> With a fiat currency, the central bank can mitigate the disasters by printing more dollars and loaning them to the banks. Because of that, people don't worry

> With a fiat currency, the central bank can mitigate the disasters by printing more dollars and loaning them to the banks. Because of that, people don't worry as much about their bank, so the runs don't happen in the first place. The problem with this kind of "mitigation of disasters" is: in the end it rewards the banks that siphoned away more money through reckless risk assessments than others by bailing them out with state money, so everyone else's money. If you set up such a reward system you get exactly the shitty financial sector that led to GFC 2008. > The money supply M0 would be fixed, but the M1, M2, etc. currencies would inflate exactly the way they always have. Only with greater opportunities for bank panics. I think this is short sighted. Letting people access the M0 pool and putting their savings in it and transacting in it means that risk aversive people use it more. And come some crash, they'll be rewarded for it (by not being as much caught up in it as others). So there's incentive to do so. People who accept more risk would make their bets in the M1/M2 pools and sometimes get burned. Assuming the state weren't able to take hold of people's M0 funds, in the case of some crash, it could only shuffle around the M1/M2 funds amoung those who played riskier there, and they'd maybe learn a lesson. This way the whole system could settle at some more or less stable dynamic equilibrium (where the financial sector cannot just rely on getting bailed out out of everyone's pockets) with some people holding mostly M0 (never loosing their funds) and some doing risky stuff with M1/M2 and sometimes loosing some funds because of insolvencies. > So we again watch as the crypto fans recreate 20th century economics on fast-forward. The senctence sounds nice. But now that Bitcoin exists, the situation now is only comparable to back then to a certain degree.