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Actually, that's a good point. Inflation would be even worse if that cash was going into physical goods and services. The government now has an incentive to lea
by evergrande 5y ago
Actually, that's a good point. Inflation would be even worse if that cash was going into physical goods and services. The government now has an incentive to leave crypto alone aside from providing clarity.
- mensetmanusman 5y agoThat is an interesting justification for leaving crypto alone. “Well if those poor people weren’t gambling on that ponzi scheme for a new dog coin they would actually be materially improving their living conditions and prices for everyone else would go up” It’s interesting to see the wealth transfer of all these people that usually buy weekly lotto tickets get crypto instead and send their 10s of millions to programmers making an ICO and a fancy website.
- bezalmighty 5y agoIn the macro economic sense, fiat money isn't 'used up' or 'locked away' when you buy something like crypto, it's transferred from your account to someone else's bank account. Worse, it goes through the process of fractional reserve banking and multiplies about ~10x after changing hands repeatedly.
- Dylan16807 5y agoMinus all the fees to the crypto miners, which end up wasting many hours of labor and causing pollution. That money will eventually be used again but it's worse than paying someone to dig and fill a hole.
- RC_ITR 5y agoThe trickiest question in business that noone seems to get right: Q: How much money flows into "X" market? A: None, money flows THROUGH markets.
- WA 5y agoNot sure about that. Money velocity went down a lot. If you pay Apple money, Apple – the company – keeps that money as cash reserves in some form or another. This might be reinvested and circulates a bit more, but is it really spend in the real economy so that average Joe benefits from this?
- RC_ITR 5y agoDiscussion is around the stock market. Yes, when you buy newly issued shares from Apple (rare), cash flows through the stock market into Apple's accounts, but again, no money went 'into' the stock market. If you're talking about Apple selling devices, then it's another concept entirely.
- klipt 5y agoAlthough if you have X in circulation as money, and Y in stock market valuation, you could say Y/(X+Y) of total value is in the stock market. If the market valuation goes up to Y+Z, you could say money has "entered" the stock market, pushing its share of value to (Y+Z)/(X+Y+Z) even though the money in circulation, X, could be unchanged.
- medvezhenok 5y agoYes, although you could argue that money that was transferred from a checking account to a brokerage account has « flowed into » a market, at least for the time it takes to settle any trades and for the counter party to withdraw theirs (since it will not be used for consumption)
- RC_ITR 5y agoLol you’re giving me an opportunity to be snarky and I will not turn it down. :) Yes, when an item goes through something, it is briefly inside of that thing. I agree.
- markus_zhang 5y agoNot necessarily if the money goes to just a few person though.
- neilwilson 5y agoThere's no such thing as fractional reserve banking. It's an urban myth that has been debunked by QE for over a decade. Lord only knows why people still believe it. Banks create money on demand by discounting collateral. Government creates money on demand by discounting the power to tax. Fiat money disappears by the drain to taxation, to repaying loans and to 'rainy day funds'.
- baking 5y agoQueen Elizabeth?
- neilwilson 5y agoThat would be HMQ.
- derwiki 5y agoQuantitative Easing
- RhodesianHunter 5y agoThis is easily verified as nonsense. Fractional reserve banking absolutely exists. QE is so thinly related I can hardly imagine how you could contort it to have "disproved" something which is codified in law and taught in basic finance and economics courses.
- neilwilson 5y agoIs it. The reserve ratio in the UK and Canada is zero. Which means we should have infinite money in the banking system according to your beliefs. Yet demonstrably we do not. You have the line of causality backward, as the Bank of England helpfully explains in detail here: https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...
- bezalmighty 5y ago
- wexler88 5y agoFirst sentence absolutely correct, second sentence absolute garbage.
- tim333 5y agoBut if someone with money to spend transfers it to a crypto scammers account rather than buying say a car, that avoids inflationary pressure on car prices.
- KETpXDDzR 5y agoThat's correct. However, investing in Crypto using dollars will inflate the dollar. Thus, the arguments that the government will probably leave crypto alone, still holds.
- tshaddox 5y agoI mean what percentage of all money being spent is being spent on cryptocurrency stuff? Surely that’s gotta be approximately 0%.
- coralreef 5y agoDon't know if percentage of money being spent is a good metric, but Bitcoin is 92.45% the market cap of silver, and 11% the market cap of gold.
- tshaddox 5y agoPercentage of money spent ought to be significant if the claim is that demand for crypto is meaningfully substituting for demand for physical goods.
- MeinBlutIstBlau 5y agountil the bubble bursts and bankrupts shittons of people causing bank runoffs and failures...like in 1929 and 2008...
- fallingknife 5y agoBanks don't have any significant portion of their assets in crypto, so no.
- MeinBlutIstBlau 5y agoBanks don't need to be. If half their customers declare bankruptcy or default on their mortgages, loans, etc; The bank won't have enough liquid assets to take on the subprime loans.