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so many people in this thread will play the common HN intellectual and exclaim how the fed is obviously trapped, or what they did wrong to do get us here. And

so many people in this thread will play the common HN intellectual and exclaim how the fed is obviously trapped, or what they did wrong to do get us here. And in a different thread will trash bitcoin only focusing on its energy consumption and not its potential sound money properties. If Bitcoin is bad, and the Fed (and every government ever) created a situation which will only lead to poverty & widening wealth gap, whats the solution?

sfblah 5y ago
The solution is to set interest rates to a historically reasonable level, say 4%. Then, accept you're going to have a recession as asset values reset to reasonable levels. The reason you need a reasonable risk-free rate is, without that, almost any marginally profitable that you can finance with debt will get financed. This leads to malinvestment. You can see this all around you. Asset inflation has the insidious side-effect of damaging democracy by producing oligarchy. An alternative solution would be simply to declare a maximum net worth and set tax rates on income over, say, $1m per year to 95%.
boppo1 5y ago
>whats the solution? If I misjudge a cool jump off the roof into the pool and catastrophically break both my legs, then my legs are broken.
alliao 5y ago
i don't think bitcoin is the saviour it claims, especially now it's being used and swayed by all the usual suspects of the old monetary system. It's now just another bucket within sea of capital. Used to adjust and move capital around, ended up to be just another instrument....
cowmoo728 5y ago
The solution to bad governance is better governance, not utopianism. Problems like this are the entire reason that democratic countries have elections and peaceful transfers of power. Does it always work? No. But looking for a technical solution (short of all powerful general AI) to a human problem will only lead to pain when the human problems start creeping back in to whatever technical solution was designed.
colechristensen 5y ago
The fed was able to maintain a functioning economy without major disruption in essentials (i.e. there weren't major shocks in being able to buy food or maintain housing) despite shutting down or significantly modifying large sections of the economy for a significant time. They aren't "trapped" this is the natural and expected consequence of creating a lot more money to sidestep a temporary condition. Considering the US is the strongest-ish economy in the world and the rest of the world had to do the same thing, there shouldn't be terrible consequences as long as nobody does anything really stupid. Bitcoin, gold, and anti-fed fanboys have a tendency to have a poor understanding at best of global economics with very basic misunderstandings like thinking that bumping the rate bumps the rates of all previous bonds. Some people who do advocate for those things do know what they are talking about and can argue valid points which are up for discussion, but you don't actually see those very often. Monetary policy in the US has made major mistakes, but it has been doing a pretty good job, and importantly has avoided the worst kinds of disaster for a long time. What it did during covid was essentially the only option, what a gold standard economy would have been able to do would have led to much worse outcomes. People will complain about anything. The HN crowd generally overestimates its expertise in matters not related to startup tech (i.e. physics, engineering, economics posts often have pretty awful comments)
- spiralx 5y ago
  > Bitcoin, gold, and anti-fed fanboys have a tendency to have a poor understanding at best of global economics with very basic misunderstandings like thinking that bumping the rate bumps the rates of all previous bonds. Discussion on this post is worse than the usual level of discussion here, and the usual level around these topics isn't great at best. Hard to discuss monetary policy with someone who doesn't know what monetary policy actually is.
  - jeffalbertson 5y ago
    Not trying to be a rude but why even make this comment? Just saying something is bad and inferring people are amateurs without offering any insight yourself is just as useless as the opinions you think are uninformed
beefman 5y ago
It's often different subsets of users in these threads. People tend to read and comment on stories they're interested in. Any bias in this interest can become amplified. For example, most commenters on stories claiming that low-level environmental pollution causes large socioeconomic effects believe the claim. Dissesnting comments are likely to be downvoted, so people with dissenting opinions don't bother commenting. Each topic becomes its own echo chamber. There are discentralized digital currencies that don't require insane energy consumption. But since clean energy is essentially unlimited on our planet, this isn't a reason to avoid conventional blockchains (that reason would be their abysmal scaling behavior). None of them provide any price stability at all -- or wouldn't, if more than precisely zero goods and services were priced in one of them. (Certain DeFi markets have elements of a banking system that might, concievably, offer some price stability.) The COVID-19 helicopter drops -- which were performed by the Treasury, not the Fed -- certainly could cause inflation. But this would generally be an inflationary shock, not an ongoing inflationary regime. Instead, it's the lockdowns (or hysteria more generally), which damaged the structure of the global economy. You can think of the inflation as the cost of rebuilding these networks, of convincing people to work together again. Simply put, things become cheap when they're produced by efficient networks. If those networks decay, things become more expensive.
alexb_ 5y ago
Just look at the value of Bitcoin and try to argue that would create a better or more stable economy. Not to mention 99% of people are hoping their favorite coin is insanely deflationary so they can become rich, not to actually create any functioning economy.

