[HN Gopher] The Casino-Chip Society
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The Casino-Chip Society
Author : Gigamouse
Score : 66 points
Date : 2022-11-30 15:24 UTC (7 hours ago)
(HTM) web link (brettscott.substack.com)
(TXT) w3m dump (brettscott.substack.com)
| miohtama wrote:
| Regading CBDCs:
|
| There was a Bitcoin hostile article published by European Central
| Bank today. I was wondering why ECB even bothers to write about
| Bitcoin. Turned out, the author is a fan of CBDCs and taking cash
| away so that ECB could enforce negative interest rates.
|
| > For example, Dyson and Hodgson (2016) argue that "if digital
| cash is used to completely replace physical cash, this could
| allow interest rates to be pushed below the zero-lower bound."
| Rogoff (2016) develops this argument in detail. By allowing to
| overcome the zero-lower bound ("ZLB") and therefore freeing
| negative interest rate policies ("NIRP") of its current
| constraints, a world with only digital central bank money would
| allow for - according to this view - strong monetary stimulus in
| a sharp recession and/or financial crisis. This could not only
| avoid recession, unemployment, and/or deflation but also the need
| to take recourse to non-standard monetary policy measures which
| have more negative side effects than NIRP. Opponents of NIRP will
| obviously dislike this argument in favor of CBDC, and will thus
| see CBDC potentially as an instrument to overcome previous
| limitations of "financial repression" and "expropriation" of the
| saver.
|
| > In sum: it seems that the remuneration of CBDC is per se
| neither necessary to clear a market, nor to control inflation, in
| analogy with the case of banknotes, which also cause none of
| these issues8. However, still, the ability to remunerate CBDC, in
| contrast to banknotes, is a privilege that has a number of
| advantages. It allows shifting the interest rate on CBDC in
| principle in parallel to monetary policy rates, such as to avoid
| that the relative attractiveness of CBDC relative to market- and
| central bank policy rates depends on the absolute level of
| interest rates, as it is the case for banknotes. Indeed, the fact
| that the remuneration of banknotes stands at zero regardless of
| whether short-term risk-free rates are at 10% or at -0.5% (as
| currently in the euro area) may be perceived as an anomaly, which
| becomes increasingly problematic when the zero lower bound is
| being approached or passed. Moreover, a negative remuneration of
| CBDC also allows addressing the possible danger of a run into
| CBDC in case of a systemic banking crisis (as also noted by
| Kumhof and Noone). As shown in section 4, in the 2008 banking-,
| and 2011/12 euro area debt crises, a run into banknotes played
| only a rather minor role, relative to the run from perceived weak
| to perceived strong banks - despite the fact that the
| remuneration of banknotes remained at zero, and that the level of
| short term risk free rates quickly approached this level after
| the Lehman default, reducing the opportunity costs of holding
| banknotes. Nevertheless, since a run into CBDC would be easier,
| it would be recomforting to have as extra tool the ability to
| impose negative rates on CBDC.
|
| This kind of money tinkering sits at the opposite of the
| political spectrum of Bitcoin, regardless if you like Bitcoin or
| European Central Bank.
|
| https://deliverypdf.ssrn.com/delivery.php?ID=779068125074119...
| jrm4 wrote:
| This is _so good._ I was in another thread suggesting that, even
| if you hate crypto, it 's still valuable to understand and accept
| the "fiat is all made up" idea, even if it's often badly stated
| and argued.
|
| I have a degree in economics, but I confess I really didn't
| understand the whole thing until much later in life, when I was
| able to look at it through the lens of e.g. video game design.
| Which is to say, there are real consequences and real effects of
| actions -- but the economy still isn't something like "nature" or
| "scientific" despite what many would have you believe. It's much
| more like a _designed game_ who 's rules can be tweaked,
| sometimes arbitrary, etc.
| akira2501 wrote:
| If money only exists in the mind of people, how could there
| truly ever be a "science" of it? It strikes me, from a somewhat
| cynical point of view, that "economics" is a somewhat confused
| and lower resolution study of "psychology," which I think
| offers a the workable explanation for your final sentence.
