7 ms·

> But the competition is fiat; backed by fighter jets and nukes; literally. How is it that someone can't steal your money? The bank makes sure. How is it the ba

> But the competition is fiat; backed by fighter jets and nukes; literally. How is it that someone can't steal your money? The bank makes sure. How is it the bank can be sure? The cops protect them. How is it the cops aren't overwhelmed? The military protects them. At first glance, I find this an interesting take and it makes me rethink some things. But I don't think I find it very convincing, or at least it's too exaggerated. Fighter jets and nukes primarily protect physical property and institutions, not cash. The primary purpose of banks is to lend, i.e. to allocate resources, not to protect people's cash. And police don't spend much of their time on currency theft - it's much more about order in public space. A side effect of all these things is a stable society in which cash can thrive (backed by the idea that you can pay your taxes in it). I'm willing to believe that bitcoin would survive certain modes of societal collapse that fiat currency wouldn't. I'm not sure that those modes are particularly likely to happen.

jasode 6y ago
>But I don't think I find it very convincing, or at least it's too exaggerated. Fighter jets and nukes primarily protect physical property and institutions, not cash. Typically, the concept of "military force" like fighter jets, aircraft carriers, etc in criticism about fiat currency (especially $USD) is about connecting the dots to explain the strength of that currency. E.g., USA gets Saudi Arabia to sell oil denominated in $USD and in exchange, Saudi Arabia monarchy gets "protection" from invasion by enemies like Iraq. This is one concept of the "petrodollar". This military protection requires fighter jets, etc. This makes $USD valuable to acquire by other foreign countries that want to buy oil. In contrast, Bitcoin doesn't need the expense of the military to decree that it's valuable; people just voluntarily agree to exchange it for value. (E.g. exchange 10000 bitcoins for 2 large pizzas.[1]) The (wasted?) energy for defending the $USD is more diffused among different institutions so it's harder to measure -- and thus harder to criticize. In any case, energy usage also includes the Treasury Dept's Secret Service anti-counterfeiting force running around the world to stop fake currency. The Bureau of Engraving that prints the sheets of paper currency. US Mint stamping coins. All the above require enormous energy expenditure as well. Then you have the energy costs of the Fed Reserve, member banks, etc all doing settlement with each other and the associated security systems to protect from hacking. Bitcoin doesn't need any of that. Does bitcoin use more or less energy than the collective sum of energy to maintain integrity of $USD? I have no idea. What's the best complete accounting of the carbon footprint for $USD? [1] https://bitcointalk.org/index.php?topic=137.0 https://bitcointalk.org/index.php?topic=137.0
- pas 6y ago
  Not just denominated, settled. They literally want USD for their oil instead of SAR (riyal). (Sure, SAR is pegged to USD.) Here's a very thought provoking article about the "dollar system": https://phenomenalworld.org/analysis/the-class-politics-of-the-dollar-system https://phenomenalworld.org/analysis/the-class-politics-of-t...
  - selectodude 6y ago
    Why would they want riyal for their oil? That would cause massive price action and destabilize their currency causing wild swings in the value of the riyal depending on the demand for oil. The last thing in the world an export economy wants is a currency that becomes stupidly expensive when people want it and worthless when people don’t. Settling in dollars allows for a stable riyal.
    - pas 6y ago
      The riyal is pegged to the dollar. But the point is that if you want the "maximum wealth" for your export stuff and you export a lot you obviously want to settle in your domestic currency, since that would lead to you being able to stock up on enormous amounts of foreign currency reserves. Just like China did. Because if there's demand your your currency you can just print it. Sure, this way they are stocking up on USD, but they can't print USD. The destabilization on the other hand is also "exported" to the US. Eg, when oil demand drops, US Treasury rates increase coupled with the economic downturn, less tax revenue, more volatility, but this increase in uncertainty leads to people flocking to stable investments, which pushes rates back down a bit, plus it seems central banking is inseparably coupled to near-zero rates going forward. (Of course the US economy is a lot bigger, they were the main buyers of oil anyway, so it made sense to just settle in USD, and initially the extra demand for USD was seen as a good thing, as it helped finance the US public spending via keeping bond yields - interest rates - low.) --- That said, I'm not fully sold on the linked article's arguments.
  - imtringued 6y ago
    The "exorbitant privilege"? You mean the exorbitant privilege to create government debt to cancel out a savings glut? I've never understood this argument. I always heard how the USA is "riding" or "abusing" the US to achieve some nefarious goal when from my perspective it was always the inverse. Since I lacked the necessary knowledge I tried to think about how the effects work from first principles and I always came to the same conclusion. When it helps it does nothing and when it hurts the downsides are grave and a strong economy is necessary to just be able to counteract the effects of the exorbitant burden. This is compared to the misguided idea that the dollar having the global reserve "status" as some benefit that helps the USA. Global reserve status is basically equivalent to a partial currency union similar to the eurozone. There are two potential effects. Either your currency becomes stronger than the average currency in the currency union or your currency becomes weaker. Germany is "riding" the effect of a weaker euro to export goods and thus creates a savings glut in the nations it is exporting goods to. The reserve situation is that your currency becomes