8 ms·

The killer app for Bitcoin is escaping government fiat money that is backed by literally nothing at all and is being printed at increasingly alarming rates. 40

The killer app for Bitcoin is escaping government fiat money that is backed by literally nothing at all and is being printed at increasingly alarming rates. 40% of all USD ever created were “made” in 2020. That will have repercussions for decades and isn’t a currency I want to stay in. https://fred.stlouisfed.org/series/M1 https://fred.stlouisfed.org/series/M1 Ironically (or not) Bitcoin was created in 2009 right when that graph gets really crazy.

notahacker 6y ago
USD is backed by being valid for the redemption of outstanding USD denominated invoices, loan repayments and tax bills, all of which ensures demand to possess the currency and are likely to continue to exist in increasing quantities in future. "Escaping" that for something which literally is backed by nothing at all is a strange move.
raesene9 6y ago
That only works when people take payment in BTC without translating the value provided back to a Fiat currency. Until that time, expansion of the USD (or other Fiat) supply impacts the "value" that BTC has.
- dmichulke 6y ago
  During the gold standard, did people take payment in gold? I don't think so... They used paper that symbolized "withdrawal rights to gold". USD (or any other piece of paper that people agree has a value) is a perfect currency for exchange, it's just not a great store of value.
  - raesene9 6y ago
    The point I was responding to was saying that they wanted to get away from USD and that this was BTC's killer app. My point is that you can't "get away" from USD, while the BTC market is effectively tied to USD. so if the USD supply is massively inflated, and people can use those USD to buy BTC, the tie is still there. If and when people denominate their goods and services in BTC without any reference to a fiat amount, then they are decoupled and BTC loses the tie to USD.
  - FabHK 6y ago
    > did people take payment in gold? No, but prices were denominated in gold, effectively, as the price of gold was fixed. That was the whole point.
  - Majromax 6y ago
    > USD [...] is a perfect currency for exchange, it's just not a great store of value. USD is a fantastic store of value. Since 1982 (arguably the beginning of the modern inflation-targeting era), the USD has lost no more than 6.3% of its value year-over-year, nor gained more than 2% (CPI measured, source https://fred.stlouisfed.org/series/CPIAUCSL#0 https://fred.stlouisfed.org/series/CPIAUCSL#0). In contrast since 2016, Bitcoin has 60% of its value year-over-year (2018) and gained 1700% (also 2018). A store of value is not a story of appreciation and hoping for a gain, it's a story about holding a stable and most importantly predictable value into the future. The USD more than satisfies this condition. Bitcoin does not, no matter its speculative merits. Most importantly, society does not owe people a fictional store of value guaranteed to never lose purchasing power. People don't eat quarters, nor do they live under dollar bills. It strains credulity that a nominal token (however minted) should hold a guaranteed value, without taking capital-like risks required of any productive investment.
user22 6y ago
I have a question, isn't the problem with the gold standard that the amount of dollars is fixed and in order to have enough currency to drive a rapidly growing economy you would in essence be buying a gallon of milk for .25 cents? It seems to me that either you the amount of currency in circulation needs to increase or the value of the existing currency needs to increase. Taking into account the gold standard was used for possibly centuries (not sure) was this problem encountered before and how was it solved?
- ldiracdelta 6y ago
  Yes. That is called deflation. It also has to do with fractional reserve banking. The fraction of your outstanding dollars that you could actually cover with gold. If no one ever wants to make a run on your bank, you can keep the fraction very low.
  - user22 6y ago
    I understand the deflation part, but my question really was is it an economy the size of the united states even possible if we stayed on the gold standard.
    - TearsInTheRain 6y ago
      Not having enough money to transact would definitely have suppressed our economic growth, but then again maybe we would have gotten really good at mining for gold to make up for it
      - Ekaros 6y ago
        "Really good at mining." This might be good point to compare with BTC. Where huge amounts of electricity is spend on doing essentially useless calculations, outside keeping the system safe and running. Good at mining would have meant spending good part of our economic output to mine gold and then just storing it somewhere or moving it around...
- 6y ago
puranjay 6y ago
> literally backed by nothing Backed by $750B in annual military spending
qeternity 6y ago
Backed by nothing...as opposed to bitcoin? People who repeat this don't understand that fiat money is based on trust...and that is not a bad thing. This is why blockchain is fundamentally stunted: the global society is based on trust and cooperation. Trustless systems will never be able to compete in these arenas.
- gthaman 6y ago