| mattnewton wrote:
| > economics" is a somewhat confused and lower resolution
| study of "psychology,"
|
| Maybe sociology, since money matter because it can be
| exchanged between people, but personally I don't think you'd
| be wrong for thinking about economics as a narrow but
| important branch of sociology/psychology, in the same way you
| might think of biology as a narrow but important branch of
| chemistry and physics.
| felix318 wrote:
| Numbers also only exist in our minds but that doesn't make
| mathematics a branch of psychology. There is a rational side
| to economics because money can be measured and the
| measurements are reliable.
|
| The unpredictable side of economics is of course the
| behaviour of the various economical agents, and regarding
| this I think economics is closer to astrology than to
| psychology.
| jrm4 wrote:
| That's exactly correct. It _cannot_ much be a science.
| adamsmith143 wrote:
| Economics, flawed as it is, was never the science of money
| but the science of markets.
| nonrandomstring wrote:
| > how could there truly ever be a "science" of it?
|
| There isn't. There's a practice and set of local "crafts
| pertaining to". That's why it's econom(ics). [-ikos, -ique]
|
| Like electronics, acoustics, politics...
|
| As opposed to being econom(ology), a more systematic science
| [-logy (logos)] being a branch of knowledge.
|
| Even hardcore economists aren't keen to raise it to the level
| of a "science".
| plsbenice34 wrote:
| It's like game theory. Once you set rules and laws you can
| mathematically model and analyse players' behaviour in
| reaction to those incentives. Assuming players follow a
| selfish strategy can be a useful approximation of the
| psychology sometimes. Since it's 'just made up' societies can
| modify the rules.
| anon291 wrote:
| This post said nothing about fiat other than that people trust
| it.
|
| Fiat is not the L2 in this system. It is the L1 state issued
| currency.
|
| Bitcoin is analogous to fiat in the crypto world and the
| exchanges/custodial wallets the L2
| somethoughts wrote:
| I'd throw out that if attempting to make analogies to crypto
| - as I understand it - the standard US bank has pretty
| specific rules, reporting and audits w.r.t. how high the
| ratio of L2 to L1 can go and to whom/how/what uses the L2
| money can be the loaned out.
|
| The crypto exchanges do not have any such rules, reporting or
| auditing requirements and can self-report as L2 but in fact
| be some custom self-defined push the boundaries of
| acceptability Layer (a la FTX advertised as L2 but loaning
| the customer balances to its Alameda Research "hedge fund"
| partner).
| igorkraw wrote:
| But in the _real_ world, bitcoin and indeed all of crypto is
| a /are token/s without an army behind it or any form of legal
| promises except those conferred to them by $L1. Unless you
| want to go to El Salvador or that one other nation that made
| it legal tender, Bitcoin is L2 (and a shitty one at that
| looking at stability, fees and speed)
| TreeRingCounter wrote:
| Bitcoin doesn't need petrodollar warfare like the dollar
| does.
| ben_w wrote:
| It has as much need for it as the dollar, which is either
| "both need it" if you're focusing on the warfare part and
| using "petrodollar" as rhetorical emphasis, or "neither
| needs it" if you're focusing on literally the support of
| petroleum and using "warfare" as rhetorical emphasis.
|
| "Both" is because guns beat bits. Or, to put it another
| way, if the USA had used Bitcoin instead of dollars in
| 1960, the Soviet Union would've been just as much a
| threat, and similarly the forced nationalisation in Cuba
| after the revolution would've happened no matter who
| recorded what on any blockchain.
|
| "Neither" is because petroleum is just one of the major
| energy sources of the last century, vital for the
| industrial strength of the US economy and its capacity to
| actually make things worth buying (in addition to
| uselessly trinkets), but not the power source of the next
| century.
| teddyh wrote:
| The funny thing is, what he calls "Layer 1 cash" is not the
| lowest layer. Most cash currencies were issued as tokens which
| could themselves be reimbursed for _gold_ or _silver_ by the
| issuing state or bank. The current level of cash (which he tries
| to defend) is already one level removed from what was originally
| valued. One could see where gold bugs and silverites get their
| thinking from.
|
| But, one could argue, if most people really think there's only
| one type of money, isn't that by then by definition, true? I.e.
