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> The basic premise is that money is simply technology that makes our wealth today available for consumption tomorrow. Thus the "best" money is the one that wil

by tormeh 5y ago

> The basic premise is that money is simply technology that makes our wealth today available for consumption tomorrow. Thus the "best" money is the one that will give its holder the most purchasing power over time. This is absurd. A complete misunderstanding of what money is for. Money is a means of exchange. The "best" money is the one that's most widely accepted in places you want to spend it. It only needs to function as a store of value in the short term. Anything with less than 10% inflation per year should work.

arcticbull 5y ago
Money only needs to be a few things. 1. Cheap, fast and easy to transact + broadly accepted. 2. Fungible. 3. Predictable. 4. Hold its value for exactly as long as it takes you to convert your earnings into either long-term value storage assets, or to spend on the necessities of life. Any longer is a non-goal. 5. [bonus] Flexible enough to respond to shocks, changes and externalities, offering mild, predictable inflation as measured against a basket of necessities. Every crypto fails 1, 3, 4 and 5 - and all the popular ones fail (2) also - as a public ledger revealing a coins history makes each transaction quantum unique. No idea why you got down-voted, the article is totally wrong.
- fastball 5y ago
  1. There are plenty of cryptos that this applies to right now. Cheap is not true for ETH atm, but it may soon be given the very real scaling solutions that are soon to come online. 2. Why does a means of exchange need to be fungible? Regardless, Monero and others are fungible. 3. Not sure what this means or why its required for money, but still seems like crypto can apply here. 4. Stablecoins exist, and I'm not even counting the shady AF ones like Tether. For example there is DAI, which is fully decentralized, runs on the Ethereum blockchain, has held stable very well (certainly well enough for the above use case) and which saw $2.6B trade volume in the last 24hr.
  - deleted 5y ago
    [deleted]
- jkhdigital 5y ago
  Nice list, but it seems kind of like a straw man specifically constructed to claim that cryptocurrencies fail to meet it. Anyways, I don’t understand your extreme hard-line stance on holding money. You do realize that liquidity is important, right? Holding uninvested cash sends two important signals: that I want a buffer against adverse events without having to liquidate assets, and/or that none of the currently available investment opportunities meets my desired risk/reward criteria. These are extremely important market signals that get squashed when you abuse your money supply to bully everyone into being 110% invested at all times, good or bad.
  - arcticbull 5y ago
    I agree some amount of cash is worth holding, and the 2% annualized inflation you pay is simply a fee for liquidity. It harms the economy but benefits you, so a fee doesn't seem unreasonable. I didn't construct the list specifically to attack cryptocurrencies, the whole crypto situation has led me to do a lot of research on just what a reasonable monetary policy is.
fastball 5y ago
Seems like Ethereum will win that one too, since Layer 1 scaling solutions seems imminent (and it is already much better than say BTC in terms of throughput anyway) and most "smart chain" crypto stuff is happening on Ethereum as well (DeFi, NFTs, ERC20s, etc)
Geee 5y ago
The money that keeps its purchasing power will be the most widely accepted.
- arcticbull 5y ago
  That's a non-goal of a currency, it's the goal of an asset.
  - Geee 5y ago
    It's a goal for a better currency. You don't have to store wealth in pointless assets if money has this property.
    - arcticbull 5y ago
      No, it isn't. A currency only needs to hold its value from the time you get it, to the time you productively allocate it or spend it on necessities. There is no benefit to a currency holding its value long term, and in fact, it is a detriment as currencies are not productive vehicles. Keeping capital locked up unproductively is a detriment to the economy. Money is the pointless asset.
      - Geee 5y ago
        It sounds like you're stuck with that definition. Sometimes it's better to save money, in order to productively allocate it later. Spending non-productively is a detriment to economy and environment. And, because people are free to choose the better money, you can't do anything to prevent it from taking over anyway.
        arcticbull 5y ago
        Again it’s strictly worse at being money. You just keep restating that it’s not instead of attempting to justify your position.
awrence 5y ago
I'm afraid this is the complete misunderstanding of what money is for. You're describing the best medium of exchange, which you know today generally as base money of fiat currencies (cash). Acting as a medium of exchange is a property money can have but absolutely does not require to be used for its principal and only use which is to store value. Why is that its only function? Because the only way to use a medium of exchange is to find in turn someone who wants to store wealth himself. Absent that market participant your medium of exchange becomes worthless. Acting as a medium of exchange is a transitory instant blip in the life of an asset that lives for the sole actual purpose of storing wealth. Now if the average redemption horizon of monetary wealth was short as you seem to imply, then in effect all monetary assets would be used frequently as mediums of exchange and their capacity to preserve value over meaningful periods of time would be less of a consideration. Becoming accepted for payments everywhere would become the most important feature they could have. But this is absolutely not the case. The average redemption horizon of monetary wealth today is very long. Some 200tn+ of monetary wealth sits today in various monetary instruments (100tn+ in fiat treasuries equivalent, real estate, 10tn in gold etc) that are absolutely never used as mediums of exchange. But they serve monetary assets' main and only role of preserving wealth through time, generally for long periods of time. Even the bulk of cash generally sits dormant as medium to long term investments by people holding onto the most liquid of reserve assets in case of crisis / emergency, very rarely to be used transactionally. Whenever those investors need some transactional money, they simply then clip off a little bit of their monetary assets to buy whatever medium of exchange is en vogue to go about their daily spending habits. The rest sits idle to store wealth for as long as needed. And on that front, finding the hardest monetary asset you can find is your driving concern, and a digital new entrant like bitcoin with a hard cap is an extremely interesting alternative to other options available to this point which all have material drawbacks to that main goal, especially fiat currencies which get inflated by their central banks at a bare minimum of 25% per decade (but these days more like 15%+ per year).

