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A few questions I need help with - If bitcoin becomes a store of value / digital gold and people increasingly hold their wealth in Bitcoin countries will lose

A few questions I need help with - If bitcoin becomes a store of value / digital gold and people increasingly hold their wealth in Bitcoin countries will lose the ability control and regulate their own economy. 1) Why would any country hand over the reins of its economy to others ? India is already thinking of banning cryptocurrencies, China has similar thoughts too, if many large countries ban it how would Bitcoin sustain ? 2) US has fought wars to retain dollar as the global reserve currency. Why would the US give up this advantage ? 3) Presently, economic sanctions are used to push interests and disincentivize bad behavior. How would this play out in a world of Bitcoin ? 4) If bitcoin exists with fiat and exchange points can be controlled and blocked by governments, what's the point of Bitcoin ?

krupan 6y ago
1. They won’t hand it over. Bitcoin and it’s participants are taking it. 2. This is the same question as 1, isn’t it? Again, Bitcoin is people voting with their feet (so to speak) to take power away from governments. 3. Economic sanctions punish the common folk more than the evil governments. Bitcoin simultaneously takes power away from evil governments (see 1 and 2) and gives power to common folk. 4. I think you are alluding to one way governments can try to fight what is happening in 1, 2, and 3. If governments really try and crack down on exchanges, people will simply transact directly in Bitcoin. Those who have accumulated it pre-crackdown will purchase goods and services using Bitcoin, people who did not obtain any pre-crackdown and want it will offer goods and services to those who are offering Bitcoin. In all honesty, these extreme scenarios are far fetched. Governments all ultimately get their authority from the people. If the people are choosing Bitcoin, the governments won’t fight it for long.
arbawk 6y ago
1) Countries economies consist of the individuals within them. In India, where Bitcoin is banned, its exchange rate has since increased. Same in Pakistan. Hyperinflation occurs frequently despite a governments' best efforts. The market is the master and the government is only an actor. 2) This is probably the best piece on that point: https://quillette.com/2021/02/21/can-governments-stop-bitcoin/ https://quillette.com/2021/02/21/can-governments-stop-bitcoi.... The summary is that unlike another country's currency, Bitcoin is significantly harder to attack. 3) Economic sanctions can still exist. You still have to pay your taxes even though many avoid them. What sanctions are you referring to specifically? 4) Look into the Lightning Network to see one among various ways Bitcoin is scaling outside of exchanges. It will continue to develop in interesting ways. In the meantime, governments that enable what a growing number of people want will be rewarded while those that attempt to ban it will suffer. The incentives to do so are not in their favor (also argued in the article above).
spiralx 6y ago
> US has fought wars to retain dollar as the global reserve currency. Why would the US give up this advantage ? Not true, the US has been trying to reduce the usage of the USD as a reserve currency (it's the largest such currency but not the only one) due to it not having any real benefit to the US while exposing its economy to the effects of financial crises around the world. --- Ben Bernanke (ex-FED Chairman) - The dollar’s international role: An “exorbitant privilege”? https://www.brookings.edu/blog/ben-bernanke/2016/01/07/the-dollars-international-role-an-exorbitant-privilege-2/ https://www.brookings.edu/blog/ben-bernanke/2016/01/07/the-d... > A great deal of U.S. currency is held abroad, which amounts to an interest-free loan to the United States. However, the interest savings are probably on the order of $20 billion a year, a small fraction of a percent of U.S. GDP, and that “seigniorage,” as it is called, would probably still exist even if the dollar lost ground to other currencies... > The safe haven aspect of the dollar is actually a negative for U.S. firms, since it implies that they become less competitive (the dollar is stronger) at precisely the times that global economic conditions are most difficult. --- The ‘reserve currency’ myth: The US dollar’s current and future role in the world economy https://www.ussc.edu.au/analysis/the-reserve-currency-myth-the-us-dollars-current-and-future-role-in-the-world-economy https://www.ussc.edu.au/analysis/the-reserve-currency-myth-t... > This safe-haven bid for US dollar assets means that the US dollar often behaves in ways that seem counter-intuitive relative to US economic fundamentals. As Figure 2 shows, the US dollar appreciates in response to economic policy uncertainty. A 1 per cent increase in the Global Economic Policy Uncertainty Index raises the real value of the US dollar by 0.2 per cent, controlling for relative interest rate, inflation and economic growth differentials with the rest of the world. > The appreciation exacerbates trade tensions between the United States and the rest of the world by weighing on US export competitiveness, setting in train a protectionist spiral. --- That the USD's role as a reserve currency isn't really very important doesn't change the fact that Bitcoin is a moderately interesting solution to a niche CS problem, and not the solution to financial problems nobody actually has, either because they were solved decades or centuries ago, or because they're not and never were real problems in the first place.

