The difference is that you don't easily lend money that you can't print at will. Lending under a bitcoin standard will involve much more due diligence, possibly the lender would almost always prefer to be an investor instead
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Or even get a seat on the board.
Under the Bitcoin standard, people will still borrow Bitcoins to buy houses or other assets. These loans will be cheap, like 0.5% rather than 5% and they will have high liquidation penalties.
Example: You have 5 Bitcoins and you want to buy a house worth 10 Bitcoins. The market value for this house right now is 10 Bitcoins. The loan issuer will happily accept the house as collateral and give you the loan. You both agree to use a market analyst who estimates the value of the house at any time. Right now it is 10 Bitcoins. And you agree to liquidate the house if the debt value + liquidation penalty (say 1 Bitcoin) > the value of the house.
You are now 5 Bitcoins in debt with 5% interest rate.
You are right to assume that the value of the house COULD go down in value with respect to Bitcoin over time if the value of Bitcoin keeps going up. In 2 years, say the market analyst says the value of the house is 5.5 Bitcoins and you are still 4.5 Bitcoins in debt. You made a bad investment.
So this triggers a liquidation where the issuer sells your house for 5.5 Bitcoins and will keep the entire amount as the penalty is 1 Bitcoin.
I don't see a problem here. Do you?
Ideally you do not want to buy a house by borrowing Bitcoin unless you believe the house will outperform Bitcoin in 10 years. Which might happen by the way, Bitcoin cannot keep going up with respect to every other asset in the world. Some real estate will definitely outperform Bitcoin once it reaches the $100T range.
Now, why would you take a loan in Bitcoin? Because there are no other currencies in the world still standing. The issuers will only issue loans in Bitcoin. Because the issuer does not want to hold any other currencies.
The Bitcoin standard will fix everything. Ahahaha
The problem I see here is that you are now homeless and probably broke.
also that he's probably never even held as much as 10 bit cents
It's the reality ahahaha
Why didn't you work hard to pay back your loan Laeserin?
Ha ha. Nah, Laeserin don't take no loans. 😂
I bet you will take loans in the future.
I bet you will borrow Bitcoin against some collateral as well.
Nah, I don't even have a credit card balance or a car loan.
I don't even have a car.
i hate cars because of how much they entangle me with the government and police... occasionally it's a hassle not having a car but i wouldn't even want a car until i really needed it, living 50km away from the nearest grocery store
Ok, you're talking about a scenario where Bitcoin is 100x bigger than it is today. I still don't know why anybody in their right mind would borrow bitcoin to repay in 10+ years, especially with the liquidation risk. It just seems like this type of lending will become rare.
Also, if Bitcoin becomes the primary store of value, it will demonetize real estate, so it's unlikely that any standard real estate would outperform the deflationary store of value (maybe some rare/premium real estate could).
People will borrow bitcoin because they will have no other options. If someone is lending you in $$$ they would be the holders of $$$. The right question here would then be "who in their right might would hold dollars in the future".
Our current system is debt-based. If you take out a loan/mortgage in dollars, the bank wasn't previously holding those dollars, they get created upon your agreement to repay. So "who in their right mind would hold the dollar" is already true today.
Under a Bitcoin standard, lending and borrowing will become less common, because it's tougher to pay off in a deflating currency. Higher risk of default means more stringent conditions for lending, which means fewer loans.
Bitcoin will be less and less deflationary going forward. We will have better tools to hold and spend our sats. Bitcoin is a fixed supply currency.
Currencies with inflation will go out of fashion.
It has to be deflationary if the economy grows because the same amount of Bitcoin will represent an increasing amount of goods and services on offer and it can only do that by lowering the price per good or service.
A deflationary currency discourages spending which in turn tampers the economy. It's Bitcoin's self defeating mechanism, or for that matter the self defeating mechanism of any fixed supply currency.
That's why the dollar had to be detached from gold. While the amount of gold is increasing it's nowhere increasing as fast as the economy.
I don't even know where to start ahahahaha
You could start selling Bitcoin for fiat while there are still greater fools.
Then create a better fiat that does a better job at growing and shrinking the money supply in line with a growing and shrinking economy to maintain stable prices.
This is covered in Silvio Gesell's "The Natural Economic Order" and the movie "Shillings from Heaven" that you can find on YouTube.
"That's why the dollar had to be detached from gold."
No, Nixon decoupled the dollar from gold in 1971 because some countries (e.g. France) were demanding to redeem dollars for gold as originally promised under Bretton Woods, but the US very likely did not have enough gold to cover the dollars it had printed.
I agree that a deflationary currency discourages spending compared to an inflationary currency, but I don't see that as a bad thing. It discourages *stupid* spending, and encourages *sensible* spending.
How does a house "outperform Bitcoin"? What's the standard by which performance is measured?
By being valued at 12 Bitcoins. That means the house has outperformed Bitcoin.
When the house was bought:
1 Bitcoin = $100k
1 house = 10 BTC = $1m
After 2 years
1 Bitcoin = $200k
1 house = 12 BTC = $2.4m
That means the house has outperformed Bitcoin. Even if there's no dollar in the world anymore, the house will have outperformed Bitcoin if the exchange rate is 12 BTC instead of 10
Ok. "Outperform" is your weird way of saying "the price went up" I guess.
You are as annoying as you were before. You are the devil I know than a stranger. I'll take it. Ahhahhaahahha
The house would have outperformed Bitcoin with respect to every asset in the universe.
Say 1 Bitcoin = 0.00000001 Sun (if we use stars as currencies)
1 house would be 0.0000001 Sun
After 2 years
1 Bitcoin = 0.00000002 Sun
1 house would be 0.00000024 Sun
A weird asset to compare against but if that's your thing ...
I take the devil part as a compliment. I'm here to ask the hard questions.