26 ms·

Why would you think money is not about belief? If people stopped believing in fiat, there would be a major bank run. So yes, the value of crypto, just as like

• Aunche 5y ago
  It doesn't matter whether or not you believe fiat is valuable or not. I know that tomorrow, I can buy a Big Mac for $4, and McDonald's knows that the person who makes it will go to work for $10/hour. There are way too many transactions that take place for people to "believe" that fiat is worthless. The same cannot be said about cryptocurrency.
  • mellavora 5y ago
    > McDonald's knows that the person who makes it will go to work for $10/hour vs "A Florida McDonald's is paying people $50 just to show up for a job interview, and it's still struggling to find applicants" https://www.businessinsider.com/mcdonalds-pays-50-for-job-interviews-highlighting-hiring-struggles-2021-4?r=US&IR=T https://www.businessinsider.com/mcdonalds-pays-50-for-job-in... Entry-level employees will be making $11 to $17 per hour, https://www.cnbc.com/2021/05/13/mcdonalds-raises-hourly-wages-for-company-owned-restaurants.html https://www.cnbc.com/2021/05/13/mcdonalds-raises-hourly-wage... (with apologies for the scammy links, these were the first google hits I found)
    • Aunche 5y ago
      Yes, inflation is a thing. The numbers aren't important to my argument. My point is that the value of fiat is baked into virtually every transaction. As such, even if you don't believe in fiat, so long as you want to participate in the economy, you'll still use it all the same.
  • gringo_flamingo 5y ago
    This is most likely one of the most unintelligent statements I have ever heard. Value is subjective, period. End of story. The US dollar literally only has value if people have confidence in it. Because we are still bartering and trading, the US dollar is simply a standardization of value. Again, value will always differ from person to person. In fact, I think commodity based tokens would be interesting. Cryptocurrency, as it is, has no value to me. The dollar bill is a standard that will certainly change. Hopefully we can have a utility/commodity based currency in the future. We used to have that when the Dollar was actually backed by bars of gold. LOL
  • koonsolo 5y ago
    I agree with you. But imagine that a secondary ecosystem emerges because of these crazy cryptocoiners, who start using crypto for everything (just out of principle) (see https://99bitcoins.com/bitcoin/who-accepts/ https://99bitcoins.com/bitcoin/who-accepts/ for viability). They also insist on getting paid in crypto (not every country puts capital gains on crypto). This basically means we could have a small parallel ecosystem. Imagine this thing growing to a few % of all transactions. Now the question comes to people holding fiat: are you sure your fractional reserve money will keep its value? Only a small percentage of fearful people could cause serious issues for that fiat system. So I agree that you are right for now. But I wouldn't rule out the possibility of it taking a shift in the future.
• anonporridge 5y ago
  The difference is that the local monopoly on violence forces demand for their fiat on the people and organizations within their sphere of influence, explicitly and implicitly. It remains to be seen if an entirely voluntary money can be a major player in the modern world. Then again, raw fiat is a very new experiment as well. It's only been about 50 years since the US broke the pretense of the dollar being constrained by gold reserves. So from that context, bitcoin's 13 years doesn't actually seem that radically young, especially if compared to gold's 5000 years.
  • lubonay 5y ago
    Raw fiat is NOT a new experiment, the Yuan dynasty in China printed paper money in the 13th century, not backed by any precious metal or commodity. They printed too much and had inflation problems, so that's not a new problem either.
    • anonporridge 5y ago
      Ah, you are right. I knew that, but had forgotten. Thanks for the correction!
  • kragen 5y ago
    If people (specifically, the police and soldiers) stopped believing in the local monopoly on violence, it wouldn't exist either. Historically, this is a thing that happens pretty often, every few decades. Gold in coinage is only about 2700 years old, btw, not 5000, and that was really electrum. Gold, silver, or electrum by weight may go back significantly further.
    • anonporridge 5y ago
      Wasn't gold commonly used as money long before it was first struck as coins? Coinage really just seems to be a technology improvement to make trade more efficient, because you can more quickly verify and count the units.
      • 5y ago
• wmf 5y ago
  There's an interesting contrast: the technical security of crypto relies on not trusting and not believing anyone or anything but the value relies on social belief.
  • kragen 5y ago
    You say, "the technical security of crypto relies on not trusting and not believing anyone or anything," but I don't think that's quite right. I think it's more accurate to say that the purpose of the technical security of crypto is to permit you to not trust anyone (or, in some sense, "anything"). However, by "anyone", we mean "any single person", in the same way that science or money permits you to not trust anyone. For example, fake ivermectin covid studies are eventually found to be fake, so in that sense we "don't trust anyone" to not fake their studies. But if everybody publishing ivermectin studies is actually in a grand conspiracy to promote ivermectin, this fails; at least some honest people have to run studies with ivermectin to find out that it doesn't cure covid. In fact, probably even a majority. This is still a great improvement over the medieval system where the Pope decided whose opinions could be published on whether the Earth moved or not. Similarly, the great thing about money is that it gives you autonomy; if you have money, it doesn't matter that much that the Soup Nazi banned you from his restaurant, because you can just go buy soup elsewhere. You won't starve, the way a child abandoned by their parents often will.