krupan 6y ago

1. They won’t hand it over. Bitcoin and it’s participants are taking it. 2. This is the same question as 1, isn’t it? Again, Bitcoin is people voting with their feet (so to speak) to take power away from governments. 3. Economic sanctions punish the common folk more than the evil governments. Bitcoin simultaneously takes power away from evil governments (see 1 and 2) and gives power to common folk. 4. I think you are alluding to one way governments can try to fight what is happening in 1, 2, and 3. If governments really try and crack down on exchanges, people will simply transact directly in Bitcoin. Those who have accumulated it pre-crackdown will purchase goods and services using Bitcoin, people who did not obtain any pre-crackdown and want it will offer goods and services to those who are offering Bitcoin. In all honesty, these extreme scenarios are far fetched. Governments all ultimately get their authority from the people. If the people are choosing Bitcoin, the governments won’t fight it for long.

arbawk 6y ago

1) Countries economies consist of the individuals within them. In India, where Bitcoin is banned, its exchange rate has since increased. Same in Pakistan. Hyperinflation occurs frequently despite a governments' best efforts. The market is the master and the government is only an actor. 2) This is probably the best piece on that point: https://quillette.com/2021/02/21/can-governments-stop-bitcoin/ https://quillette.com/2021/02/21/can-governments-stop-bitcoi.... The summary is that unlike another country's currency, Bitcoin is significantly harder to attack. 3) Economic sanctions can still exist. You still have to pay your taxes even though many avoid them. What sanctions are you referring to specifically? 4) Look into the Lightning Network to see one among various ways Bitcoin is scaling outside of exchanges. It will continue to develop in interesting ways. In the meantime, governments that enable what a growing number of people want will be rewarded while those that attempt to ban it will suffer. The incentives to do so are not in their favor (also argued in the article above).

spiralx 6y ago

> US has fought wars to retain dollar as the global reserve currency. Why would the US give up this advantage ? Not true, the US has been trying to reduce the usage of the USD as a reserve currency (it's the largest such currency but not the only one) due to it not having any real benefit to the US while exposing its economy to the effects of financial crises around the world. --- Ben Bernanke (ex-FED Chairman) - The dollar’s international role: An “exorbitant privilege”? https://www.brookings.edu/blog/ben-bernanke/2016/01/07/the-dollars-international-role-an-exorbitant-privilege-2/ https://www.brookings.edu/blog/ben-bernanke/2016/01/07/the-d... > A great deal of U.S. currency is held abroad, which amounts to an interest-free loan to the United States. However, the interest savings are probably on the order of $20 billion a year, a small fraction of a percent of U.S. GDP, and that “seigniorage,” as it is called, would probably still exist even if the dollar lost ground to other currencies... > The safe haven aspect of the dollar is actually a negative for U.S. firms, since it implies that they become less competitive (the dollar is stronger) at precisely the times that global economic conditions are most difficult. --- The ‘reserve currency’ myth: The US dollar’s current and future role in the world economy https://www.ussc.edu.au/analysis/the-reserve-currency-myth-the-us-dollars-current-and-future-role-in-the-world-economy https://www.ussc.edu.au/analysis/the-reserve-currency-myth-t... > This safe-haven bid for US dollar assets means that the US dollar often behaves in ways that seem counter-intuitive relative to US economic fundamentals. As Figure 2 shows, the US dollar appreciates in response to economic policy uncertainty. A 1 per cent increase in the Global Economic Policy Uncertainty Index raises the real value of the US dollar by 0.2 per cent, controlling for relative interest rate, inflation and economic growth differentials with the rest of the world. > The appreciation exacerbates trade tensions between the United States and the rest of the world by weighing on US export competitiveness, setting in train a protectionist spiral. --- That the USD's role as a reserve currency isn't really very important doesn't change the fact that Bitcoin is a moderately interesting solution to a niche CS problem, and not the solution to financial problems nobody actually has, either because they were solved decades or centuries ago, or because they're not and never were real problems in the first place.