Under a #Bitcoin standard I think we might still need or want some kind of fiat for uncollateralized loans. Otherwise no one would be willing to invest in ideas. Even collateralized loans might still ideally be made in fiat. The supply of fiat would inflate based on how many loans are given and that would directly determine the interest rate rather than the arbitrary decision of bankers.
Both systems can coexist and are actually mutually beneficial to each other. Interest rates are supposed to be an expression of risk. So if a lot of loans are being made the supply goes up, this the interest rate rises. Eventually loans become to risky because they interest rate is so high and loans get made less. As some of those loans are defaulted on that destroys money and brings the interest rate down allowing more risk.
It is a system that finds a risk equilibrium and prevents really bad ideas from receiving investment just because it's stupidly cheap to borrow.
Everything would still be priced in Bitcoin. What you would do is get a loan in dollars, buy Bitcoin with it, use that to make your investment and start generating return in Bitcoin. Then you use that return to buy dollars to pay back the loan with interest. The dollars that make up the principle get destroyed, and the bank used the interest dollars to buy Bitcoin so they make a profit.
Does this work? Am I missing something?
