> Isn't the fundamental difference here that we can't print more bitcoin to bail out bad investments?
Absolutely. (Although it's "a" difference, not "the" difference.)
> you can lend out bitcoin and even do fractional reserves, but ultimately, the bill must come due and over leveraged bad bets will get wiped out and good bets get rewarded.
Yes, and the subeconomy of bitcoin investing has a very different risk profile. As an example: I mentioned in another comment, the exchanges are already doing fractional reserves in spades. Bitmex has an insurance fund, and there has been at least one occasion where liquidation could not be covered by the traders and then exhausted the insurance fund. What happened then? The insurance fund paid out pro-rata on the successful bets (the successful traders made less than they should have") and much grousing ensued.
So it's the rough equivalent of an old-fashioned bank run, but tempers lessened because some money was made and nobody was zeroed out (other than the losing bets who should have gone negative but were only zeroed out).
I'm not sure the occasional bank run by people who get over zealous with their greed and desire for MORE is necessarily a bad thing.
The problem in my mind is when banks are doing fractional reserve without the explicit understanding and consent of their depositors. This might mean we'll have to get used a world where we pay banks a tiny fee to secure our money, rather than the risk free interest we expect now.
> I'm not sure the occasional bank run by people who get over zealous with their greed and desire for MORE is necessarily a bad thing.
I mostly agree. I think one of the biggest problems with the bank meltdown of 2008 is that no heads rolled, so it's no surprise that there has ultimately been very little behavioral change.
> The problem in my mind is when banks are doing fractional reserve without the explicit understanding and consent of their depositors.
All of them are consenting (FRB is what banks do, they don't make money by simply holding a deposit) but boy is there a lack of understanding on how the modern bank works as a business and it's effect on the money supply.
Absolutely. (Although it's "a" difference, not "the" difference.)
> you can lend out bitcoin and even do fractional reserves, but ultimately, the bill must come due and over leveraged bad bets will get wiped out and good bets get rewarded.
Yes, and the subeconomy of bitcoin investing has a very different risk profile. As an example: I mentioned in another comment, the exchanges are already doing fractional reserves in spades. Bitmex has an insurance fund, and there has been at least one occasion where liquidation could not be covered by the traders and then exhausted the insurance fund. What happened then? The insurance fund paid out pro-rata on the successful bets (the successful traders made less than they should have") and much grousing ensued.
So it's the rough equivalent of an old-fashioned bank run, but tempers lessened because some money was made and nobody was zeroed out (other than the losing bets who should have gone negative but were only zeroed out).