| if other people _value_ a "layer 2 digital chip" as much as
| "layer 1 cash", aren't both worth the same to me, since I can get
| the same worth from them both? And, therefore, why should we care
| anything about any shift from layer 1 to layer 2, since the shift
| from layer 0 to layer 1 seems to not be a problem now?
|
| This is a limited view, and is true solely if you look _only_ at
| the two forms' notional "value". Hovever, the differences between
| the two lie instead in the technical limitations in how they can
| be used. If layer 1 cash cannot be used by, say, online
| retailers, or in certain shops, that form might have less value
| for me, if I want to buy something online or in those shops. On
| the other hand, if layer 2 digital chips cannot be used without
| the bank (and state) getting and keeping a permanent log of all
| my transactions, and also makes it impossible to send money to
| what either the government or the credit card companies deem to
| be unsuitable destinations, then I might value _that_ form less.
|
| It all depends on what you, yourself, value, or (by extension),
| what freedoms and/or conveniences you want society as a whole to
| have. He chooses to defend "the balance of power" between the
| two. We must all make our own choices here, and remember that all
| our actions will affect the balance.
| redeyedtreefrog wrote:
| The vast majority of the money supply created by central banks is
| digitally created. I am entirely at a loss as to why this
| supposed introduction to how money works consistently implies
| money created by the state approximately equals cash, and that
| cash is particularly special. That's not how it works. And
| because that's not how it works, a cashless society is nothing
| like as radical change as the article implies. Cash is already of
| only limited importance.
| teddyh wrote:
| I also liked this JWZ blog post:
| (https://www.jwz.org/blog/2016/08/like-regular-money-but-more...)
|
| HN link:
| https://kilobytely.com/sh6vk9ync1qf4tzod2rg5uj8xmb0ti7wlazod...
| guelo wrote:
| I think the article would have been better if it used standard
| money supply definitions M0, M1, M2, and M3 instead of the
| "Layer" terminology. That way the reader would be able to carry
| that knowledge to other conversations. But an advantage of his
| terminology is that it keeps the layers separate while the
| standard definitions are nested, so M1 includes M0, M2 includes
| M1, M3 includes M2. With his layered model he is able to
| highlight some of the power struggles more easily.
| EGreg wrote:
| As of 2020, the Federal Reserve lowered reserve requirements to
| ZERO. And in Canada too. That means banks can now issue money
| without being required to back it by L1 money.
|
| Those trillions "printed" and given out to people as PPP loans
| were originated by banks. But the loan forgiveness comes from
| where? Who pays the liabilities these banks have to each other?
|
| Technically, the banks can simply cancel liabilities they have to
| each other. If Bank A issues a loan or credit card and it is
| redeemed for credits in Bank B, while Bank B does the same for
| bank A, then the banks can simply cancel out their debt to each
| other when they settle their balances periodically using the
| Automated Clearing House (ACH) system that is also run by the
| Federal Reserve.
|
| So banks can issue a ton of money to spur economic activity, and
| then cancel the debts to each other and take it out of
| circulation.
|
| I started intercoin.org to making an alternative way to the
| banking system, allowing cities and other communities to issue
| their own currency (eg Berkshares, Bristol Pounds etc.), give it
| out as a UBI and then tax it back to remove money from
| circulation (fiscal policy). The fiscal policy can then be used
| to mitigate negative externalities like pollution etc. So the
| monetary and fiscal policies are managed by the people. The
| businesses are getting money from people spending money on things
| they actually want, rather thank bank underwriters trying to
| guess whether there will be a lot of demand for the business's
| services 5 years later.
|
| Crypto has been captured by ponzi schemes and nonsense. But the
| real value is in communities. Real goods and services by people
| accepting the local currency is what backs the local currency.
| The other stuff ("redeemable for gold, etc.") are just mostly
| fictions to get a critical mass of adoption in a community.
| cmeacham98 wrote:
| This article is bad, and contains several falsehoods, but the
| worst one is about fractional reserve banking:
|
| > banks are able to issue out far more digital chips than they
| have in a state money 'behind the counter'
|
| > Imagine a person arriving a casino with no money but requesting
| chips nevertheless - this is pretty much what happens when
| someone approaches a bank and asks for a loan.
