> otherwise, you get severe inflation Say what? Severe inflation is very often caused by how banks and central banks manipulate the money supply, which is much

> otherwise, you get severe inflation Say what? Severe inflation is very often caused by how banks and central banks manipulate the money supply, which is much more difficult if the economy uses money with restricted supply. You say that fiat money is connected to the underlying economy, but the supply is really controlled by central banks and regular banks. If we're being nice then they indeed do their best to follow the market, but they can never be perfect and sometimes outright bad at it. It's the same reason why planning economies doesn't work, the market is far too complex to predict. And of course this will have negative effects. > If you're just saying that governments are too free with their manipulation of the abstraction, there's some merit to that. But that's not a problem with the concept of fiat currency. Having the ability to freely control the money supply indeed makes the problem of government (rather bank and central bank) manipulation worse, and to a large extent it's what makes it possible. Yes you can create an abstract IOU-Bitcoin too, but there's no lender of last resort to bail you out when you fail, so you'll have to be much more careful if you decide to do it.