5 ms·

The big difference is the FDIC.

toomuchtodo 5y ago
Which, if it were to fail (which is exceptionally unlikely), is backed by the US Treasury and the Federal Reserve. EDIT: Walking back to first principals, why can't the USD fail? Because you can print whatever adults in the room decide need to be printed to hold the economy up. You cannot do this with a deflationary digital asset, nor one tied to smart contracts.
- dannyw 5y ago
  AKA: You, the American taxpayer.
  - deleted 5y ago
    [deleted]
  - howinteresting 5y ago
    Sounds good to me. Why do neo-goldbugs always try and present this as some sort of gotcha? As an American taxpayer I'm happy to buy into the social contract that it implies.
- gruez 5y ago
  >Because you can print whatever adults in the room decide need to be printed to hold the economy up. You cannot do this with a deflationary digital asset, nor one tied to smart contracts. Sounds like a feature to me. Printing money is effectively a socialized loss for everyone who's holding the currency.
  - toomuchtodo 5y ago
    A currency is a socioeconomic compact between capital and labor, intermediated by subject matter experts (ie the central bank) and government. > Sounds like a feature to me. Printing money is effectively a socialized loss for everyone who's holding the currency. The economy functioning is of greater benefit to the whole than the value to currency hoarders (remember, it's a currency, it's meant for exchange not for value storage and it is optimized for that role) maintaining its value. If you want to preserve wealth, own property/assets you expect people to trade their time or capital for into the future. People don't buy stonks or bonds for the ticker in their account, they buy the appreciation of the underlying or its cashflow. Most people buy real estate to live in (utility), for the appreciation of the property, or for the rental income cash flow (caveat is folks like the Chinese buying up international property to store their wealth outside of the reach of the CCP).
    - IG_Semmelweiss 5y ago
      >>>>> The economy functioning is of greater benefit to the whole than the value of currency hoarders maintaining its value. If you want to preserve wealth, own things you expect people to trade their time or capital for into the future. Retirees on a fixed income; immigrants, the poor, and people with no access to credit would like to have a word with you
      - toomuchtodo 5y ago
        Have the word with me. That's what cost of living adjustments (social security or other systems) & prudently investing a lifetime of retirement savings (in a safe mix of investments to support both growth and safety) and improved underwriting and funding for those folks (respectively) is for. It's not an issue with the currency, that's not what currencies are for. If you're expecting the value of a currency to never change, you are asking a fish to climb a tree.
        IG_Semmelweiss 5y ago
        >>>>> That's what cost of living adjustments (social security or other systems) Isnt that also... Insolvent? >>>> prudently investing a lifetime of retirement savings Would you deem people that invested on bonds of the US govt, GM, that they invested prudently? >>>>If you're expecting the value of a currency to never change, you are asking a fish to climb a tree. Change implies movement in both directions. Yet what we are seeing is a clear, pronounced, increasing onedirectional slope
        emn13 5y ago
        While I'm sure you have a point that some people are getting shafted by lack of inflation compensation, what does that imply for stablecoins vs. conventional banks and/or central banks? That issue could occur in any system with expanding money supply, and you want a system in which the money supply expands in some sync with the economy, because otherwise it's attractive to just hoard paper (or crypto, or whatever) wealth and not invest. In any case, isn't this primarily a political problem (or where the issue is private: a problem of a poorly phrased or one-sided contract)?
  - xur17 5y ago
    But this means that all users of USD are providing an insurance pool for the banks for free. Doesn't quite seem fair. There are some decentralized stablecoins (stablecoins backed by crypto assets + market rules that ensure they keep the peg) that have explicit insurance pools + rewards for being part of that insurance pool. For example, Liquity [0] allows users to deposit the stablecoin and earn rewards + favorable liquidation positions (a 10% discount) in return for being the first layer that purchases liquidations. Not exactly sure what the equivalent would be in the traditional finance world, but I could imagine some sort of higher interest savings account that isn't FDIC insured, and takes losses first. [0] https://www.liquity.org/ https://www.liquity.org/
    - cinquemb 5y ago
      > There are some decentralized stablecoins Most people clamoring for regs around stablecoins haven't gotten a chance to wrap their minds around this yet… nor have most of them considered the $ demom "cash and cash equivalents" that are on banks balance sheets not domiciled in the US, who have even smaller cash flows than some centralized stablecoin issuers folks love to pick on…
  - wins32767 5y ago
    We've run this experiment before. Look at the number and severity of recessions/depressions prior to fiat currency and after.