stronger than it should be. You get nations like Greece or Spain that are struggling with debt because additional savings can only exist if there is a debt somewhere to balance savings and investments. Once I started reading up on the downsides [0] of having your currency be a major global reserve currency it pretty much confirmed everything and it made the situation completely hopeless. There are no good answers here. The hands of the USA are tied and the situation is pretty dire. The USA obviously has a stronger currency than it would usually have. This means importing products from overseas becomes the obvious choice and domestic consumption is avoided. The weak demand causes unemployment and now you are at the ultimate economic dilemma. Do you create government debt to create investments for the savings glut or do you let people become unemployed so that domestic savings go down to make room for foreign savings? The only choice is to just do endless deficit spending thanks to the "exorbitant privilege". It's not really a choice. [0] https://carnegieendowment.org/chinafinancialmarkets/56856 https://carnegieendowment.org/chinafinancialmarkets/56856
kodah 6y ago
It's a reasonable world view. Our currency is backed by "Trust". Trust in what? A system that is reinforced by all of those things, for stability's sake.
ur-whale 6y ago
> The primary purpose of banks is to lend This is really not the case anymore in the 21st century, especially with interest rates where they are now.
vharuck 6y ago
Exactly. As long as people need land and die when shot, there will be militaries.
EVa5I7bHFq9mnYK 6y ago
To build a factory to perfectly counterfeit US dollar bills costs a few million dollars. It's certainly within technical abilities of Russia or North Korea. The only thing that stops them building such factory is American nukes.
- pydry 6y ago
  Nukes very much did not prevent North Korea from counterfeiting US dollar bills: http://news.bbc.co.uk/2/hi/programmes/panorama/3819345.stm http://news.bbc.co.uk/2/hi/programmes/panorama/3819345.stm
  - EVa5I7bHFq9mnYK 6y ago
    The paper dollar still trades on par with electronic dollar, which is the evidence that the breach has not occured.
lottin 6y ago
> Fighter jets and nukes primarily protect physical property and institutions, not cash. This is basically it. I don't know how bitcoin advocates expect property rights (in fact, any right) to be upheld in the absence of a coercive state. They have become so removed from reality that they don't see the most obvious things.
- kurthr 6y ago
  The same way that their super-secret-extra-long password protects them from someone with a wrench. It doesn't. However, it does make money laundering, speculative kiting, and paying for illegal services easier. Those are arguably the opposite or orthogonal to property rights, but they are useful to the those with money and power.
- thedrbrian 6y ago
  > This is basically it. I don't know how bitcoin advocates expect property rights (in fact, any right) to be upheld in the absence of a coercive state. They have become so removed from reality that they don't see the most obvious things. Errr something something blockchain?
  - lolthishuman 6y ago
    Solves what physical property ? Requires trusting a third party. Worse.
- kbelder 6y ago
  I'm expecting that someday, my defense budget will be part of my Amazon Prime fees.
- beardedetim 6y ago
  Do you think that it is only through a coercive State that I can have the right to food or housing? Put another way, do you believe the only way to ensure others have things is by coercion? I totally admit that a State is needed to ensure safety. There’s always a boogie man. Not sure if that’s true for all rights though. What do you think?
Jetrel 6y ago
One point of comparison that's a hell of a point in favor of fiat currencies, is the that because fiat is just based on a really nebulous 'general consensus' rather than any sort of 'hard store of value', the same thing that's a bogeyman (of authorities deciding to cancel out all of your assets by executive decision) can work in reverse. Most of our forms of fraud protection, like identity theft, bank robbery, etc, basically boil down to the government looking at you and going "boy, that's not fair what happened to you. Even though the closest thing we have to a hard store of value's been taken from you, we're just going to literally rewrite the books and set you back to the state where you had your money." It literally treats storage of money like a database restore. The beauty of that is they can do that without losing anything (besides slightly inflating the system) - with hard currency (whether gold or BTC), they have to actually deplete their reserve of stored value. --- The most extreme example of this historically, was the national debt crisis britain had during the south sea bubble, where most of the country got wrapped up in a giant stock-buying scheme for a company that ended up having no value. This ponzi-scheme crashed, and it briefly looked like something like half the country was going to go bankrupt. What was amazing about it was that the government realized they had absolute executive power, and just forcibly reset the economy. They just decreed that all of the debts related to it were cancelled, and dictated that individual assets which had been collateral for the debt (like people's houses) had to be returned to them. Many instances of "stores of currency value" got wiped out, but the important thing the government provided was a floor - you might have all the money you earned on south sea speculation deleted, but they guaranteed the average person didn't end up in poverty.
- louwrentius 6y ago
  Thank you for sharing this. I think many people may not know/understand this aspect /feature of our existing banking system and the role of government. Or they deliberately try to ignore the entire safety mechanism because it goes against their narrative that government control is bad, it collides with this libertarian spiel. All to keep the grift going. When not understanding or misunderstanding things makes you more money (let’s you recruit new ‘suckers’) a honest discussion will start to become impossible.
  - 6y ago

