90% of money in the world don't really exist?

  1. Hello there,
    it's quite a longtime since last time I pose my question here.


    '90% of money in the world don't really exist'

    I can't remember when or where I heard this form, not really matter.
    but... is it true?

    Imagine that Every single person in the world withdrew all their money form bank, empty their account. (only cash)

    what will happen?

    does bank have enough money to pay? I bet they don't.


    If money really do exist, If economic is truly honest trade, this shouldn't be any problem at all.
    Every human being have right to withdraw their own money.
    but I'm sure they use dirty trick like emergency close all bank to prevent that.

    what is the gap between actual money and digit of number run around the world?

    fill me if I'm wrong.


    English is not my native language, forgive me if I'm wrong in spelling or gamma.
  2. jcsd
  3. Ryan_m_b

    Staff: Mentor

    They wont due to fractional reserve banking. Essentially banks can lend out more money than they have, they essentially create money this way. I don't think it's correct to say that the majority of money doesn't exist. Rather money can be created at whim, essentially money is just a record of credit and debt.
  4. russ_watters

    Staff: Mentor

    The money exists, the physical currency/cash does not.
  5. phyzguy

    phyzguy 2,492
    Science Advisor

    With a fiat currency like the US dollar, the money exists by definition. As russ_waters says, the physical dollar bills may not exist at a given time, but given time the treasury can print up as many bills as needed.
  6. most countries are fiat, all the tops are.

    the only thing that gives currency value ( in reality) is nothing more than pure acceptance.

    this occurred when nixon removed the gold standard, which meant currency( USD in this case) is back by gold.

    at this moment in time the whole world needs to devalue , close to what's considered to be fundamental value.
    europe will have to print money to cover the debt, borrowing cost, and buy their own bonds to lower the borrowing cost.
    same with china,
    china has these rural cities that failed, they used borrowed money to build them.
    all that, that is occurring over there is not fixed and fine.
    keep this in mind.
    Last edited: Apr 16, 2013
  7. Everything always leads to a bigger picture.The subjects out come is based on human mentality and human behavior in a majority with out subject to change.There's at lease 10% truth to everything,More than likely 90% of it is bull ****.Nothing more.Humanity flows in it's path as it does,And as of this moment in humanity,what is value to it, is what is value to it.Nothing more.We as humans decide what is valuable by a majority.Nothing more.In the end,there's only 3 thing for human existence that is tangibly or realistically valuable,and those 3 things are,Life,intelligence and language Everything else is just ******** to keep a majority content.humanity has already failed.
  8. To expand on that - a bank note or other legal instrument can also replace physical cash in a transaction.
  9. Now we have bitcoin, which has no intrinsic value whatsoever. There is a protocol to prevent counterfeiting and other such games. I think it is a good idea.
  10. And what intrinsic value does a dollar have?
  11. russ_watters

    Staff: Mentor

    I don't understand. Why do you think Bitcoin is a good idea?

  12. I like it because it has no backing at all. So there is no commodity or organization that can fail and weaken confidence in the currency.

    There IS an organization that maintains the honesty of the system. That could fail. But that is slightly different. I'm assuming that this will not be a problem. We don't know yet so kindly assume for the sake of argument that this is true.

    It reminds me a lot of the art market. Rich financiers often invest in art such as Monet, Renoir, Picasso, etc. The art has no intrinsic value. It's value is strictly in the mind of the beholder. So this actually makes it a more secure investment than, say, Apple stock. Apple might lose favor, get a bum manager, etc. None of these can happen to that Monet. Monet has passed away and is very unlikely to be involved in a scandal. The very unreality of the commodity is actually safety. There is much less that can go wrong, as long as you take care of the painting. This is why a painting can sell for multi-millions. It is a safe investment with a very good record of appreciation.

    Bitcoin is similar. I know nothing about the details but the basic idea seems sound. The US or the EU constantly encounter political challenges. Bitcoin should be relatively free of that. There is no political dimension to it. That political dimension mostly serves as a source of uncertainty and danger, so good riddance I say.

    And that is not all. Credit card companies get about 3% of each transaction using them. Wouldn't you rather not pay that? Not only that, credit cards are painfully insecure. I can give details about that if you like. Not only that, credit card transactions all go into a big government data base. I don't see how this is any of their business, especially political donations. Maybe the the 2020 Palin administration won't like what I've done, and take action against me. With bitcoin I might be secure against that.