  - amanaplanacanal 5y ago
    I don't believe there has ever been non-inflationary money before in the whole history of humankind. Add the saying goes, "bad money drives out good." In this case it probably means that crypto coins will mostly be held as an asset while national currencies are used for most transactions. Looking around, that certainly appears to be what is happening.
- chroem- 5y ago
  > Walking back to first principals, why can't the USD fail? Because you can print whatever adults in the room decide need to be printed to hold the economy up. You cannot do this with a deflationary digital asset, nor one tied to smart contracts. The practical implication of solving large scale bank failures with mass currency printing is hyperinflation. You would only get your money back in nominal terms, but its purchasing power would be greatly reduced. See also: Weimar Germany and Zimbabwe.
  - emn13 5y ago
    The fed has expanded money supply to react to shocks before, and there was no hyperinflation. Even if clearly at some point, given enough money-printing, inflation would result, there's no reason to assume it's some binary thing; either hyper-inflation ala zimbabwe or normal inflation. It's more likely you'd see gradual inflation, and that the amount of money printed influences how much inflation results - so assuming that any expansion of the money supply is reasonable, and not egregious. Frankly, if banks start failing to the extent that FDIC is not only necessary on a large scale but even possibly unsustainable, I kind of doubt that a bit of inflation is going to be the worst of our worries.
    - deleted 5y ago
      [deleted]
  - shadowgovt 5y ago
    It is the differences between the US and Weimar Germany / Zimbabwe that make it possible for the US to print its way out of most problems. Other national governments didn't stuff Z$ into their armored-up national mattresses to bolster against the collapse of their local currency, and there wasn't an IMF holding debts denoted in Reichsmarks to create a demand for them internationally.
    - emn13 5y ago
      The whole comparison is specious; there were far more factors at play than "printing money". Central banks print money all the time. It's not just in response to the 2008 crisis; the money supply in 2007 wasn't what it was in 1957 either, right? At the very least you'd need to quantify exactly how much money over what period of time might be a shock, and what kind other factors play a role. And then, yes, sure - let's not do things quantifiably similar to Zimbabwe or Weimar Germany. But I suspect there's a huge amount of room for most central banks to maneuver between status quo and hyperinflation; merely "some" printing of money isn't going to be a problem. Indeed there are regularly stories of smaller countries without the kind of reserve status the dollar enjoys that make problematic central bank policies - and even if that has consequences (e.g. Turkey now), that's still a far cry from Weimar Germany or Zimbabwe under Mugabe.

Which, if it were to fail (which is exceptionally unlikely), is backed by the US Treasury and the Federal Reserve. EDIT: Walking back to first principals, why can't the USD fail? Because you can print whatever adults in the room decide need to be printed to hold the economy up. You cannot do this with a deflationary digital asset, nor one tied to smart contracts.

dannyw 5y ago
AKA: You, the American taxpayer.
- deleted 5y ago
  [deleted]
- howinteresting 5y ago
  Sounds good to me. Why do neo-goldbugs always try and present this as some sort of gotcha? As an American taxpayer I'm happy to buy into the social contract that it implies.
gruez 5y ago
>Because you can print whatever adults in the room decide need to be printed to hold the economy up. You cannot do this with a deflationary digital asset, nor one tied to smart contracts. Sounds like a feature to me. Printing money is effectively a socialized loss for everyone who's holding the currency.
- toomuchtodo 5y ago
  A currency is a socioeconomic compact between capital and labor, intermediated by subject matter experts (ie the central bank) and government. > Sounds like a feature to me. Printing money is effectively a socialized loss for everyone who's holding the currency. The economy functioning is of greater benefit to the whole than the value to currency hoarders (remember, it's a currency, it's meant for exchange not for value storage and it is optimized for that role) maintaining its value. If you want to preserve wealth, own property/assets you expect people to trade their time or capital for into the future. People don't buy stonks or bonds for the ticker in their account, they buy the appreciation of the underlying or its cashflow. Most people buy real estate to live in (utility), for the appreciation of the property, or for the rental income cash flow (caveat is folks like the Chinese buying up international property to store their wealth outside of the reach of the CCP).
  - IG_Semmelweiss 5y ago
    >>>>> The economy functioning is of greater benefit to the whole than the value of currency hoarders maintaining its value. If you want to preserve wealth, own things you expect people to trade their time or capital for into the future. Retirees on a fixed income; immigrants, the poor, and people with no access to credit would like to have a word with you
    - toomuchtodo 5y ago
      Have the word with me. That's what cost of living adjustments (social security or other systems) & prudently investing a lifetime of retirement savings (in a safe mix of investments to support both growth and safety) and improved underwriting and funding for those folks (respectively) is for. It's not an issue with the currency, that's not what currencies are for. If you're expecting the value of a currency to never change, you are asking a fish to climb a tree.
