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What makes central bank currencies special is that institutions like the Fed can "mint" or "burn" dollars whenever they please to maintain the "peg". In reality
by ipnon 4y ago
What makes central bank currencies special is that institutions like the Fed can "mint" or "burn" dollars whenever they please to maintain the "peg". In reality they're targeting a 2% floating rate of inflation, and the "minting" is done by making loans to banks that are motivated by economic stability instead of profit. Crypto stable coins don't have this luxury because this mechanism is founded upon trust in the central bank's governance and the underlying government.
- School-Cotton 4y agoCorrect. You’ve discovered one of the many disadvantages with cryptocurrencies relative to traditional finance.
- stickfigure 4y agoAlso the advantage! Sometimes central banks screw up the minting process and severely damage the currency (see: Argentina, Venezuela, Zimbabwe). Historically, currencies are a mixed bag and we should be glad there is more than one.
- Fnoord 4y agoRight, and you can add Russia to that list most likely, but I live in a relatively stable country.