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I understand your position, but saying something is "backed by nothing" is much different than saying something is "intrinsically useless and lacks commitment f

by toolz 4y ago

I understand your position, but saying something is "backed by nothing" is much different than saying something is "intrinsically useless and lacks commitment for conversion". Both bitcoin and USD (as an example of traditional fiat) are absolutely backed by something - they are backed by quite a large economy, for one. I'm not sure if you intentionally left this out, but following your quote literally just one sentence further you get: > Further, it is assumed that fiat money is costless to produce, to store and to transfer, and does not pay interest to the holder Which is quite obviously not a definition that fits bitcoin.

lottin 4y ago
The term backing has a very precise meaning. It means the issuer of the currency promises to redeem the currency for a certain amount of a commodity. When people say "Tethers are backed by dollars" they mean that, i.e., that Tether Inc. promises to redeem Tethers for one dollar each. While it's true that the value of a US dollar is related (in a non-trivial way) to the output of the US economy, this doesn't mean that the dollar is backed by the US economy. The issuer of US dollars is under no obligation to redeem the dollars, and therefore it's right to say the US dollar isn't backed by anything. > I'm not sure if you intentionally left this out, but following your quote literally just one sentence further you get It says that these economic models assume fiat money costs nothing to produce, which is not accurate, because it does cost money. However, the production cost is not relevant for the purposes of these models, and therefore they can make this simplification and assume that it costs nothing.
- toolz 4y ago
  > The term backing has a very precise meaning. It definitely doesn't, at least not the way you're suggesting - you can find article after article talking about oil backed USD. Further, you can find plenty of definitions for the gold standard that don't use the word "backed" because it's not a precise term. > It says that these economic models assume fiat money costs nothing to produce You can either use this models parameters as a definition for fiat or as simply parameters for the model, you don't get to pick and choose only the parts that support your argument while ignoring the parts that explicitly don't.
  - lottin 4y ago
    It has a precise meaning. I've just told you what that meaning is. I'm an economist and I know the language of economics. Regarding your other point, I'm not sure what you're trying to say. Are you saying that the dollar is not fiat money because it costs something to produce? To be honest, I don't care. I have nothing else to add to this conversation, therefore I'm out.

by toolz 4y ago

lottin 4y ago

The term backing has a very precise meaning. It means the issuer of the currency promises to redeem the currency for a certain amount of a commodity. When people say "Tethers are backed by dollars" they mean that, i.e., that Tether Inc. promises to redeem Tethers for one dollar each. While it's true that the value of a US dollar is related (in a non-trivial way) to the output of the US economy, this doesn't mean that the dollar is backed by the US economy. The issuer of US dollars is under no obligation to redeem the dollars, and therefore it's right to say the US dollar isn't backed by anything. > I'm not sure if you intentionally left this out, but following your quote literally just one sentence further you get It says that these economic models assume fiat money costs nothing to produce, which is not accurate, because it does cost money. However, the production cost is not relevant for the purposes of these models, and therefore they can make this simplification and assume that it costs nothing.

toolz 4y ago
> The term backing has a very precise meaning. It definitely doesn't, at least not the way you're suggesting - you can find article after article talking about oil backed USD. Further, you can find plenty of definitions for the gold standard that don't use the word "backed" because it's not a precise term. > It says that these economic models assume fiat money costs nothing to produce You can either use this models parameters as a definition for fiat or as simply parameters for the model, you don't get to pick and choose only the parts that support your argument while ignoring the parts that explicitly don't.
- lottin 4y ago
  It has a precise meaning. I've just told you what that meaning is. I'm an economist and I know the language of economics. Regarding your other point, I'm not sure what you're trying to say. Are you saying that the dollar is not fiat money because it costs something to produce? To be honest, I don't care. I have nothing else to add to this conversation, therefore I'm out.