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Fair point that my comment is off topic, I’ve been rightly downvoted and flagged for it : ( But I’ll respond to your comment in hopes that it might pique the i

Fair point that my comment is off topic, I’ve been rightly downvoted and flagged for it : ( But I’ll respond to your comment in hopes that it might pique the interest of some sensible non-commenting lurker, and if it’s my lucky day perhaps you’ll genuinely consider my response as well. When you say it’s a “totally reasonable system of money” I’m going to make the assumption that you believe this because there has been an absolutely, never before seen in the history of mankind, massive rise in the standard of living over the past 100+ years. Implicit in your statement, however, is that transitioning away from hard money (Eg a gold standard) and towards a fiat standard is in some way the cause of this rather than it merely being correlated (no doubt you’re well versed, like most people on HN, in the correlation vs causation problem). My specific claim is that the massive increase in technology (including information technology) is the cause of this rapid rise in the standard of living, and this improvement has actually masked the serious and growing problems with fiat (such as recurring and exacerbated financial crises). I can’t “prove” this conclusively anymore than you can “prove” a fiat/credit economy is the cause of it — we can’t re-run the 20th century on a hard money standard and compare the outcomes of the two. But it sure is convenient for governments to tell people that hard money is bad, but never let us test it out to see for ourselves, which begs the question, “cui bono?” In this situation it’s clear who benefits from fiat currencies — nation states. The ability to print money at will and fund your own expenditures with that newly minted money (whose value comes from savers), is a temptation that no man can be trusted with. I believe this overwhelming temptation is WHY the market (billions of consumers acting voluntarily over thousands of years) ultimately settled on gold — it’s near impossible to pass counterfeits and the difficulty of mining it makes it a naturally low-inflation money. The biggest downside to gold, however, is that governments have successfully prevented it from being used as money (through coercion, obviously). I believe this is why cryptocurrency is an interesting experiment, no doubt governments and their 3-letter agencies are using propaganda to control the narrative there, but unlike gold they can’t control the supply or prevent its circulation with coercion.

arcticbull 8y ago
Thing is since the switch wages have kept pace with inflation even at the low end, and logically the poor have the least money so by extension the least exposed to inflation of cash on hand. Either way nobody should be holding money but instead using it to buy productive assets in which case it wouldn’t affect them right? On average home values outpace inflation in the US too, and that’s most Americans biggest investment. It inflates away debts, too, in that the principal always decreases in value in constant dollars. Thus, it’s not clear to me how inflation affects any invested individual, it’s just a regular haircut for unproductive capital. Any other wealth accumulation would be a failure of tax or social policy not monetary policy. Inflation doesn’t come at the expense of savers because savers don’t save cash, that’s because of inflation, and its not a bug, it’s a feature. It’s exactly the incentive you call out — to allocate your capital to investments which outpace inflation instead of sitting on it. I can’t think of any good reason a wad of dollar bills should be worth more tomorrow (or even keep value) by virtue of me just ... having them — can you?
- sbenitoj 8y ago
  Yes — increasing the supply of money decreases the purchasing power over time of all other dollars in existence and simultaneously encourages people to make risky investments to avoid the value of their money from decreasing.
  - arcticbull 8y ago
    They needn't be risky, just yielding more than 2% like government bonds. If the government goes under their bonds are no good, but neither would your dollars be. Literally anything other than stuffing them under your mattress. Nothing's stopping you from buying precious metals either (physical, ETF or mining company shares). If you want your own wealth to be "gold backed" ... just buy gold. Then you can even borrow against it to make other purchases. Hey, it's basically "be your own bank" but with real assets.
    - sbenitoj 8y ago
      You’re defining risky from your perspective, just because YOU don’t perceive an asset designed to keep pace with inflation as risky doesn’t mean it’s not and it also doesn’t mean those investors wouldn’t prefer to keep it in cash. If being your own bank weren’t threatening to govts, why don’t they just let gold backed currencies circulate and compete (eg see the Liberty Dollar — https://en.m.wikipedia.org/wiki/Liberty_dollar_(private_currency) https://en.m.wikipedia.org/wiki/Liberty_dollar_(private_curr...)
      - arcticbull 8y ago
        Based on a cursory skim of the wikipedia article you linked the liberty dollar was taken down because it was a haven for "...money laundering, mail fraud, wire fraud, counterfeiting, and conspiracy." You still haven't explained how you're any worse off by buying literal gold, or if you don't want to carry it around yourself, shares in a gold ETF like GLD. In what way is a share certificate of GLD any different than a gold-backed currency? It's even government-regulated (albeit by the SEC instead of the department of the treasury). Salaries track inflation, so you're always getting the same in real dollar terms. Inflation is irrelevant if you don't hold money. If you want a gold-backed dollar, you can achieve the same result buy using your money as quick as you get it to buy gold or in lieu, shares of GLD. You can even buy precious metal currency minted by governments like the platinum, gold and silver coins from the Royal Canadian Mint [1] -- not that they're a good value. This isn't a problem. AFIAK you can even put any of the above into an IRA. [1] https://www.mint.ca/store/buy/gold-and-platinum_coins-cat120004 https://www.mint.ca/store/buy/gold-and-platinum_coins-cat120...

