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This made me think of the original idea of using Gold or precious metals as a currency. The idea is that this type of currency should hold value and buy the sa
by tmaly 5y ago
This made me think of the original idea of using Gold or precious metals as a currency.
The idea is that this type of currency should hold value and buy the same amount of goods and services. A 1 ounce gold coin in 1920 would buy a nice tailored suit. Today a 1 ounce gold coin still buys a nice tailored suit.
Could this idea be extended to a crypto currency that is not used for pure speculative trading, but really as a store of value?
- immibis 5y agoThis is not possible. 1 ounce of gold today is €1500. You don't want a fixed supply for a stable price level. The equation is MV=PY - monetary base times velocity equals price level times total output. You are aiming to hold the price level constant. You can't really control the output, apart from making it lower, which you don't want. Controlling the velocity is hard. That leaves the monetary base... which is very easy to control if you admit centralized control. Or maybe someone smarter than me can figure out an algorithm to control it automatically. Either way, fixing M doesn't work. To stabilize P, you have to adjust M to counteract the change in Y÷V.