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> Money stores the value of that economic output. One must also consider whether it is a medium of exchange at any given point in time, if its used as an unit

> Money stores the value of that economic output. One must also consider whether it is a medium of exchange at any given point in time, if its used as an unit of account, the variable storage/protection/transportation costs, durability against the elements, fungibility, accessibility, liquidity, etc. > Who sets the interest rate? Does a lower interest rate increase private lending or decrease it? Why can't private banks hold 0% in fractional reserve? Take a look at "5% fixed-floating swap, Receive fixed"[0], who sets those float-fixed (or even the float-float) swap rates for the myriad of financial instruments, mostly in bilateral transactions with no third party involvement, that start at zero initial value and supposedly yield a non zero number, ever involving in complexity in response to demand and outside the awareness and interests of most people despite being very integral to their daily lives? Hint: by far, not just central banks (which at least in the US are owned by private banks at different branches)… [0] https://en.wikipedia.org/wiki/DV01#Risk_%E2%80%93_duration_as_interest_rate_sensitivity https://en.wikipedia.org/wiki/DV01#Risk_%E2%80%93_duration_a...

coralreef 5y ago
> One must also consider whether it is a medium of exchange at any given point in time, if its used as an unit of account, the variable storage/protection/transportation costs, durability against the elements, fungibility, accessibility, liquidity, etc. Yes, there are many commodities making many tradeoffs as money. Over time, through trade and travel, societies adopted gold as the premier base of money, because of its superiority in the tradeoffs they cared about. Gold was chosen by the market as the best monetary medium. Nobody chose fiat. Dollar bills originally represented redeemable vouchers for gold stored in a bank, and so while the storage/protection/transportation costs of paper notes is/was superior to carrying gold bars, those vouchers were worthless unless you could reliably redeem them for gold. Those paper notes are worthless if people didn't trust the bank/government issuing them, which is how bank runs started. Eventually the gold peg was removed, and the continuous debasement of dollars has somehow been accepted as feature, not a bug. Every decade unto infinity, dollars will become worth less. This does not work in the long run. We are in an era of great economic productivity thanks to technology, but I fear these gains hide the weaknesses in our monetary systems.
- cinquemb 5y ago
  > Gold was chosen by the market as the best monetary medium. The same market has also accepted: > and the continuous debasement of dollars has somehow been accepted as feature, not a bug. Every decade unto infinity, dollars will become worth less. As well as accepting a host of other things beyond paper notes redeemable for x. > Nobody chose fiat. The shareholders of the federal reserve branches did… > but I fear these gains hide the weaknesses in our monetary systems. I don't have that fear, the market will adapt with the times based on demand and risks individual actors perceive relative to the power they have to make their desires a reality, rather than some hypothetical idealized scenario we can carve out in our minds about how it "should" be. Some to this day only do commodity (i.e. certain multi party tested quality of gold and oil) settlement with other actors, others are okay with rehypothicated UST's and AAPL paper, and others are ok with BTC/ETH/USDT/beenie baby tokens/etc.
  - coralreef 5y ago
    >The same market has also accepted: ... As well as accepting a host of other things beyond paper notes redeemable for x. Efficient market hypothesis is based on humans acting rationally with available information. But humans tend to be short sighted and only optimize for their lifespans. Ex: clearly we have done poorly with carbon emissions and global warming, and now we can only hope that throwing money at the problem can solve it. As things get worse, we'll throw more money at it. But all we can do is hope that a solution will be found, and that is scary. > The shareholders of the federal reserve branches did… Can you explain what you mean by this? "The Federal Reserve System is not "owned" by anyone. The Federal Reserve was created in 1913 by the Federal Reserve Act to serve as the nation's central bank. The Board of Governors in Washington, D.C., is an agency of the federal government and reports to and is directly accountable to the Congress" https://www.federalreserve.gov/faqs/about_14986.htm https://www.federalreserve.gov/faqs/about_14986.htm > I don't have that fear, the market will adapt with the times based on demand and risks individual actors perceive relative to the power they have to make their desires a reality, rather than some hypothetical idealized scenario we can carve out in our minds about how it "should" be. I'm confident society will make it out alive, but at what cost. What does the mother of all hyperinflation events look like? What are the effects of the collapse of the world's reserve currency? The closer we get to those events, the more seriously people will start to take this problem.

coralreef 5y ago

> One must also consider whether it is a medium of exchange at any given point in time, if its used as an unit of account, the variable storage/protection/transportation costs, durability against the elements, fungibility, accessibility, liquidity, etc. Yes, there are many commodities making many tradeoffs as money. Over time, through trade and travel, societies adopted gold as the premier base of money, because of its superiority in the tradeoffs they cared about. Gold was chosen by the market as the best monetary medium. Nobody chose fiat. Dollar bills originally represented redeemable vouchers for gold stored in a bank, and so while the storage/protection/transportation costs of paper notes is/was superior to carrying gold bars, those vouchers were worthless unless you could reliably redeem them for gold. Those paper notes are worthless if people didn't trust the bank/government issuing them, which is how bank runs started. Eventually the gold peg was removed, and the continuous debasement of dollars has somehow been accepted as feature, not a bug. Every decade unto infinity, dollars will become worth less. This does not work in the long run. We are in an era of great economic productivity thanks to technology, but I fear these gains hide the weaknesses in our monetary systems.

cinquemb 5y ago
> Gold was chosen by the market as the best monetary medium. The same market has also accepted: > and the continuous debasement of dollars has somehow been accepted as feature, not a bug. Every decade unto infinity, dollars will become worth less. As well as accepting a host of other things beyond paper notes redeemable for x. > Nobody chose fiat. The shareholders of the federal reserve branches did… > but I fear these gains hide the weaknesses in our monetary systems. I don't have that fear, the market will adapt with the times based on demand and risks individual actors perceive relative to the power they have to make their desires a reality, rather than some hypothetical idealized scenario we can carve out in our minds about how it "should" be. Some to this day only do commodity (i.e. certain multi party tested quality of gold and oil) settlement with other actors, others are okay with rehypothicated UST's and AAPL paper, and others are ok with BTC/ETH/USDT/beenie baby tokens/etc.
- coralreef 5y ago
  >The same market has also accepted: ... As well as accepting a host of other things beyond paper notes redeemable for x. Efficient market hypothesis is based on humans acting rationally with available information. But humans tend to be short sighted and only optimize for their lifespans. Ex: clearly we have done poorly with carbon emissions and global warming, and now we can only hope that throwing money at the problem can solve it. As things get worse, we'll throw more money at it. But all we can do is hope that a solution will be found, and that is scary. > The shareholders of the federal reserve branches did… Can you explain what you mean by this? "The Federal Reserve System is not "owned" by anyone. The Federal Reserve was created in 1913 by the Federal Reserve Act to serve as the nation's central bank. The Board of Governors in Washington, D.C., is an agency of the federal government and reports to and is directly accountable to the Congress" https://www.federalreserve.gov/faqs/about_14986.htm https://www.federalreserve.gov/faqs/about_14986.htm > I don't have that fear, the market will adapt with the times based on demand and risks individual actors perceive relative to the power they have to make their desires a reality, rather than some hypothetical idealized scenario we can carve out in our minds about how it "should" be. I'm confident society will make it out alive, but at what cost. What does the mother of all hyperinflation events look like? What are the effects of the collapse of the world's reserve currency? The closer we get to those events, the more seriously people will start to take this problem.