      - IG_Semmelweiss 5y ago
        >>>>> That's what cost of living adjustments (social security or other systems) Isnt that also... Insolvent? >>>> prudently investing a lifetime of retirement savings Would you deem people that invested on bonds of the US govt, GM, that they invested prudently? >>>>If you're expecting the value of a currency to never change, you are asking a fish to climb a tree. Change implies movement in both directions. Yet what we are seeing is a clear, pronounced, increasing onedirectional slope
        emn13 5y ago
        While I'm sure you have a point that some people are getting shafted by lack of inflation compensation, what does that imply for stablecoins vs. conventional banks and/or central banks? That issue could occur in any system with expanding money supply, and you want a system in which the money supply expands in some sync with the economy, because otherwise it's attractive to just hoard paper (or crypto, or whatever) wealth and not invest. In any case, isn't this primarily a political problem (or where the issue is private: a problem of a poorly phrased or one-sided contract)?
- xur17 5y ago
  But this means that all users of USD are providing an insurance pool for the banks for free. Doesn't quite seem fair. There are some decentralized stablecoins (stablecoins backed by crypto assets + market rules that ensure they keep the peg) that have explicit insurance pools + rewards for being part of that insurance pool. For example, Liquity [0] allows users to deposit the stablecoin and earn rewards + favorable liquidation positions (a 10% discount) in return for being the first layer that purchases liquidations. Not exactly sure what the equivalent would be in the traditional finance world, but I could imagine some sort of higher interest savings account that isn't FDIC insured, and takes losses first. [0] https://www.liquity.org/ https://www.liquity.org/
  - cinquemb 5y ago
    > There are some decentralized stablecoins Most people clamoring for regs around stablecoins haven't gotten a chance to wrap their minds around this yet… nor have most of them considered the $ demom "cash and cash equivalents" that are on banks balance sheets not domiciled in the US, who have even smaller cash flows than some centralized stablecoin issuers folks love to pick on…
- wins32767 5y ago
  We've run this experiment before. Look at the number and severity of recessions/depressions prior to fiat currency and after.
- amanaplanacanal 5y ago
  I don't believe there has ever been non-inflationary money before in the whole history of humankind. Add the saying goes, "bad money drives out good." In this case it probably means that crypto coins will mostly be held as an asset while national currencies are used for most transactions. Looking around, that certainly appears to be what is happening.
chroem- 5y ago
> Walking back to first principals, why can't the USD fail? Because you can print whatever adults in the room decide need to be printed to hold the economy up. You cannot do this with a deflationary digital asset, nor one tied to smart contracts. The practical implication of solving large scale bank failures with mass currency printing is hyperinflation. You would only get your money back in nominal terms, but its purchasing power would be greatly reduced. See also: Weimar Germany and Zimbabwe.
- emn13 5y ago
  The fed has expanded money supply to react to shocks before, and there was no hyperinflation. Even if clearly at some point, given enough money-printing, inflation would result, there's no reason to assume it's some binary thing; either hyper-inflation ala zimbabwe or normal inflation. It's more likely you'd see gradual inflation, and that the amount of money printed influences how much inflation results - so assuming that any expansion of the money supply is reasonable, and not egregious. Frankly, if banks start failing to the extent that FDIC is not only necessary on a large scale but even possibly unsustainable, I kind of doubt that a bit of inflation is going to be the worst of our worries.
  - deleted 5y ago
    [deleted]
- shadowgovt 5y ago
  It is the differences between the US and Weimar Germany / Zimbabwe that make it possible for the US to print its way out of most problems. Other national governments didn't stuff Z$ into their armored-up national mattresses to bolster against the collapse of their local currency, and there wasn't an IMF holding debts denoted in Reichsmarks to create a demand for them internationally.
  - emn13 5y ago
    The whole comparison is specious; there were far more factors at play than "printing money". Central banks print money all the time. It's not just in response to the 2008 crisis; the money supply in 2007 wasn't what it was in 1957 either, right? At the very least you'd need to quantify exactly how much money over what period of time might be a shock, and what kind other factors play a role. And then, yes, sure - let's not do things quantifiably similar to Zimbabwe or Weimar Germany. But I suspect there's a huge amount of room for most central banks to maneuver between status quo and hyperinflation; merely "some" printing of money isn't going to be a problem. Indeed there are regularly stories of smaller countries without the kind of reserve status the dollar enjoys that make problematic central bank policies - and even if that has consequences (e.g. Turkey now), that's still a far cry from Weimar Germany or Zimbabwe under Mugabe.