  yawn speaking of jumping the shark, have you seen what governments have been up to lately ? interest rates at a 5,000 year low, moral hazard abound & global fiat collapse imminent in the best case and in the worst case we have banks/elites/governments who are going to be looking to further enslave those in debt and forced out of business/work with some dystopian debt forgiveness scheme involving a 'vaccine' schedule and travel restrictions or whatever else (use your imagination). the truth is that everything mentioned in these comments was an argument that had already been had years ago - the markets reflect that - but i did enjoy reading the last sentence of your original comment and thinking to myself "am I reading Time Magazine ?"
  - mkr-hn 6y ago
    And yet people still buy T-bills.
  - qeternity 6y ago
    1) trying to distract the above problems by pointing out other issues doesn't make them go away 2) you talk about fiat collapse being imminent...USDT is worth far less than any fiat (see: nothing) I don't get how these ardent fiat haters don't see their entire ecosystem has been coopted by something that has infinitely less value than the thing they so despise
  - mockery 6y ago
    Seems to me like you're tacitly agreeing with GP here - you're just making a claim about which currency system you trust more! (And attempting to convince others of the same position.)
fuzzylightbulb 6y ago
> backed by literally nothing It is the only thing the government accepts for tax payments. Given that you can be arrested for not paying your taxes it is "backed" by the barrel of a gun, a threat to your very being. In one sense this is the only real thing there is.
- paulgb 6y ago
  Indeed. A thought experiment: say the US government created a USD-prime currency that floated freely from USD. You could still use the USD in private transactions, but the US government would only transact and tax in USD-prime. What would be the fate of the original USD? My belief that it would go to zero. I’m curious whether “fiat is backed by nothing” proponents would disagree.
  - nicky0 6y ago
    Both fiat currency and Bitcoin are backed by the same thing: mass belief. An incredibly powerful thing.
    - paulgb 6y ago
      Yep, but my point is that one is mass belief that the US government will continue wanting USD, the other is a mass belief that other people will continue wanting BTC. Both could be right, both could be wrong, but they are not the same proposition.
      - nicky0 6y ago
        Don't forget that the US gov itself is also propped up by mass belief. Its authority rests in the people. Now you might say "actually its authority rests on people with guns", but that's only to the extent that the people with the guns believe in the governments's authority to tell them who to point them at. Underneath all is belief and sentiment.
- freewilly1040 6y ago
  This argument doesn't really refute the argument for bitcoin as digital gold. It's not as though you can't exchange bitcoin to pay your taxes.
deleted 6y ago
[deleted]
chalst 6y ago
The 40% relates essentially to cash-like assets, which is a tiny part of the total USD money supply. The total has not grown drastically. See https://en.m.wikipedia.org/wiki/Money_supply https://en.m.wikipedia.org/wiki/Money_supply
patagonia 6y ago
Money is not property. Money is an entry on a ledger, which tracks credits and debits. So yes, fiat currency is not redeemable for a physical asset. But if it was redeemable, what ensures that say gold or a chicken will suffice to settle a debt or serve as credit for a future transaction. Chickens die and gold is only as valuable as your skills as a trader. The ledger and all of the social norms and institutional structures that accompany it is what maintains financial wealth. Preventing debasement of currency via inflation via printing money, which a lot of people use as their go to argument against fiat money, is simply adding economy wide debt to the ledger. This is necessary from time to time especially during crises and especially in a services/financial services/ intellectual property heavy economy. If no money existed, at all, how would you receive compensation for providing work of an IP nature to your neighbor. You would need either a perfect trade (you really want their chicken it’s just the right amount of chicken for you) or you take an iou. Which is a debt. Now have them write that iou down on a piece of paper and hand it to you. Your neighbor just printed money. Not so crazy.
TomSwirly 6y ago
> government fiat money that is backed by literally nothing at all It would be really nice for people to spend even a few minutes thinking about how money works, or open a textbook even just to learn what you disagree with. It's tiresome to explain over and over and over again to people how the "full faith and credit of the United States" is not "nothing at all" but in fact a guarantee of great value, at least as good as any on any other security, and one that is quite measurable (by for example comparing the prices of full faith and credit securities with other almost identical securities without this guarantee). On the contrary, I'd say that it's the cryptocurrencies that _by design_ are based on nothing at all.
- elvatoloco55 6y ago
  Whats is the value of the full faith and credit of Venezuela, Argentina, Ukraine, India, Mexico etc etc? Please do share your limited US centric view!

