3 ms·

> New value is created every day Not necessarily, and you may be conflating demand for a currency (which controls its valuation and exchange rate) with economi

by zanny 10y ago

> New value is created every day Not necessarily, and you may be conflating demand for a currency (which controls its valuation and exchange rate) with economic productivity in an economy. Its not so much, I imagine, about stopping the creation of money - the economic fundamentals behind why inflation is good are obvious. The promise of digital currencies going forward is the hopeful removal of human irrationality from the process. Would you prefer to trust the Federal Reserve, with all its own internal goals and motivations, to print money "honestly", or would you rather have an algorithm that adjusted the block payout rate to maintain constant 1% inflation in the monetary base, relative to monetary velocity? IE, when the money slows down, which implies money is being hoarded because its value is rising, you print more to offset it, and when money speeds up you reduce the printing speed to try to keep the velocity stable.

seanalltogether 10y ago
> Would you prefer to trust the Federal Reserve, with all its own internal goals and motivations, to print money "honestly", or would you rather have an algorithm that adjusted the block payout rate to maintain constant 1% inflation in the monetary base, relative to monetary velocity? I would prefer that people not have to create their own promissory notes during economic booms because it's impossible to create a legitimate loan due to the current monetary supply. You're begging for a black market currency at that point.
JumpCrisscross 10y ago
> or would you rather have an algorithm that adjusted the block payout rate to maintain constant 1% inflation in the monetary base, relative to monetary velocity We have not yet found a consistent set of rules for setting monetary policy that work across the board. The problem is compounded for dual-mandate central banks such as the Federal Reserve. Even measuring inflation is a manual process - how would you code basket selection into your currency?
lmm 10y ago
> Would you prefer to trust the Federal Reserve, with all its own internal goals and motivations, to print money "honestly", or would you rather have an algorithm that adjusted the block payout rate to maintain constant 1% inflation in the monetary base, relative to monetary velocity? IE, when the money slows down, which implies money is being hoarded because its value is rising, you print more to offset it, and when money speeds up you reduce the printing speed to try to keep the velocity stable. At the moment I'd rather have a (democratically accountable) human in the loop. I don't have anything like the level of confidence in economic theory to trust any argument that 1% is the "right" level of inflation for all time. If there are unforseen shifts in the economy and we end up thinking that (say) 10% inflation is the best thing to do at the moment, I'd rather we had the capability to do that.
forgetsusername 10y ago
>Would you prefer.. Until we have evidence of an optimal money growth rate, I want the system to be flexible. >keep the velocity stable. Velocity is, basically, a fudge factor in the PQ = MV equation (as in, it makes the formula work). Is there any research that points to stable velocity being optimal? I think it changes drastically over time. I think you're on the right track, and "the system" could definitely use more transparency and objectivity. But I don't think there's any algorithm near ready for prime time. The economy is too complex.

by zanny 10y ago

seanalltogether 10y ago

JumpCrisscross 10y ago

> or would you rather have an algorithm that adjusted the block payout rate to maintain constant 1% inflation in the monetary base, relative to monetary velocity We have not yet found a consistent set of rules for setting monetary policy that work across the board. The problem is compounded for dual-mandate central banks such as the Federal Reserve. Even measuring inflation is a manual process - how would you code basket selection into your currency?

lmm 10y ago

> Would you prefer to trust the Federal Reserve, with all its own internal goals and motivations, to print money "honestly", or would you rather have an algorithm that adjusted the block payout rate to maintain constant 1% inflation in the monetary base, relative to monetary velocity? IE, when the money slows down, which implies money is being hoarded because its value is rising, you print more to offset it, and when money speeds up you reduce the printing speed to try to keep the velocity stable. At the moment I'd rather have a (democratically accountable) human in the loop. I don't have anything like the level of confidence in economic theory to trust any argument that 1% is the "right" level of inflation for all time. If there are unforseen shifts in the economy and we end up thinking that (say) 10% inflation is the best thing to do at the moment, I'd rather we had the capability to do that.

forgetsusername 10y ago

>Would you prefer.. Until we have evidence of an optimal money growth rate, I want the system to be flexible. >keep the velocity stable. Velocity is, basically, a fudge factor in the PQ = MV equation (as in, it makes the formula work). Is there any research that points to stable velocity being optimal? I think it changes drastically over time. I think you're on the right track, and "the system" could definitely use more transparency and objectivity. But I don't think there's any algorithm near ready for prime time. The economy is too complex.