sfblah 5y ago

The solution is to set interest rates to a historically reasonable level, say 4%. Then, accept you're going to have a recession as asset values reset to reasonable levels. The reason you need a reasonable risk-free rate is, without that, almost any marginally profitable that you can finance with debt will get financed. This leads to malinvestment. You can see this all around you. Asset inflation has the insidious side-effect of damaging democracy by producing oligarchy. An alternative solution would be simply to declare a maximum net worth and set tax rates on income over, say, $1m per year to 95%.

boppo1 5y ago

>whats the solution? If I misjudge a cool jump off the roof into the pool and catastrophically break both my legs, then my legs are broken.

alliao 5y ago

i don't think bitcoin is the saviour it claims, especially now it's being used and swayed by all the usual suspects of the old monetary system. It's now just another bucket within sea of capital. Used to adjust and move capital around, ended up to be just another instrument....

cowmoo728 5y ago

The solution to bad governance is better governance, not utopianism. Problems like this are the entire reason that democratic countries have elections and peaceful transfers of power. Does it always work? No. But looking for a technical solution (short of all powerful general AI) to a human problem will only lead to pain when the human problems start creeping back in to whatever technical solution was designed.

colechristensen 5y ago

The fed was able to maintain a functioning economy without major disruption in essentials (i.e. there weren't major shocks in being able to buy food or maintain housing) despite shutting down or significantly modifying large sections of the economy for a significant time. They aren't "trapped" this is the natural and expected consequence of creating a lot more money to sidestep a temporary condition. Considering the US is the strongest-ish economy in the world and the rest of the world had to do the same thing, there shouldn't be terrible consequences as long as nobody does anything really stupid. Bitcoin, gold, and anti-fed fanboys have a tendency to have a poor understanding at best of global economics with very basic misunderstandings like thinking that bumping the rate bumps the rates of all previous bonds. Some people who do advocate for those things do know what they are talking about and can argue valid points which are up for discussion, but you don't actually see those very often. Monetary policy in the US has made major mistakes, but it has been doing a pretty good job, and importantly has avoided the worst kinds of disaster for a long time. What it did during covid was essentially the only option, what a gold standard economy would have been able to do would have led to much worse outcomes. People will complain about anything. The HN crowd generally overestimates its expertise in matters not related to startup tech (i.e. physics, engineering, economics posts often have pretty awful comments)

spiralx 5y ago
> Bitcoin, gold, and anti-fed fanboys have a tendency to have a poor understanding at best of global economics with very basic misunderstandings like thinking that bumping the rate bumps the rates of all previous bonds. Discussion on this post is worse than the usual level of discussion here, and the usual level around these topics isn't great at best. Hard to discuss monetary policy with someone who doesn't know what monetary policy actually is.
- jeffalbertson 5y ago
  Not trying to be a rude but why even make this comment? Just saying something is bad and inferring people are amateurs without offering any insight yourself is just as useless as the opinions you think are uninformed

beefman 5y ago

It's often different subsets of users in these threads. People tend to read and comment on stories they're interested in. Any bias in this interest can become amplified. For example, most commenters on stories claiming that low-level environmental pollution causes large socioeconomic effects believe the claim. Dissesnting comments are likely to be downvoted, so people with dissenting opinions don't bother commenting. Each topic becomes its own echo chamber. There are discentralized digital currencies that don't require insane energy consumption. But since clean energy is essentially unlimited on our planet, this isn't a reason to avoid conventional blockchains (that reason would be their abysmal scaling behavior). None of them provide any price stability at all -- or wouldn't, if more than precisely zero goods and services were priced in one of them. (Certain DeFi markets have elements of a banking system that might, concievably, offer some price stability.) The COVID-19 helicopter drops -- which were performed by the Treasury, not the Fed -- certainly could cause inflation. But this would generally be an inflationary shock, not an ongoing inflationary regime. Instead, it's the lockdowns (or hysteria more generally), which damaged the structure of the global economy. You can think of the inflation as the cost of rebuilding these networks, of convincing people to work together again. Simply put, things become cheap when they're produced by efficient networks. If those networks decay, things become more expensive.

alexb_ 5y ago

Just look at the value of Bitcoin and try to argue that would create a better or more stable economy. Not to mention 99% of people are hoping their favorite coin is insanely deflationary so they can become rich, not to actually create any functioning economy.