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> Do you honestly believe the government has a magic/economic-violating ability to create $100 worth of value when it spends $0.13 printing a new paper bill? [1

> Do you honestly believe the government has a magic/economic-violating ability to create $100 worth of value when it spends $0.13 printing a new paper bill? [1] Or even less when it's digitally inflated? That's basically a complete misunderstanding of what money is. The fact that money is a store of value is (and mostly has always been) an emergent property. This is part of why when systems that try to tie value to things like gold pop up every now and then, they always eventually fail and the peg breaks - because it's just not how it actually works. The primary purpose of money is to represent an obligation to provide a good or service at a later time. In the Government's case, their spending from money they create is actually putting money into the economy so they can tax it back later. It's actually around the requirement of a population to pay tax in a certain currency that the wider economy emerges around it (this is called 'baseline demand' for a currency). Now, to the question of 'does the Government magically create $100 of value when they issue a banknote?' No. But the if the economy has produced $100 of new value, then it actually needs somebody to create $100 more money to operate in a non-deflationary way. At the moment, a lot of that comes from banks, which also expand the money supply when they create new loans, but at the same time create private debt. And it's actually when you get too much private debt and something happens in the economy that stops enough people being able to pay up that banks require bailouts.

DINKDINK 8y ago
>The fact that money is a store of value You are arguing that something that can be effortlessly created (paper money) is a better store of value than something that cannot be effortlessly created (bitcoin). >systems that try to tie value to things like gold pop up every now and then, they always eventually fail and the peg breaks - because it's just not how it actually works They fail because there's trust in pegging something to gold, one must obviate the peg. i.e. bitcoin >It's actually around the requirement of a population to pay tax in a certain currency that the wider economy emerges around it (this is called 'baseline demand' for a currency). The term you're looking for is Chartalism [1] and it's a naive view of money. >if the economy has produced $100 of new value, then it actually needs somebody to create $100 more money to operate in a non-deflationary way. Let's assume that the central-planning of money does create a economic free lunch and that it is a superior money. Why then does it need a state-enforced monopoly around it? If it clearly was superior, it would win in a free market without the aid of a state-enforced monopoly. [1] https://en.wikipedia.org/wiki/Chartalism https://en.wikipedia.org/wiki/Chartalism
- omegaworks 8y ago
  >it's a naive view of money. The link you provided actually contradicts this statement.
  - DINKDINK 8y ago
    >The link you provided actually contradicts this statement. If Chartalism was a valid theory then no fiat money -- which required to be used to pay tax -- would have ever failed. That is to say, history and time provide real-world proof[1] that Chartalism is a specious theory of money. At the end of the day though, if you know more than the market, take negative delta exposure to bitcoin and profit handsomely. [1] https://trader2trader.co/2012/11/28/list-of-590-dead-currencies-demonetized-r-i-p/ https://trader2trader.co/2012/11/28/list-of-590-dead-currenc...
    - dragonwriter 8y ago
      > If Chartalism was a valid theory then no fiat money -- which required to be used to pay tax -- would have ever failed. That's...not a justifiable conclusion; there's at least two obvious failure modes consistent with Chartalism: withdrawal of the exclusive mandate for taxes to be paid in the currency, and practical failure of the State imposing the requirement. The latter, especially, is not a binary condition, and can easily occur in a mutual death-spiral of state and currency in response to some shock. Most collapses (or even temporary near collapses) of fiat currency I can think of were that kind of mutual death spiral with the sponsoring state resulting either from war or internal crisis of order.
    - omegaworks 8y ago
      >if you know more than the market, take negative delta exposure to bitcoin and profit handsomely. "The market can remain irrational longer than you can remain solvent."
      - DINKDINK 8y ago
        That aphorism is used by naive people who 1.) want to capture the upside of if they're right but suffer no penalty if they're wrong. 2.) Don't understand how to take low probability, high payout exposure: Buy a deep, out-of-money put you'll profit handsomely if right.

DINKDINK 8y ago

>The fact that money is a store of value You are arguing that something that can be effortlessly created (paper money) is a better store of value than something that cannot be effortlessly created (bitcoin). >systems that try to tie value to things like gold pop up every now and then, they always eventually fail and the peg breaks - because it's just not how it actually works They fail because there's trust in pegging something to gold, one must obviate the peg. i.e. bitcoin >It's actually around the requirement of a population to pay tax in a certain currency that the wider economy emerges around it (this is called 'baseline demand' for a currency). The term you're looking for is Chartalism [1] and it's a naive view of money. >if the economy has produced $100 of new value, then it actually needs somebody to create $100 more money to operate in a non-deflationary way. Let's assume that the central-planning of money does create a economic free lunch and that it is a superior money. Why then does it need a state-enforced monopoly around it? If it clearly was superior, it would win in a free market without the aid of a state-enforced monopoly. [1] https://en.wikipedia.org/wiki/Chartalism https://en.wikipedia.org/wiki/Chartalism

omegaworks 8y ago
>it's a naive view of money. The link you provided actually contradicts this statement.
- DINKDINK 8y ago
  >The link you provided actually contradicts this statement. If Chartalism was a valid theory then no fiat money -- which required to be used to pay tax -- would have ever failed. That is to say, history and time provide real-world proof[1] that Chartalism is a specious theory of money. At the end of the day though, if you know more than the market, take negative delta exposure to bitcoin and profit handsomely. [1] https://trader2trader.co/2012/11/28/list-of-590-dead-currencies-demonetized-r-i-p/ https://trader2trader.co/2012/11/28/list-of-590-dead-currenc...
  - dragonwriter 8y ago
    > If Chartalism was a valid theory then no fiat money -- which required to be used to pay tax -- would have ever failed. That's...not a justifiable conclusion; there's at least two obvious failure modes consistent with Chartalism: withdrawal of the exclusive mandate for taxes to be paid in the currency, and practical failure of the State imposing the requirement. The latter, especially, is not a binary condition, and can easily occur in a mutual death-spiral of state and currency in response to some shock. Most collapses (or even temporary near collapses) of fiat currency I can think of were that kind of mutual death spiral with the sponsoring state resulting either from war or internal crisis of order.
  - omegaworks 8y ago
    >if you know more than the market, take negative delta exposure to bitcoin and profit handsomely. "The market can remain irrational longer than you can remain solvent."
    - DINKDINK 8y ago
      That aphorism is used by naive people who 1.) want to capture the upside of if they're right but suffer no penalty if they're wrong. 2.) Don't understand how to take low probability, high payout exposure: Buy a deep, out-of-money put you'll profit handsomely if right.