by tormeh 5y ago

arcticbull 5y ago

Money only needs to be a few things. 1. Cheap, fast and easy to transact + broadly accepted. 2. Fungible. 3. Predictable. 4. Hold its value for exactly as long as it takes you to convert your earnings into either long-term value storage assets, or to spend on the necessities of life. Any longer is a non-goal. 5. [bonus] Flexible enough to respond to shocks, changes and externalities, offering mild, predictable inflation as measured against a basket of necessities. Every crypto fails 1, 3, 4 and 5 - and all the popular ones fail (2) also - as a public ledger revealing a coins history makes each transaction quantum unique. No idea why you got down-voted, the article is totally wrong.

fastball 5y ago
1. There are plenty of cryptos that this applies to right now. Cheap is not true for ETH atm, but it may soon be given the very real scaling solutions that are soon to come online. 2. Why does a means of exchange need to be fungible? Regardless, Monero and others are fungible. 3. Not sure what this means or why its required for money, but still seems like crypto can apply here. 4. Stablecoins exist, and I'm not even counting the shady AF ones like Tether. For example there is DAI, which is fully decentralized, runs on the Ethereum blockchain, has held stable very well (certainly well enough for the above use case) and which saw $2.6B trade volume in the last 24hr.
- deleted 5y ago
  [deleted]
jkhdigital 5y ago
Nice list, but it seems kind of like a straw man specifically constructed to claim that cryptocurrencies fail to meet it. Anyways, I don’t understand your extreme hard-line stance on holding money. You do realize that liquidity is important, right? Holding uninvested cash sends two important signals: that I want a buffer against adverse events without having to liquidate assets, and/or that none of the currently available investment opportunities meets my desired risk/reward criteria. These are extremely important market signals that get squashed when you abuse your money supply to bully everyone into being 110% invested at all times, good or bad.
- arcticbull 5y ago
  I agree some amount of cash is worth holding, and the 2% annualized inflation you pay is simply a fee for liquidity. It harms the economy but benefits you, so a fee doesn't seem unreasonable. I didn't construct the list specifically to attack cryptocurrencies, the whole crypto situation has led me to do a lot of research on just what a reasonable monetary policy is.

fastball 5y ago

Seems like Ethereum will win that one too, since Layer 1 scaling solutions seems imminent (and it is already much better than say BTC in terms of throughput anyway) and most "smart chain" crypto stuff is happening on Ethereum as well (DeFi, NFTs, ERC20s, etc)

Geee 5y ago

The money that keeps its purchasing power will be the most widely accepted.

arcticbull 5y ago
That's a non-goal of a currency, it's the goal of an asset.
- Geee 5y ago
  It's a goal for a better currency. You don't have to store wealth in pointless assets if money has this property.
  - arcticbull 5y ago
    No, it isn't. A currency only needs to hold its value from the time you get it, to the time you productively allocate it or spend it on necessities. There is no benefit to a currency holding its value long term, and in fact, it is a detriment as currencies are not productive vehicles. Keeping capital locked up unproductively is a detriment to the economy. Money is the pointless asset.
    - Geee 5y ago
      It sounds like you're stuck with that definition. Sometimes it's better to save money, in order to productively allocate it later. Spending non-productively is a detriment to economy and environment. And, because people are free to choose the better money, you can't do anything to prevent it from taking over anyway.
      - arcticbull 5y ago
        Again it’s strictly worse at being money. You just keep restating that it’s not instead of attempting to justify your position.

awrence 5y ago

I'm afraid this is the complete misunderstanding of what money is for. You're describing the best medium of exchange, which you know today generally as base money of fiat currencies (cash). Acting as a medium of exchange is a property money can have but absolutely does not require to be used for its principal and only use which is to store value. Why is that its only function? Because the only way to use a medium of exchange is to find in turn someone who wants to store wealth himself. Absent that market participant your medium of exchange becomes worthless. Acting as a medium of exchange is a transitory instant blip in the life of an asset that lives for the sole actual purpose of storing wealth. Now if the average redemption horizon of monetary wealth was short as you seem to imply, then in effect all monetary assets would be used frequently as mediums of exchange and their capacity to preserve value over meaningful periods of time would be less of a consideration. Becoming accepted for payments everywhere would become the most important feature they could have. But this is absolutely not the case. The average redemption horizon of monetary wealth today is very long. Some 200tn+ of monetary wealth sits today in various monetary instruments (100tn+ in fiat treasuries equivalent, real estate, 10tn in gold etc) that are absolutely never used as mediums of exchange. But they serve monetary assets' main and only role of preserving wealth through time, generally for long periods of time. Even the bulk of cash generally sits dormant as medium to long term investments by people holding onto the most liquid of reserve assets in case of crisis / emergency, very rarely to be used transactionally. Whenever those investors need some transactional money, they simply then clip off a little bit of their monetary assets to buy whatever medium of exchange is en vogue to go about their daily spending habits. The rest sits idle to store wealth for as long as needed. And on that front, finding the hardest monetary asset you can find is your driving concern, and a digital new entrant like bitcoin with a hard cap is an extremely interesting alternative to other options available to this point which all have material drawbacks to that main goal, especially fiat currencies which get inflated by their central banks at a bare minimum of 25% per decade (but these days more like 15%+ per year).