Banking and finance roundup

Cato-centric edition:


  • The core of the “Bitcoin isn’t an environmental disaster” argument seems to be that credit card transactions are worse, and that miners have incentives to migrate to more efficient sources of power. However… just because credit cards are worse than Bitcoin, that doesn’t mean that Bitcoin isn’t bad, that adding an additional negative without reducing the others is somehow not that bad for the environment, or that in the absence of Bitcoin, people would be doing other, less energy efficient things. Rather, since most BC transactions are large, it would seem that it’s people cashing out some coins and moving to other types of currency, which are likely back to credit/debit cards or the like (not resulting in a reduced environmental impact).

    The pointers towards energy costs in Iceland and Canada also seem misleading, to me. The link in the article to Iceland’s energy costs put it at 24 euro cents per kWh, or about $0.27 US. The same link lists Ukraine’s energy costs at four euro cents per kWh. The primary incentive to use energy from a different country in Bitcoin money is cost, not hydroelectric versus coal. China’s power is still vastly cheaper to the end user than Iceland’s, and is cheaper than Canada’s as well (from what I can find in a bit of googling). So while there may be incentives to locate somewhere like the Ukraine, there most certainly do not seem to be incentives to move from China to Iceland or Canada – and China’s and Ukraine’s power generation is almost certainly dirtier than Iceland’s or Canada’s.

  • Rebutting the evils of fractional reserve banking, George Bailey:

    “…you’re thinking of this place all
    wrong. As if I had the money back in a safe. The money’s not
    here. Your money’s in Joe’s
    house right next to yours. And in the Kennedy house, and Mrs.
    Macklin’s house, and a hundred others. Why, you’re lending them
    the money to build, and then, they’re
    going to pay it back to you as best they can.”

    Just what would a bank, or building and loan, do to make money if 100% of the deposits were uninvested?

  • Use their capital to make loans.

    • Capital from where? Ending fractional reserve banking will mean a massive contraction in the money supply and a major increase in interest rates.

      It also will mean;

      Massive drop in generation of new business/innovation.
      Massive drop in home prices.
      Wages going down.
      A stock market crash the likes of which we haven’t seen.
      Likely a worldwide recession or possibly depression.
      A massive trade imbalance as we will be flooded with cheap imports and our exports will be all but unsalable (due to the dollar jumping dramatically relative to other currencies).
      Likely a huge number of defaults.
      The end of free checking/savings accounts.

      That’s just for starters.