• praxulus 5y ago
  The difference is that the government will (implicitly) point a gun at you and demand a tax payment from you next April, and they'll want that payment in fiat. Everyone knows that everyone else will be coerced into coming up with some U.S. dollars in a few months, so they have a lot more to rely on than everyone else's mere belief in money.
  • seibelj 5y ago
    Post crypto as collateral -> get fiat loan at 2% -> die massively in debt, never paying taxes. That’s the way to win the fiat system.
    • bradwood 5y ago
      Amen to that. Incidentally this is not just a crypto tax avoidance play. It's an asset-rich tax avoidance play. Do you think Bezos sells stock to buy the latest mega-yacht? Of course not. He'd realise a substantial capital gain. Instead he borrows against his stock. No capital gain = no CGT.
      • rsj_hn 5y ago
        I really wish people would think systematically about these issues before jumping on their soapbox, as this strategy does not eliminate tax payment, it merely defers it, with some interest cost. Consider the following scenario: Say the interest rate for a wealthy individual like Bezos is 1% per period. Case A: Bezos sells $100 of stock. He pays 20% and consumes $80. NPV of tax liability is $20. Case B: Bezos borrow borrows $80 to spend in a period and then at the end of the period sells $101 of stock to pay back the loan and (and pay taxes on it). Thus his tax liability at the end of the period is .20*101, which in present value terms = .20*100 = $20. Exactly the same amount of taxes he would have paid if he didn't borrow. Case C: Bezos sells only $80 of stock and then borrows $16 to pay his taxes, ending with a debt of $16.16 at the end of the period, and he will need to sell $20.2 in stock to extinguish his total liability ($16.16 due the bank and also the $4.04 in taxes on the sale), which in present value terms is the same payment as before, namely $20. The real reason people like Bezos borrow to pay their taxes is because the interest rate charged to them by the bank is less the growth rate of their assets. Therefore they are acting like a bank, borrowing at one rate and investing at another rate, making money on the spread. Thus keeping the stock is worth more to Bezos than borrowing to pay the tax, which is effectively what is happening. At least, this is what they believe. Of course this type of balance sheet expansion comes with risk - risk that they bear that if the stock price falls, they will end up paying much more than if they hadn't levered up and borrowed to pay their taxes. But that's a risk they are willing to take. So you don't need to pull your hair out worrying that Bezos is not paying taxes. He is effectively borrowing to pay taxes so that he ends up with a bigger payment down the road, which in present value terms is the same tax liability as if he didn't borrow. The treasury will receive not only all the tax money as if Bezos never borrowed, but all the tax money with interest, namely whatever interest Bezos needs to pay. However Bezos is betting that the growth rate of his assets is even higher. So now you understand why everyone is borrowing to pay taxes -- because interests are so low. So thank the Fed that this type of arbitrage is possible. It's not tax arbitrage, it's interest rate arbitrage.
• dclowd9901 5y ago
  But it isn’t. Fiat currency is tied to a _countries_. What tanks are going to line up to save an attack on crypto? What standing militaries defend crypto? Exactly.
  • koonsolo 5y ago
    If nobody believes in fiat anymore, which police and soldiers will be willing to fight for it?
    • oblio 5y ago
      The government, you know, that thing that has a million other uses, will always want control over the currency. If the crypto point of view is that no one should control currency, first of all, that's super naive and secondly, that puts it on a collision course with governments. My money's on governments winning.
      • koonsolo 5y ago
        Putting the central bank under direct government control is a very bad idea. That's why most major countries don't allow that. That's pretty recent actually. So in some sense, government is already losing power over money.
• jo909 5y ago
  I do not understand why one would fetch stacks of paper from the bank if one believes toilet paper is the more valuable type of paper you should hoard and maybe also trade with. Seriously, why would the end of fiat cause a bank run? I would expect it would cause a switch back to trading physical goods directly, or the emergence of another currency-like thing or good (like cigarettes might have been in the past).
  • 0x0nyandesu 5y ago
    When bank runs were common it was normal for a bank to go out of business while nothing really happened to devalue the currency so you'd essentially be racing other customers to withdraw first. The Fed's guarantee to cover accounts in the event of a bank failing stopped bank runs entirely.
  • koonsolo 5y ago
    Because fiat is created in 2 ways: central bank and bank. Cash in hand means it's central bank money, numbers on your bank account are the multiplied variant. Both are part of the fiat system.