notahacker 6y ago

USD is backed by being valid for the redemption of outstanding USD denominated invoices, loan repayments and tax bills, all of which ensures demand to possess the currency and are likely to continue to exist in increasing quantities in future. "Escaping" that for something which literally is backed by nothing at all is a strange move.

raesene9 6y ago

That only works when people take payment in BTC without translating the value provided back to a Fiat currency. Until that time, expansion of the USD (or other Fiat) supply impacts the "value" that BTC has.

dmichulke 6y ago
During the gold standard, did people take payment in gold? I don't think so... They used paper that symbolized "withdrawal rights to gold". USD (or any other piece of paper that people agree has a value) is a perfect currency for exchange, it's just not a great store of value.
- raesene9 6y ago
  The point I was responding to was saying that they wanted to get away from USD and that this was BTC's killer app. My point is that you can't "get away" from USD, while the BTC market is effectively tied to USD. so if the USD supply is massively inflated, and people can use those USD to buy BTC, the tie is still there. If and when people denominate their goods and services in BTC without any reference to a fiat amount, then they are decoupled and BTC loses the tie to USD.
- FabHK 6y ago
  > did people take payment in gold? No, but prices were denominated in gold, effectively, as the price of gold was fixed. That was the whole point.
- Majromax 6y ago
  > USD [...] is a perfect currency for exchange, it's just not a great store of value. USD is a fantastic store of value. Since 1982 (arguably the beginning of the modern inflation-targeting era), the USD has lost no more than 6.3% of its value year-over-year, nor gained more than 2% (CPI measured, source https://fred.stlouisfed.org/series/CPIAUCSL#0 https://fred.stlouisfed.org/series/CPIAUCSL#0). In contrast since 2016, Bitcoin has 60% of its value year-over-year (2018) and gained 1700% (also 2018). A store of value is not a story of appreciation and hoping for a gain, it's a story about holding a stable and most importantly predictable value into the future. The USD more than satisfies this condition. Bitcoin does not, no matter its speculative merits. Most importantly, society does not owe people a fictional store of value guaranteed to never lose purchasing power. People don't eat quarters, nor do they live under dollar bills. It strains credulity that a nominal token (however minted) should hold a guaranteed value, without taking capital-like risks required of any productive investment.

user22 6y ago

I have a question, isn't the problem with the gold standard that the amount of dollars is fixed and in order to have enough currency to drive a rapidly growing economy you would in essence be buying a gallon of milk for .25 cents? It seems to me that either you the amount of currency in circulation needs to increase or the value of the existing currency needs to increase. Taking into account the gold standard was used for possibly centuries (not sure) was this problem encountered before and how was it solved?

ldiracdelta 6y ago
Yes. That is called deflation. It also has to do with fractional reserve banking. The fraction of your outstanding dollars that you could actually cover with gold. If no one ever wants to make a run on your bank, you can keep the fraction very low.
- user22 6y ago
  I understand the deflation part, but my question really was is it an economy the size of the united states even possible if we stayed on the gold standard.
  - TearsInTheRain 6y ago
    Not having enough money to transact would definitely have suppressed our economic growth, but then again maybe we would have gotten really good at mining for gold to make up for it
    - Ekaros 6y ago
      "Really good at mining." This might be good point to compare with BTC. Where huge amounts of electricity is spend on doing essentially useless calculations, outside keeping the system safe and running. Good at mining would have meant spending good part of our economic output to mine gold and then just storing it somewhere or moving it around...
6y ago

puranjay 6y ago

> literally backed by nothing Backed by $750B in annual military spending

qeternity 6y ago

Backed by nothing...as opposed to bitcoin? People who repeat this don't understand that fiat money is based on trust...and that is not a bad thing. This is why blockchain is fundamentally stunted: the global society is based on trust and cooperation. Trustless systems will never be able to compete in these arenas.

