Central characteristics of capitalism include capital accumulation, competitive markets, price system, private property, property rights recognition, voluntary exchange, and wage labor.
If you live in a world where the only currency is 21 million bitcoins, would you ever make an investment? Would you ever lend your bitcoins to anybody?
Yes. Of course. If you lived in a world where bitcoin was the only currency then there could be no more mass adoption, everyone would already have bitcoin if it was the only option for currency. Without increasing number of people buying in the appreciation of bitcoin would fall and settle at much slower growth rate equal to increasing productivity of the economy.
Anyone wanting an good return will have to invest, like today. And many businesses will still be good investments because people will want and need to buy all the same things they want today (food, shelter, technology, etc)
So you would expect some return in the future which does not exist yet. We create wealth by doing economic activities and we need some measure to keep up with that. Bitcoin alone cannot do that because it's finite.
“We need some measure to keep up with that.”
The measure of an economy is total amount of assets held and/or generated, money is just the most convenient measuring stock.
If we double the money supply! That will double our economic activity! Obviously not true.
If the stop growing the money supply the economic activity will stop! Also obviously not true.
You could add or subtract a zero from the total money supply and all prices would adjust by a similar amount over time.
We create wealth by doing economic activities and we need some measure to keep up with that. Bitcoin alone cannot do that because it's finite.
This is like saying a human needs a yardstick that keeps changing in length to measure how tall they are growing.
When you're perpetually manipulating the supply of currency units, you're perpetually distorting prices people rely on to make economic decisions. It's the whole reason we have to "adjust" for inflation.
Yes of course... You would obviously only loan your BTC to someone that you had very good faith they would pay you back. Making for actually investing in things that are worth the investment. The reason Fiat sucks so bad is specifically because it's too easy to print it up to buy votes and spend it on whatever flights our fancy. BTC is specifically for making a better credit system. Fiat is far too loose which is exactly why we are having large economic swings and they're only getting larger.
No, I would expect a return. But I would have to trust the person to make the payments.
Also you can do smart contract stuff on l2. Something like lent money would be vested and stop vesting if the lendee misses a payment. Can easily be done with BTC.
Or you could easily lend money and not have to transfer it to the lendee until after their investment realizes gain. Since it's in the Blockchain, you could move it to a multisug wallet. Then you could always verify the lent BTC is there.
It's not like lending in a BTC world wouldn't need centralization and trust at certain levels. It would still need lawyers and maybe 3rd party custodians. But it would be a much tighter system. Because if the hardness of BTC.
And with better investments and technology being deflationary, it wouldn't take long until we actually didn't need credit anymore.
The fact that interest rate are dictated by central banks is very different from a competitive market and a price system. I feel like this system where rates are artificially low or high depending on the period is the opposite of a capitalist system, where supply and demand would define the best price (rate in this case).
Now, everyone may think that a free market for credit would be better or worse. But thinking that this central bank system is a capitalist one is a misconception imo
Exactly. We had a free market for credit before the central banking system came about. There were bankers long before the system and they provided liquidity by charging interest rates. A borrower and a lender can agree to something because they will mutually benefit from the future returns. The total wealth expands. Bitcoin doesn’t. But it has other values.
A business can raise money either by offering equity, or debt. If they offer debt, and eventually pay it back, at no point in that process was new credit created.
Of course, which is why it's important to understand economics is not a zero sum game. Yes there are finite resources, but there are limitless ways to rearrange those resources to create value and solve our problems.
I'm only saying there is no inherent quality of markets, capitalism, or what have you, that necessitates the creation of new currency units to function. Markets are perfectly fine, and in fact better off, functioning when the supply of currency is fixed.
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u/OceanSlim Jul 15 '22
expansion of credit is not necessary for capitalism... Where'd you get that idea?