jasode 6y ago

>But I don't think I find it very convincing, or at least it's too exaggerated. Fighter jets and nukes primarily protect physical property and institutions, not cash. Typically, the concept of "military force" like fighter jets, aircraft carriers, etc in criticism about fiat currency (especially $USD) is about connecting the dots to explain the strength of that currency. E.g., USA gets Saudi Arabia to sell oil denominated in $USD and in exchange, Saudi Arabia monarchy gets "protection" from invasion by enemies like Iraq. This is one concept of the "petrodollar". This military protection requires fighter jets, etc. This makes $USD valuable to acquire by other foreign countries that want to buy oil. In contrast, Bitcoin doesn't need the expense of the military to decree that it's valuable; people just voluntarily agree to exchange it for value. (E.g. exchange 10000 bitcoins for 2 large pizzas.[1]) The (wasted?) energy for defending the $USD is more diffused among different institutions so it's harder to measure -- and thus harder to criticize. In any case, energy usage also includes the Treasury Dept's Secret Service anti-counterfeiting force running around the world to stop fake currency. The Bureau of Engraving that prints the sheets of paper currency. US Mint stamping coins. All the above require enormous energy expenditure as well. Then you have the energy costs of the Fed Reserve, member banks, etc all doing settlement with each other and the associated security systems to protect from hacking. Bitcoin doesn't need any of that. Does bitcoin use more or less energy than the collective sum of energy to maintain integrity of $USD? I have no idea. What's the best complete accounting of the carbon footprint for $USD? [1] https://bitcointalk.org/index.php?topic=137.0 https://bitcointalk.org/index.php?topic=137.0