gthaman 6y ago
yawn speaking of jumping the shark, have you seen what governments have been up to lately ? interest rates at a 5,000 year low, moral hazard abound & global fiat collapse imminent in the best case and in the worst case we have banks/elites/governments who are going to be looking to further enslave those in debt and forced out of business/work with some dystopian debt forgiveness scheme involving a 'vaccine' schedule and travel restrictions or whatever else (use your imagination). the truth is that everything mentioned in these comments was an argument that had already been had years ago - the markets reflect that - but i did enjoy reading the last sentence of your original comment and thinking to myself "am I reading Time Magazine ?"
- mkr-hn 6y ago
  And yet people still buy T-bills.
- qeternity 6y ago
  1) trying to distract the above problems by pointing out other issues doesn't make them go away 2) you talk about fiat collapse being imminent...USDT is worth far less than any fiat (see: nothing) I don't get how these ardent fiat haters don't see their entire ecosystem has been coopted by something that has infinitely less value than the thing they so despise
- mockery 6y ago
  Seems to me like you're tacitly agreeing with GP here - you're just making a claim about which currency system you trust more! (And attempting to convince others of the same position.)

fuzzylightbulb 6y ago

> backed by literally nothing It is the only thing the government accepts for tax payments. Given that you can be arrested for not paying your taxes it is "backed" by the barrel of a gun, a threat to your very being. In one sense this is the only real thing there is.

paulgb 6y ago
Indeed. A thought experiment: say the US government created a USD-prime currency that floated freely from USD. You could still use the USD in private transactions, but the US government would only transact and tax in USD-prime. What would be the fate of the original USD? My belief that it would go to zero. I’m curious whether “fiat is backed by nothing” proponents would disagree.
- nicky0 6y ago
  Both fiat currency and Bitcoin are backed by the same thing: mass belief. An incredibly powerful thing.
  - paulgb 6y ago
    Yep, but my point is that one is mass belief that the US government will continue wanting USD, the other is a mass belief that other people will continue wanting BTC. Both could be right, both could be wrong, but they are not the same proposition.
    - nicky0 6y ago
      Don't forget that the US gov itself is also propped up by mass belief. Its authority rests in the people. Now you might say "actually its authority rests on people with guns", but that's only to the extent that the people with the guns believe in the governments's authority to tell them who to point them at. Underneath all is belief and sentiment.
freewilly1040 6y ago
This argument doesn't really refute the argument for bitcoin as digital gold. It's not as though you can't exchange bitcoin to pay your taxes.

deleted 6y ago

[deleted]

chalst 6y ago

The 40% relates essentially to cash-like assets, which is a tiny part of the total USD money supply. The total has not grown drastically. See https://en.m.wikipedia.org/wiki/Money_supply https://en.m.wikipedia.org/wiki/Money_supply

patagonia 6y ago

Money is not property. Money is an entry on a ledger, which tracks credits and debits. So yes, fiat currency is not redeemable for a physical asset. But if it was redeemable, what ensures that say gold or a chicken will suffice to settle a debt or serve as credit for a future transaction. Chickens die and gold is only as valuable as your skills as a trader. The ledger and all of the social norms and institutional structures that accompany it is what maintains financial wealth. Preventing debasement of currency via inflation via printing money, which a lot of people use as their go to argument against fiat money, is simply adding economy wide debt to the ledger. This is necessary from time to time especially during crises and especially in a services/financial services/ intellectual property heavy economy. If no money existed, at all, how would you receive compensation for providing work of an IP nature to your neighbor. You would need either a perfect trade (you really want their chicken it’s just the right amount of chicken for you) or you take an iou. Which is a debt. Now have them write that iou down on a piece of paper and hand it to you. Your neighbor just printed money. Not so crazy.

TomSwirly 6y ago

> government fiat money that is backed by literally nothing at all It would be really nice for people to spend even a few minutes thinking about how money works, or open a textbook even just to learn what you disagree with. It's tiresome to explain over and over and over again to people how the "full faith and credit of the United States" is not "nothing at all" but in fact a guarantee of great value, at least as good as any on any other security, and one that is quite measurable (by for example comparing the prices of full faith and credit securities with other almost identical securities without this guarantee). On the contrary, I'd say that it's the cryptocurrencies that _by design_ are based on nothing at all.

elvatoloco55 6y ago
Whats is the value of the full faith and credit of Venezuela, Argentina, Ukraine, India, Mexico etc etc? Please do share your limited US centric view!