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Comment by adammunich | Hacker News Reader

What is the best book on our current central bank currency paradigm you would recommend?

I don't know a book to recommend. basic scheme is explained in any money & banking textbook. if you know what a bank run is, why it occurs and how it is being prevented then you will see why bitcoin's decentralization makes no sense. only part that is probably not on textbook is this blind faith that volume guarantees stability. it does not.

I know what a bank run is, why it occurs and how it is being prevented (probably better than your average bear) and I see no correlation between that and bitcoin.

The only problem I see, if you could even call it that, is that bitcoin "banks" (exchanges?) are restricted to being 100% warehousing operations since there is nobody to bail them out if (when?) they decide they can make more profit earning interest by loaning out the funds they are contractually obligated to hold.

If you want to avoid a run on your bitcoin exchange then simply don't engage in fractional reserve banking...or, I suppose, don't lose all your holdings to hackers.

i am saying that when bitcoin value takes a hit by some global event, and people panic to sell, there is nothing that will stop the value from gyrating to zero. what are you talking about? what does charging interest or reserve have anything to do with this? you make no sense.

You know that's totally, completely different from a bank run, right?

Central banks have very little influence on the value of their currency once people lose faith in it, people will buy anything instead of holding on to their (usually rapidly devaluing) currency.

One thing every holder of bitcoin knows is it will never suffer through hyperinflation, ever.

central bank scheme is not perfect. however central bank has proven to be very effective at providing stability to currency. bitcoin's scheme is vastly inferior. protection from hyperinflation is not a great benefit compared to unstable currency value bitcoin is designed to suffer. also hyperinflation doesn't occur unless the government is essentially defunct. I'm sure people would just switch to some other reputable currency before it happens.

There's at least one thing to stop them: fundamentals and speculation. People buy back in (in part) because Bitcoin is designed to strengthen itself (not price, I'm mainly referring to incentives to mine and to steward). (And it's not equivalent to the shitcoins that it spawned so the assumption it it's not special is invalid.) That makes Bitcoin a completely different asset to model than a fiat currency. If there's one difference, there are probably more. And there certainly are.

My two cents is Banking and Financial Institutions Law in a Nutshell by William Lovett. He was my law professor on this subject, and had a knack for teaching the fundamental forces at play.

Peter D. Schiff "How an Economy Grows and Why It Crashes"

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