pas 6y ago
Not just denominated, settled. They literally want USD for their oil instead of SAR (riyal). (Sure, SAR is pegged to USD.) Here's a very thought provoking article about the "dollar system": https://phenomenalworld.org/analysis/the-class-politics-of-the-dollar-system https://phenomenalworld.org/analysis/the-class-politics-of-t...
- selectodude 6y ago
  Why would they want riyal for their oil? That would cause massive price action and destabilize their currency causing wild swings in the value of the riyal depending on the demand for oil. The last thing in the world an export economy wants is a currency that becomes stupidly expensive when people want it and worthless when people don’t. Settling in dollars allows for a stable riyal.
  - pas 6y ago
    The riyal is pegged to the dollar. But the point is that if you want the "maximum wealth" for your export stuff and you export a lot you obviously want to settle in your domestic currency, since that would lead to you being able to stock up on enormous amounts of foreign currency reserves. Just like China did. Because if there's demand your your currency you can just print it. Sure, this way they are stocking up on USD, but they can't print USD. The destabilization on the other hand is also "exported" to the US. Eg, when oil demand drops, US Treasury rates increase coupled with the economic downturn, less tax revenue, more volatility, but this increase in uncertainty leads to people flocking to stable investments, which pushes rates back down a bit, plus it seems central banking is inseparably coupled to near-zero rates going forward. (Of course the US economy is a lot bigger, they were the main buyers of oil anyway, so it made sense to just settle in USD, and initially the extra demand for USD was seen as a good thing, as it helped finance the US public spending via keeping bond yields - interest rates - low.) --- That said, I'm not fully sold on the linked article's arguments.
- imtringued 6y ago
  The "exorbitant privilege"? You mean the exorbitant privilege to create government debt to cancel out a savings glut? I've never understood this argument. I always heard how the USA is "riding" or "abusing" the US to achieve some nefarious goal when from my perspective it was always the inverse. Since I lacked the necessary knowledge I tried to think about how the effects work from first principles and I always came to the same conclusion. When it helps it does nothing and when it hurts the downsides are grave and a strong economy is necessary to just be able to counteract the effects of the exorbitant burden. This is compared to the misguided idea that the dollar having the global reserve "status" as some benefit that helps the USA. Global reserve status is basically equivalent to a partial currency union similar to the eurozone. There are two potential effects. Either your currency becomes stronger than the average currency in the currency union or your currency becomes weaker. Germany is "riding" the effect of a weaker euro to export goods and thus creates a savings glut in the nations it is exporting goods to. The reserve situation is that your currency becomes stronger than it should be. You get nations like Greece or Spain that are struggling with debt because additional savings can only exist if there is a debt somewhere to balance savings and investments. Once I started reading up on the downsides [0] of having your currency be a major global reserve currency it pretty much confirmed everything and it made the situation completely hopeless. There are no good answers here. The hands of the USA are tied and the situation is pretty dire. The USA obviously has a stronger currency than it would usually have. This means importing products from overseas becomes the obvious choice and domestic consumption is avoided. The weak demand causes unemployment and now you are at the ultimate economic dilemma. Do you create government debt to create investments for the savings glut or do you let people become unemployed so that domestic savings go down to make room for foreign savings? The only choice is to just do endless deficit spending thanks to the "exorbitant privilege". It's not really a choice. [0] https://carnegieendowment.org/chinafinancialmarkets/56856 https://carnegieendowment.org/chinafinancialmarkets/56856

kodah 6y ago

It's a reasonable world view. Our currency is backed by "Trust". Trust in what? A system that is reinforced by all of those things, for stability's sake.

ur-whale 6y ago

> The primary purpose of banks is to lend This is really not the case anymore in the 21st century, especially with interest rates where they are now.

vharuck 6y ago

Exactly. As long as people need land and die when shot, there will be militaries.

