4 ms·

The "how much value it loses per century" time scale is unimportant for most applications. You need a currency to be "not 1923 Germany", because it becomes imp

by hakfoo 5y ago

The "how much value it loses per century" time scale is unimportant for most applications. You need a currency to be "not 1923 Germany", because it becomes impossible to plan for anything past your next meal. But the "loses 100% of the value per century" doesn't really seem to be a hindrance to our real-world financial needs. Lenders are capable of understanding this risk and extending 30+ year mortgages and even those weird century-plus infrastructure bond products. The whole long-term stability thing seems to be a very narrow scare tactic: a bugabear for those who are wealthy enough to hold a lot of cash, but too naive/risk-averse/fearful to invest it in any meaningful way o beat inflation.

lowkey 5y ago
I appreciate your point of view but if we look at the origin story of Bitcoin and Satoshi’s vision of the hardest money ever created, the fact that all fiat currencies lose value over time is exactly why it was created. While bitcoin may be volatile in USD over the short term, I can tell you the exact inflation rate of Bitcoin today, tomorrow or 100 years from now. Try that with the US Dollar.
- thehappypm 5y ago
  What is the inflation rate in terms of purchasing power?
lowkey 5y ago
“But the "loses 100% of the value per century" doesn't really seem to be a hindrance to our real-world financial needs. Lenders are capable of understanding this risk and extending 30+ year mortgages and even those weird century-plus infrastructure bond products.” We are going to have to disagree on this point. To me inflation is taxation without representation. It is theft of purchasing power by Central Banks. It disproportionately negatively affects savers or those on fixed incomes and it benefits those closest to the new spending (read Wall Street Bankers) via the Cantillon Effect. I am less concerned with the needs of lenders to compensate for inflation than I am worried about the disastrous effect it has on those who wish to save for the future.
- hakfoo 5y ago
  >To me inflation is taxation without representation. It is theft of purchasing power by Central Banks. I guess, in the end, I see central banks as "indirectly representative". While they have some free hand in day-to-day policy, in the end, their leadership has to answer to elected officials. If they drive the economy into a ditch, the head of the Federal Reserve/Bank of England/ECB will get fired. So the decisions they make aren't much more "taxation without representation" than when the city sanitation department has the authority to adjust the rates for trash collection. Eventually, there's accountability. >I am less concerned with the needs of lenders to compensate for inflation than I am worried about the disastrous effect it has on those who wish to save for the future. The point was more that it's already priced in. Inflation doesn't seem to be hindering us from building projects like railroads or semiconductor fabs where the real payback may be many years after the first cheque is written. As far as I can tell, the primary loser in a managed-slow-inflation scenario is the person who is saving via the "wad of banknotes under the mattress" strategy or similar equally naive choices (i. e. a main-street bank savings account that pays below the inflation rate). It's not hard to build a very conservative investment portfolio that beats managed competent-Western-central-bank inflation. Hell, you could just buy something like TIPS or Series I savings bonds and be done with. From that perspective, it's less "robbing savers of purchasing power" and more about converting savers from "dragons sitting on top of a pile of gold" into actual investors participating in the real economy.
  - lowkey 5y ago
    “It's not hard to build a very conservative investment portfolio that beats managed competent-Western-central-bank inflation. Hell, you could just buy something like TIPS or Series I savings bonds and be done with. From that perspective, it's less "robbing savers of purchasing power" and more about converting savers from "dragons sitting on top of a pile of gold" into actual investors participating in the real economy.” I will concede that one could build an investment portfolio that beats typical western consumer price inflation rates but I don’t think it is right to force savers (read unsophisticated investors) to risk their life savings just to earn a positive inflation-adjusted return. To me, more choices for individuals is generally a good thing. Governments around the world are starting to consider or even implement negative interest rates. I for one believe Bitcoin should exist as a counter to such things as forced negative interest rates, which I referenced earlier as theft by central banks. Since the 1933/34 when the US, Canada and the UK all simultaneously dropped the gold standard (and confiscated their citizens gold by force) there has been no option for a citizen to store their savings in a bank while earning a positive return net of inflation. Store your money in a bank and you are guaranteed to lose purchasing power over time. That has been true nomatter what the inflation rate is at the time. Bank yields on savings always trail inflation. With Bitcoin individuals finally have an option that, while volatile in the short term, has a high likelihood of retaining purchasing power relative to inflation over the long-term. As such I find it difficult to understand why so many are so quick to ban such an instrument simply because it could also be used for criminal purposes. On a side note, one of the greatest inventions of the cryptocurrency revolution is the availability of positive real yields on stablecoins. With USDC, an individual has multiple options to earn 8-13% nominal annual return on a stablecoin that is pegged to the US Dollar. For the first time since 1933, an individual has an option to store their life-savings in a stable currency which maintains it’s purchasing power over time - try that with a bank.