    IMO the credit card companies abused their power by their embargo of Wikileaks. This did not make me their friend. (It is believed that there is a secret indictment. If it is secret, it cannot be challenged in court and can go on forever. This sort of sophistic greasy sneakiness disgusts me. The US Treas department refused to sanction the embargo, citing "no evidence of a crime," so the charges are weak.) The embargo was a failure and probably greatly boosted support for Wikileaks, but that is neither here nor there.

    Paul Krugman wrote that bitcoin is a speculative commodity with value that gyrates wildly. I don't like that, but at this time it is very thinly traded. If it catches on then it should be as stable as any other currency. Maybe even more so, as it is not affected by political news.

    In summary, what's not to like? It could be that Bitcoin will be cracked and blow up, but if so the next currency can learn from the failure and improve. I don't see why it can't be at least as good as the woefully insecure credit cards. It should be easy to do better than that.
    Last edited: Apr 23, 2013
  13. russ_watters

    Staff: Mentor

    Doesn't the fact that there is no backing just mean that there is no basis for ever having any confidence in the currency? That its value is 100% based on speculation and will never have any hope of long-term stability?

    This sounds like an anarchist argument.
    Until people's taste in art changes. As their taste in Beanie Babies changed. Or until the economy goes into a funk and people have less money to spend on fine art:
    Bitcoin is a currency, so it has nothing whatsoever in common with credit cards. What's not to like is the lack of basis, which implies it has no chance of ever being stable. Don't take this the wrong way, but your argument sounds like that of an anarchist who believes that there can be order in chaos. I don't think that's likely.
  14. If you continue such an ad hominem style of argument I will report you to the moderators for disciplinary action. Do you still think I'm an anarchist?

    We shall soon see in real life whether bitcoin works or not. So there's not much point in arguing about it.
  15. russ_watters

    Staff: Mentor

    There was no ad hominem in my post. You said a number of things that imply you don't like an authority controlling money -- or information.

    FYI, we have another thread active about bit coin and it has been showing instability and signs of a bubble.

    Also, apparently I messed up copying the link, but the fine art market has been depressed.
  16. Ryan_m_b

    Staff: Mentor

    I hardly think anarchist counts as an ad hominem ImaLooser. I agree with Russ on this; fiat currency is a benefit to trust, not a negative. It essentially transfers the question from "do you trust this currency" to "do you trust this nation".
  17. I'll openly admit to being an anarchist, and I'm with Looser. The appealing part of bitcoin to me is that there is no central issuer. This is an aspect which Krugman completely ignores in his critique of it yet is the aspect I find most appealing. Our current system where certain banks are borrowing at negative interest from the Federal Reserve and are bailed out when they fail seems less than equitable. Say what you will about Bitcoin and its instability, but it can't be accused of not being a market. Our current banking system is the furthest thing from a market system. IMO it doesn't matter what we think. Bitcoin is the future, and just like Napster changed the recording industry Bitcoin will change the banking industry, and ideas like Kickstarter will change the finance industry. I welcome these changes.
    Last edited: Apr 23, 2013
  18. DavidSnider

    DavidSnider 494
    Gold Member

    I think if BitCoin ever got out of the 'beanie-baby' stage and people started taking it seriously I'm fairly sure most governments would make it illegal and find ways to cripple the infrastructure supporting it so badly as to be almost unusable.
  19. russ_watters

    Staff: Mentor

    I'm not seeing how it could ever be possible to get out of the "beanie-baby stage". Market/price stability comes from a stable balance between supply and demand. For items with no inherent value whatsoever - not even aesthetic value like a painting or Beanie Baby - value can change on any whim. Like Beanie Babies, there appears to me to be a pretty good chance people will get tired of it and it will just lose all of its value.
  20. The term inherent value has been batted around in the discussion of Bitcoins. What is inherent value? The dollar only has more "inherent value" than a Bitcoin because you can pay your taxes in them. Other than that, what inherent value does any fiat currency have?
  21. russ_watters

    Staff: Mentor

    The "inherent value" of a fiat currency is the faith in and credit of the government that issues it.

    [edit] Many sources prefer to use the term "intrinsic value" and say that fiat currency has none. I'm fine with following that convention as long as we recognize/agree that there's still a difference in basis for the value of a fiat currency (faith in and credit of the government) vs Bitcoin (nothing at all).

    I'm even thinking with Bitcoin it might be a purposeful scam of a fad, almost like a pyramid scheme. The fact that you "mine" bitcoins and the mining gets harder the more bitcoins there are means that early adopters get the most out of it, just like a pyramid scheme. The mining encourages fad value but points to a possibility of an end-point when it could completely collapse (when no more coins are available/or it becomes too hard to mine them).
    Last edited: Apr 23, 2013
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