EVa5I7bHFq9mnYK 6y ago

To build a factory to perfectly counterfeit US dollar bills costs a few million dollars. It's certainly within technical abilities of Russia or North Korea. The only thing that stops them building such factory is American nukes.

pydry 6y ago
Nukes very much did not prevent North Korea from counterfeiting US dollar bills: http://news.bbc.co.uk/2/hi/programmes/panorama/3819345.stm http://news.bbc.co.uk/2/hi/programmes/panorama/3819345.stm
- EVa5I7bHFq9mnYK 6y ago
  The paper dollar still trades on par with electronic dollar, which is the evidence that the breach has not occured.

lottin 6y ago

> Fighter jets and nukes primarily protect physical property and institutions, not cash. This is basically it. I don't know how bitcoin advocates expect property rights (in fact, any right) to be upheld in the absence of a coercive state. They have become so removed from reality that they don't see the most obvious things.

kurthr 6y ago
The same way that their super-secret-extra-long password protects them from someone with a wrench. It doesn't. However, it does make money laundering, speculative kiting, and paying for illegal services easier. Those are arguably the opposite or orthogonal to property rights, but they are useful to the those with money and power.
thedrbrian 6y ago
> This is basically it. I don't know how bitcoin advocates expect property rights (in fact, any right) to be upheld in the absence of a coercive state. They have become so removed from reality that they don't see the most obvious things. Errr something something blockchain?
- lolthishuman 6y ago
  Solves what physical property ? Requires trusting a third party. Worse.
kbelder 6y ago
I'm expecting that someday, my defense budget will be part of my Amazon Prime fees.
beardedetim 6y ago
Do you think that it is only through a coercive State that I can have the right to food or housing? Put another way, do you believe the only way to ensure others have things is by coercion? I totally admit that a State is needed to ensure safety. There’s always a boogie man. Not sure if that’s true for all rights though. What do you think?

Jetrel 6y ago

One point of comparison that's a hell of a point in favor of fiat currencies, is the that because fiat is just based on a really nebulous 'general consensus' rather than any sort of 'hard store of value', the same thing that's a bogeyman (of authorities deciding to cancel out all of your assets by executive decision) can work in reverse. Most of our forms of fraud protection, like identity theft, bank robbery, etc, basically boil down to the government looking at you and going "boy, that's not fair what happened to you. Even though the closest thing we have to a hard store of value's been taken from you, we're just going to literally rewrite the books and set you back to the state where you had your money." It literally treats storage of money like a database restore. The beauty of that is they can do that without losing anything (besides slightly inflating the system) - with hard currency (whether gold or BTC), they have to actually deplete their reserve of stored value. --- The most extreme example of this historically, was the national debt crisis britain had during the south sea bubble, where most of the country got wrapped up in a giant stock-buying scheme for a company that ended up having no value. This ponzi-scheme crashed, and it briefly looked like something like half the country was going to go bankrupt. What was amazing about it was that the government realized they had absolute executive power, and just forcibly reset the economy. They just decreed that all of the debts related to it were cancelled, and dictated that individual assets which had been collateral for the debt (like people's houses) had to be returned to them. Many instances of "stores of currency value" got wiped out, but the important thing the government provided was a floor - you might have all the money you earned on south sea speculation deleted, but they guaranteed the average person didn't end up in poverty.

louwrentius 6y ago
Thank you for sharing this. I think many people may not know/understand this aspect /feature of our existing banking system and the role of government. Or they deliberately try to ignore the entire safety mechanism because it goes against their narrative that government control is bad, it collides with this libertarian spiel. All to keep the grift going. When not understanding or misunderstanding things makes you more money (let’s you recruit new ‘suckers’) a honest discussion will start to become impossible.
- 6y ago