6 ms·
1) No, crypto will never replace fiat. Thought the risk if printing money is always there, it's much much worse to have zero monetary policy implied with a fix
by jariel 6y ago
1) No, crypto will never replace fiat.
Thought the risk if printing money is always there, it's much much worse to have zero monetary policy implied with a fixed currency. A 'super hard' currency (i.e. 1 USD = 0.001 grams of Gold, without even fractional lending) would destroy the economy quickly.
Currency is not a store of value it's a medium of exchange.
As the economy expands it needs 'more currency' like more oil on a bigger engine. Hard currency starves the engine.
Also, the first external shock (covid, war) will wipe out the economy because the panic to fixed currency will shut everything down.
So we want monetary policy.
If you want a longer term store of value, put your money into something.
2) It is not convenient to have a 'worldwide currency', it's totally the opposite.
Currencies exist to facilitate exchange within an economy. Usually currencies map to markets. The bigger the market, the less monetary policy can help in regions. This is one of they key problems with the Euor right now - France/Italy/Span etc. have completely differing views as to 'what to do with monetary policy' than Germany/Netherlands/Sweden. The default 'strict' nature of Euro is actually hurting Spain and Italy quite a lot. They cannot restructure their economies fast enough (i.e. lowering wages is impossible) vis-a-vis Germany ... so the jobs go to Germany.
Normally, the reduction of competitive ability of Spain would be instantly resolved by lower value of their currency. Every Spandiards iPhone just got more expensive, but that would be an accurate reflection of their economy.
A 'global currency' is nonsensical, because where can one trade those currency units for value - if everyone is using national currencies, then the value of said 'global currency' is irrelevant other than in terms of the local economy you want to buy stuff from.
If every country in the world 'used the same currency' then it'd have to be 'very strict' meaning 'no monetary policy for anyone' meaning massive problems.
Put another way: when the US trades a lot of 'stuff' with China - there is absolutely no way for those two nations to avoid having to hold some kind of credit from that other nation. Be it RMB or USD or whatever.
There is no way around that problem. Magically putting trade deficits in some magical 'global currency' just papers over the problem, it does nothing.
So no - a 'global currency' does not help anything, because you can't imaginary wish away the underling credit or debt that various economies 'owe' each other.
Finally - it's possible that some kind of international instrument arose that was backed by real assets - for example a 'World Bank Dollar' that was properly managed and backed by real-estate or some kind of measurable commodity value. Now that just might work - the problem there is that the scale necessary of assets would just be too much. And of course, there is no institution that we trust, internationally.
So no, BTC does not solve any problems at all.
- deleted 6y ago[deleted]
- 1996 6y ago> So no, BTC does not solve any problems at all. If you define the problems away, certainly! But look at the logical coordination: your point #2 depends on point #1 being true. Remove the belief in monetary policy and it all falls into place. > the panic to fixed currency will shut everything down It's an opinion. Lots of people think the deflationary incentives built in are bad for the economy. Another alternative view is to look at all the busywork (extraction and wastage of resource) that happens because of our current system: far fewer turkeys will be allowed to fly with a crypto that just can't be inflated. You may still argue for expansation during demand crisis (another opinion). A government could still obey Keynesian prescriptions with BTC as the world currency: however, it would have to balance things out by building tax revenue during happy years, to spend it away on sad years - with a hard limit. That "small detail" of an hard limit will certainly change a lot of things: the government will have to tax/steal/confiscate what it can't wish into existence (or print). It doesn't change much in practice, but it will be quite fun to watch! I think it will be the end of social democracy! > And of course, there is no institution that we trust, internationally. ... now let me tell you about trustless and crypto :)
- jariel 6y agoI won't respond to every point, but I will say that yes - none of the responses I articulated are guaranteed outcomes, it' not black and white, however, they are rational, moreover there is a 100% chance that effective monetary policy is better than no monetary policy. There is 100% chance of economic calamity if there is an external shock. You can tie your boat to the dock with rope (flexible) or you can use boards and nail them to the dock and the boat (inflexible). As long as the boat stays in the same place, the planks are probably better than rope. But the moment the tide comes in or leaves (i.e. cycles in the economy) or a big wave hits (existential shock) - your planks are going to break and the ship will be wayward. It is not an 'opinion' that as an economy expands, it needs 'more currency' or else prices get weird and the entire point of the currency fails. And yes, as I said straight off in my comments, currency debasement is a legit problem. As for 'trusting crypto' - it's pointless because BTC 'numbers' are completely worthless. I would rather trust the a poorly managed 'World Bank Dollar' that maps 'Global Dollars' to assets in some roughly transparent way, then a 'distributed network of numbers' - which is basically ridiculous. Bitcoin is a neat idea, worthy of experimentation, but most of the Bitcoin people a) don't understand currency or b) are on some level of the Ponzi koolaid latter or both. Finally, none of this is to say that BTC won't take hold. If enough people want to use it for whatever, it will be used for that whatever. That doesn't mean it makes any sense, but we do a lot of things in this world that make no sense.