by hakfoo 5y ago

lowkey 5y ago

I appreciate your point of view but if we look at the origin story of Bitcoin and Satoshi’s vision of the hardest money ever created, the fact that all fiat currencies lose value over time is exactly why it was created. While bitcoin may be volatile in USD over the short term, I can tell you the exact inflation rate of Bitcoin today, tomorrow or 100 years from now. Try that with the US Dollar.

thehappypm 5y ago
What is the inflation rate in terms of purchasing power?

lowkey 5y ago

“But the "loses 100% of the value per century" doesn't really seem to be a hindrance to our real-world financial needs. Lenders are capable of understanding this risk and extending 30+ year mortgages and even those weird century-plus infrastructure bond products.” We are going to have to disagree on this point. To me inflation is taxation without representation. It is theft of purchasing power by Central Banks. It disproportionately negatively affects savers or those on fixed incomes and it benefits those closest to the new spending (read Wall Street Bankers) via the Cantillon Effect. I am less concerned with the needs of lenders to compensate for inflation than I am worried about the disastrous effect it has on those who wish to save for the future.

hakfoo 5y ago
>To me inflation is taxation without representation. It is theft of purchasing power by Central Banks. I guess, in the end, I see central banks as "indirectly representative". While they have some free hand in day-to-day policy, in the end, their leadership has to answer to elected officials. If they drive the economy into a ditch, the head of the Federal Reserve/Bank of England/ECB will get fired. So the decisions they make aren't much more "taxation without representation" than when the city sanitation department has the authority to adjust the rates for trash collection. Eventually, there's accountability. >I am less concerned with the needs of lenders to compensate for inflation than I am worried about the disastrous effect it has on those who wish to save for the future. The point was more that it's already priced in. Inflation doesn't seem to be hindering us from building projects like railroads or semiconductor fabs where the real payback may be many years after the first cheque is written. As far as I can tell, the primary loser in a managed-slow-inflation scenario is the person who is saving via the "wad of banknotes under the mattress" strategy or similar equally naive choices (i. e. a main-street bank savings account that pays below the inflation rate). It's not hard to build a very conservative investment portfolio that beats managed competent-Western-central-bank inflation. Hell, you could just buy something like TIPS or Series I savings bonds and be done with. From that perspective, it's less "robbing savers of purchasing power" and more about converting savers from "dragons sitting on top of a pile of gold" into actual investors participating in the real economy.
- lowkey 5y ago
  “It's not hard to build a very conservative investment portfolio that beats managed competent-Western-central-bank inflation. Hell, you could just buy something like TIPS or Series I savings bonds and be done with. From that perspective, it's less "robbing savers of purchasing power" and more about converting savers from "dragons sitting on top of a pile of gold" into actual investors participating in the real economy.” I will concede that one could build an investment portfolio that beats typical western consumer price inflation rates but I don’t think it is right to force savers (read unsophisticated investors) to risk their life savings just to earn a positive inflation-adjusted return. To me, more choices for individuals is generally a good thing. Governments around the world are starting to consider or even implement negative interest rates. I for one believe Bitcoin should exist as a counter to such things as forced negative interest rates, which I referenced earlier as theft by central banks. Since the 1933/34 when the US, Canada and the UK all simultaneously dropped the gold standard (and confiscated their citizens gold by force) there has been no option for a citizen to store their savings in a bank while earning a positive return net of inflation. Store your money in a bank and you are guaranteed to lose purchasing power over time. That has been true nomatter what the inflation rate is at the time. Bank yields on savings always trail inflation. With Bitcoin individuals finally have an option that, while volatile in the short term, has a high likelihood of retaining purchasing power relative to inflation over the long-term. As such I find it difficult to understand why so many are so quick to ban such an instrument simply because it could also be used for criminal purposes. On a side note, one of the greatest inventions of the cryptocurrency revolution is the availability of positive real yields on stablecoins. With USDC, an individual has multiple options to earn 8-13% nominal annual return on a stablecoin that is pegged to the US Dollar. For the first time since 1933, an individual has an option to store their life-savings in a stable currency which maintains it’s purchasing power over time - try that with a bank.