definition of a financial cycle! They are literally creating their own problems, and blaming someone else for them. But I digress. 

Now, let's add XRP to this situation, replacing USD. No one can step in to assist Greece. If Greece does not pay, there are defaults, asset prices fall, and nothing can stop the impending deflation. The result is a global depression. Asset prices continue to 0, unemployment tends to 100%, the entire system returns to the origin, and all countries suspend XRP payments, all systems of political organzation, such as the EU, are exited, as member states relaunch domestic currency investment to boost demand and reduce unemployment--assuming that militarized facism does not return, the outcome is still not good. 

       

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Just so you are aware Tiny, the German banks created the money lent to Greece, as that is what private banks do, create the money supply. This lending was a function of rate compression that took place after the creation of the Euro itself. So, after creating the money, they ran a narrative campaign to demonize the Greek public as profligate spenders, as they organize using tax revenue from other parts of the Eurozone to bail out the banks who were the asset holders of the that debt. So, when you say "Greek Crisis", be aware of the narrative you are participating in. 

 

 

image.thumb.png.a88fc41a323bb404d210bebff9bbd00c.png   

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