|
| This is just completely wrong - banks only loan out money they
| have. If you go to a bank and get a loan the bank didn't just
| edit a database entry - they had that money. Banks loaning out
| money they don't have is extremely illegal.
|
| The reason that banks ""create"" money is because when you loan
| money it ""duplicates"" it. You don't have to go through a bank
| to see this in action: Alice loans Bob $20 and then Bob goes and
| loans $20 to Charlie. The world now has $40 "more" in it, and
| remains that way until the loan is settled. Banks just do this
| process with your money and pay you interest for the privilege.
|
| This is the reason that banks are sometimes required to keep some
| percentage of their money in reserve (and thus where the name
| fractional reserve banking comes from), because otherwise the
| same money could be loaned out forever and the maximum money
| supply would be infinite.
| lifty wrote:
| Loan creation doesn't work like that for many many years. These
| days banks don't even have a reserve requirement. They just
| create the money and balance the books later.
|
| Edit: to make my point clearer, banks don't need your deposits
| to create new money. They just do.
| cmeacham98 wrote:
| > Loan creation doesn't work like that for many many years.
| These days banks don't even have a reserve requirement. They
| just create the money and balance the books later.
|
| I glossed over it because it isn't really relevant to my
| point, but yes, the reserve requirement in the US is
| currently zero:
| https://www.federalreserve.gov/monetarypolicy/reservereq.htm
|
| > Edit: to make my point clearer, banks don't need your
| deposits to create new money. They just do.
|
| This is not true. Like I said, banks only lend out money they
| have. The only way banks "create" money is because the same
| money can be lent out multiple times (Bank lends out Person
| A's money to Person B; Person B deposits their money at a
| bank; Bank lends out Person B's money to Person C; etc)
| cjmb wrote:
| and what would then happen if a bank were -- somehow --
| induced to make more of those loans, which, as you describe
| "duplicate" or "create" money a number of times up to the
| number of loans made?
|
| and how would the world look if that same bank then decided
| to stop making so many loans?
|
| would there be a difference in the total money
| "created"/"duplicated" between those two worlds?
|
| you can quibble with language but I think you'll find the
| OP and other commenters here have a sufficiently reasonable
| model of what is happening under the hood in the modern
| banking system. I suspect if you view the OP charitably and
| accept that he does understand what's going on and is
| describing the relative difference between these two
| hypothetical scenarios I gave above as "more or less money
| creation"...the essay becomes less "bad".
| lifty wrote:
| You are wrong. Banks don't need deposits to create
| loans/money. They crate the money, out of thin air, as the
| conspiracy theorists like to say it, and they pay the
| central bank interest on it. That's it.
|
| Start with this paper from the BoE if you want to learn
| more: https://www.bankofengland.co.uk/-/media/boe/files/qua
| rterly-...
| onlyrealcuzzo wrote:
| Not really.
|
| The bank has money, it lends it to you, and then shortly after
| it bundles that loan up into an MBS and sells it to the Fed
| (for a profit).
|
| Repeat step 1.
|
| The Fed - for the last 15 years - usually "expanded its balance
| sheet" to buy MBSes.
| cmeacham98 wrote:
| The Federal Reserve, being the government, does have the
| power to create money in a way banks do not. The money being
| injected into the system here comes from the fed not the
| banks.
| alexb_ wrote:
| This is a fantastic post - I'm 100% going to start using the term
| "Casino-Chip Society" whenever I talk about "cashless" society.
|
| There is another reason that cashless society is awful that was
| not talked about in this article, but I think is just as
| important - a digital dollar means that you have a dollar where
| it is impossible to commit crime. While that _sounds_ like a good
| thing (who wants crime?), it very much stops being a good thing
| as soon as you bump up with laws that go against your morals.
| Designing systems with the assumption that we will always have
| democratic and free government is a horrendous idea, allowing the
| government to have a complete record and log of every single
| transaction you ever make, as well as having the ability to stop
| you using digital money, makes it so easy for fascists.
| uoaei wrote:
| > it very much stops being a good thing as soon as you bump up
| with laws that go against your morals
|
| A pretty explicit part of the fascist ideology _per se_ is that
| laws are merely morals that are written down and enforced. The
| idea is that people adopt their moral code from the central
| government who defines how people "should" perceive the world
| in order to make citizens obedient to the dogma of the state.
