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The fact that having a deflationary money supply is bad, is even debated in cryptocurrency forums is the clearest indication that they have no idea how economic

The fact that having a deflationary money supply is bad, is even debated in cryptocurrency forums is the clearest indication that they have no idea how economics works. ...also, the point of a currency is to act as a STABLE unit of exchange, not some speculative moon-shot. Once these money supply and stability issues are ironed out, and once the scalability problem is solved, I think we might really have something.

JumpCrisscross 5y ago
> the point of a currency is to act as a STABLE unit of exchange Very few informed observers seriously expect crypto to become a general-use currency. That's a role it detached from years ago, first in practice and then in rhetoric. The closest analog to what crypto seems to want to become in our financial markets is in risk-free assets. Universal collateral. This used to be gold. Now it's Treasuries and Bunds. None of those markets are terrifically efficient or universalized. And neither requires long-term price stability; just predictability. (Note: it does not follow that crypto will be as valuable as e.g. the Treasury market. Treasuries serve as a safe asset. They also finance the U.S. government. Figuring out the worth of the former detached from the latter is difficult.)
- danaris 5y ago
  It may not be what informed observers want it to be, but it's still what every single person I've seen trumpeting the virtues of cryptocurrency here on HN has been shooting for. The argument is invariably "the value of cryptocurrency is giving us a currency that's not controlled by central banks". Never have I seen someone saying cryptocurrency should be used because it's highly volatile and great for speculating. So there seems to be a significant divide between the people who use cryptocurrency (but don't attach a moral value to it) and the people who believe in cryptocurrency (but ignore what it's actually used for).
- nradov 5y ago
  The closest analog to what crypto seems to want to become in our financial markets is cash hidden in a briefcase. The value is primarily in evading currency controls for smuggling wealth out of China and other authoritarian states.
- koheripbal 5y ago
  If we forget all the "wants" various parties might have today, I think we can all agree that IF the scalability issue can be ironed out, then there is extremely significant value in cryptocurrencies acting as a real world currency.
djbebs 5y ago
Bitcoin is not inherently deflationary. And the inflationary consensus in mainstream economics is not one born out of reason, evidence or good faith. The truth is, inflationary monetary policy is mainstream because of political reasons, not economic ones.
- smt88 5y ago
  The inflationary consensus is a practical issue and common sense. If an asset is deflationary, I have an incentive to hold onto it as long as possible. Spending it is costly. If an asset is inflationary, it's costly to hold it. If everyone receives an inflationary asset by default for goods/services and everyone wants to trade it for something else, we have an extremely liquid asset that can be exchanged for other things -- currency.
- dasudasu 5y ago
  It is, after all bitcoins are eventually mined, because some private keys get irretrievably lost and those coins can therefore never be recovered.
  - djbebs 5y ago
    2 things: - bitcoin tends towards 21 million mined bitcoin, but just like mathematical limits that means that it will continue mining some bitcoin essentially forever (progressively smaller and smaller amounts). - people forgetting or losing their keys doesn't make bitcoin deflationary anymore than it makes the USD deflationary. Furthermore that is not something inherent to bitcoin, but simply a practical result.
dnautics 5y ago
> The fact that having a deflationary money supply is bad. Your "fact" encodes a lot of presumptions. Bad for whom? Moreover, post-civil-war US (deflationary) is a good counterexample, not entirely clear that that era was "bad", hell, a good chunk of the population was emancipated from slavery amidst deflation.
yawaworht1978 5y ago
Well, they do not really want a stable unit. From the very founders all the way down, everyone wants a limited supply, deflationary and as much as possible of it in their own wallet. And they want to cash out in the inflationary fiat currencies.
fredthomsen 5y ago
It's very easy for people today to forget the 1800s that had significant periods of deflation and thus one of the reasons the federal reserve was created... although they allowed deflation to happen during the great depression as well. There is certainly some debate that can be had about the way to easy money policies that exist today (and I do think it's far too dovish), but people need to learn their history and realize the damage that deflation does.

JumpCrisscross 5y ago

> the point of a currency is to act as a STABLE unit of exchange Very few informed observers seriously expect crypto to become a general-use currency. That's a role it detached from years ago, first in practice and then in rhetoric. The closest analog to what crypto seems to want to become in our financial markets is in risk-free assets. Universal collateral. This used to be gold. Now it's Treasuries and Bunds. None of those markets are terrifically efficient or universalized. And neither requires long-term price stability; just predictability. (Note: it does not follow that crypto will be as valuable as e.g. the Treasury market. Treasuries serve as a safe asset. They also finance the U.S. government. Figuring out the worth of the former detached from the latter is difficult.)

danaris 5y ago
It may not be what informed observers want it to be, but it's still what every single person I've seen trumpeting the virtues of cryptocurrency here on HN has been shooting for. The argument is invariably "the value of cryptocurrency is giving us a currency that's not controlled by central banks". Never have I seen someone saying cryptocurrency should be used because it's highly volatile and great for speculating. So there seems to be a significant divide between the people who use cryptocurrency (but don't attach a moral value to it) and the people who believe in cryptocurrency (but ignore what it's actually used for).
nradov 5y ago
The closest analog to what crypto seems to want to become in our financial markets is cash hidden in a briefcase. The value is primarily in evading currency controls for smuggling wealth out of China and other authoritarian states.
koheripbal 5y ago
If we forget all the "wants" various parties might have today, I think we can all agree that IF the scalability issue can be ironed out, then there is extremely significant value in cryptocurrencies acting as a real world currency.

djbebs 5y ago

Bitcoin is not inherently deflationary. And the inflationary consensus in mainstream economics is not one born out of reason, evidence or good faith. The truth is, inflationary monetary policy is mainstream because of political reasons, not economic ones.

smt88 5y ago
The inflationary consensus is a practical issue and common sense. If an asset is deflationary, I have an incentive to hold onto it as long as possible. Spending it is costly. If an asset is inflationary, it's costly to hold it. If everyone receives an inflationary asset by default for goods/services and everyone wants to trade it for something else, we have an extremely liquid asset that can be exchanged for other things -- currency.
dasudasu 5y ago
It is, after all bitcoins are eventually mined, because some private keys get irretrievably lost and those coins can therefore never be recovered.
- djbebs 5y ago
  2 things: - bitcoin tends towards 21 million mined bitcoin, but just like mathematical limits that means that it will continue mining some bitcoin essentially forever (progressively smaller and smaller amounts). - people forgetting or losing their keys doesn't make bitcoin deflationary anymore than it makes the USD deflationary. Furthermore that is not something inherent to bitcoin, but simply a practical result.

dnautics 5y ago

> The fact that having a deflationary money supply is bad. Your "fact" encodes a lot of presumptions. Bad for whom? Moreover, post-civil-war US (deflationary) is a good counterexample, not entirely clear that that era was "bad", hell, a good chunk of the population was emancipated from slavery amidst deflation.

yawaworht1978 5y ago

Well, they do not really want a stable unit. From the very founders all the way down, everyone wants a limited supply, deflationary and as much as possible of it in their own wallet. And they want to cash out in the inflationary fiat currencies.

fredthomsen 5y ago

It's very easy for people today to forget the 1800s that had significant periods of deflation and thus one of the reasons the federal reserve was created... although they allowed deflation to happen during the great depression as well. There is certainly some debate that can be had about the way to easy money policies that exist today (and I do think it's far too dovish), but people need to learn their history and realize the damage that deflation does.