arcticbull 8y ago

Thing is since the switch wages have kept pace with inflation even at the low end, and logically the poor have the least money so by extension the least exposed to inflation of cash on hand. Either way nobody should be holding money but instead using it to buy productive assets in which case it wouldn’t affect them right? On average home values outpace inflation in the US too, and that’s most Americans biggest investment. It inflates away debts, too, in that the principal always decreases in value in constant dollars. Thus, it’s not clear to me how inflation affects any invested individual, it’s just a regular haircut for unproductive capital. Any other wealth accumulation would be a failure of tax or social policy not monetary policy. Inflation doesn’t come at the expense of savers because savers don’t save cash, that’s because of inflation, and its not a bug, it’s a feature. It’s exactly the incentive you call out — to allocate your capital to investments which outpace inflation instead of sitting on it. I can’t think of any good reason a wad of dollar bills should be worth more tomorrow (or even keep value) by virtue of me just ... having them — can you?

sbenitoj 8y ago
Yes — increasing the supply of money decreases the purchasing power over time of all other dollars in existence and simultaneously encourages people to make risky investments to avoid the value of their money from decreasing.
- arcticbull 8y ago
  They needn't be risky, just yielding more than 2% like government bonds. If the government goes under their bonds are no good, but neither would your dollars be. Literally anything other than stuffing them under your mattress. Nothing's stopping you from buying precious metals either (physical, ETF or mining company shares). If you want your own wealth to be "gold backed" ... just buy gold. Then you can even borrow against it to make other purchases. Hey, it's basically "be your own bank" but with real assets.
  - sbenitoj 8y ago
    You’re defining risky from your perspective, just because YOU don’t perceive an asset designed to keep pace with inflation as risky doesn’t mean it’s not and it also doesn’t mean those investors wouldn’t prefer to keep it in cash. If being your own bank weren’t threatening to govts, why don’t they just let gold backed currencies circulate and compete (eg see the Liberty Dollar — https://en.m.wikipedia.org/wiki/Liberty_dollar_(private_currency) https://en.m.wikipedia.org/wiki/Liberty_dollar_(private_curr...)
    - arcticbull 8y ago
      Based on a cursory skim of the wikipedia article you linked the liberty dollar was taken down because it was a haven for "...money laundering, mail fraud, wire fraud, counterfeiting, and conspiracy." You still haven't explained how you're any worse off by buying literal gold, or if you don't want to carry it around yourself, shares in a gold ETF like GLD. In what way is a share certificate of GLD any different than a gold-backed currency? It's even government-regulated (albeit by the SEC instead of the department of the treasury). Salaries track inflation, so you're always getting the same in real dollar terms. Inflation is irrelevant if you don't hold money. If you want a gold-backed dollar, you can achieve the same result buy using your money as quick as you get it to buy gold or in lieu, shares of GLD. You can even buy precious metal currency minted by governments like the platinum, gold and silver coins from the Royal Canadian Mint [1] -- not that they're a good value. This isn't a problem. AFIAK you can even put any of the above into an IRA. [1] https://www.mint.ca/store/buy/gold-and-platinum_coins-cat120004 https://www.mint.ca/store/buy/gold-and-platinum_coins-cat120...