| Willing fascists do everything they can to dissolve any notion
| of personal choice in the matter, for themselves and for
| others, and by their very constitution cannot conceive of
| morals existing outside of a system of authority.
| SQueeeeeL wrote:
| Wait, so does that mean the "War on Drugs" wasn't making me
| more free??? The US Government would never do anything
| fascist so obviously you're wrong.
| alexb_ wrote:
| All laws make you less free. Laws exist to restrict
| freedoms in order to create a better society - what a
| better society means is the part where political
| differences come up. Most people can agree on laws existing
| to prevent harm unto others, but then what does that mean?
| Answers depend on your values and goals, and are
| fundamentally what politics are.
|
| The point is though, all laws make someone "less free",
| because the purpose of law is to prohibit.
| singleshot_ wrote:
| What about a law that says you are entitled to a lawyer
| when arrested? Or a law that says if you overpay on your
| taxes, the government has to make you whole?
| nevdka wrote:
| There's the 'arrested' part and the 'taxes' part. There
| are limitations on the power we give the government to
| arrest people and to collect taxes. But the limitations
| are only there because of the freedom we loose in
| exchange for criminals being arrested and public services
| paid for.
|
| If there was a law that said everyone must only wear blue
| clothes on Wednesdays, that's taken away your freedom to
| choose what to wear. If there's an exception to that law
| that says socks can be either green or blue, that's not
| the law granting a new freedom to wear green socks, it's
| a law not taking away a freedom that existed before the
| blue clothing law.
| js8 wrote:
| > The point is though, all laws make someone "less free",
| because the purpose of law is to prohibit.
|
| I think you're wrong. Not all laws prohibit. For example,
| take a law that establishes public libraries. It doesn't
| prohibit anybody from anything.
| [deleted]
| yccs27 wrote:
| The law establishing public libraries doesn't just say
| "let there be public libraries". It designates a source
| for funding, making it a reason that taxpayers are less
| free. It forces publishers to sell/give books to the
| libraries.
|
| If it could just exist without restricting someone's
| freedom in the wider sense, we wouldn't need a law.
| AnimalMuppet wrote:
| Right. Privately funded libraries didn't need any laws.
|
| It's even worse for authors. They pay taxes to support
| institutions that exist to lend out the author's books
| for free.
| SQueeeeeL wrote:
| Nah, all government is bad. Socialism is when the
| government spends money, freedom is when I get paid $5 an
| hour and eat trans fats
| alexb_ wrote:
| When exactly did I say that all government is bad? I
| personally think it's great the government restricts the
| right of people to commit murder.
| akira2501 wrote:
| > a digital dollar means that you have a dollar where it is
| impossible to commit crime
|
| Maybe. You'll probably just be able to convert it to some other
| form of value at a loss and then continue from there. Plenty of
| governments have envisioned the end of the "black market" only
| to be shown how utterly impossible that idea is.
| bombcar wrote:
| That's the thing that wasn't explicit in the article; that
| each time you "switch layers" you often incur fees - if
| you're going _down_ or _back_.
|
| You can deposit cash at a bank and get it back, but that's
| almost an exception.
|
| Once you get into layer 3 it is harder and harder to get back
| to layer 1 or 2 without losing "some value" - gift cards
| being the most obvious example.
| jimmaswell wrote:
| So I'm paid in casino chips, pay my mortgage and credit cards
| with casino chips, pay my taxes with casino chips, and only ever
| use real money at the laundromat. Seems like the chips are more
| "real" and relevant at this point than the pieces of paper with
| no intrinsic value.
| IntFee588 wrote:
| That's not what he's saying. The "digital money" can be real if
| it is put into circulation by the central bank, by buying
| assets. There is no inherent connection to paper currency.
|
| You may feel like you're above this, but this excess leverage
| in the economy affects everyone who has a mortgage, works a
| job, or participates in the traditional economy in any way. For
| instance, businesses regularly draw on their credit facilities
| to make pay, and even well-run businesses usually hold debt.
| The artificially set price of these "chips" has a massive
| effect on all sectors.
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(page generated 2022-11-30 23:00 UTC)