4 ms·
People talk about things like Bitcoin as a threat to sovereign currencies, and they are, as competitors, of sorts No, they're competitors for the stores of sov
by weego 5y ago
People talk about things like Bitcoin as a threat to sovereign currencies, and they are, as competitors, of sorts
No, they're competitors for the stores of sovereign wealth that are the backing of sovereign currencies.
- worik 5y agoHow so? Bitcoin is not a store of value, and sovereign currencies (I think I know what that means) are not backed by stores of wealth.
- SuoDuanDao 5y agoInflationary vs deflationary instruments. Sovereign currencies are typically inflationary because central banks print them to a greater or lesser degree, National Assets like gold or land reserves are typically deflationary. Bitcoin is more the latter.
- worik 5y agoWhy are "National Assets" (and what s the definition of that) deflationary? Inflation/deflation is in my experience measured as money V. assets. Assets on their own are neither. Have I got that wrong?
- SuoDuanDao 5y agoNo, I think you're right in a technical sense. My point was that, maybe because the relevant timelines are longer for nation-states than households, their easily liquifiable assets tend to rise in value over time. A country might have gold reserves, which reduces the risk of lending to it and lets them borrow at a better interest rate. The gold reserve isn't money, the government sells bonds for money, but it can be converted to money fairly quickly. Bitcoin, similarly, is more of an asset with a fixed supply that can be quickly converted to money. Calling it 'deflationary' is probably some imprecise labeling on my part.
- tim333 5y agoStuff like gold or bitcoin if used as currency can be deflationary as in be worth more over time against good and services.
- worik 5y agoFiat money deflates too.
- SuoDuanDao 5y agoIf it has a steady supply and things are getting easier to produce, yes. Typically a larger amount is minted each year so that its value relative to goods and services decreases in a predictable fashion.