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This is so good. I was in another thread suggesting that, even if you hate crypto, it's still valuable to understand and accept the "fiat is all made up" idea,

by jrm4 4y ago

This is so good. I was in another thread suggesting that, even if you hate crypto, it's still valuable to understand and accept the "fiat is all made up" idea, even if it's often badly stated and argued. I have a degree in economics, but I confess I really didn't understand the whole thing until much later in life, when I was able to look at it through the lens of e.g. video game design. Which is to say, there are real consequences and real effects of actions -- but the economy still isn't something like "nature" or "scientific" despite what many would have you believe. It's much more like a designed game who's rules can be tweaked, sometimes arbitrary, etc.

anon291 4y ago
This post said nothing about fiat other than that people trust it. Fiat is not the L2 in this system. It is the L1 state issued currency. Bitcoin is analogous to fiat in the crypto world and the exchanges/custodial wallets the L2
- igorkraw 4y ago
  But in the real world, bitcoin and indeed all of crypto is a/are token/s without an army behind it or any form of legal promises except those conferred to them by $L1. Unless you want to go to El Salvador or that one other nation that made it legal tender, Bitcoin is L2 (and a shitty one at that looking at stability, fees and speed)
  - TreeRingCounter 4y ago
    Bitcoin doesn't need petrodollar warfare like the dollar does.
    - ben_w 4y ago
      It has as much need for it as the dollar, which is either "both need it" if you're focusing on the warfare part and using "petrodollar" as rhetorical emphasis, or "neither needs it" if you're focusing on literally the support of petroleum and using "warfare" as rhetorical emphasis. "Both" is because guns beat bits. Or, to put it another way, if the USA had used Bitcoin instead of dollars in 1960, the Soviet Union would've been just as much a threat, and similarly the forced nationalisation in Cuba after the revolution would've happened no matter who recorded what on any blockchain. "Neither" is because petroleum is just one of the major energy sources of the last century, vital for the industrial strength of the US economy and its capacity to actually make things worth buying (in addition to uselessly trinkets), but not the power source of the next century.
      - TreeRingCounter 4y ago
        No, there is an asymmetry you are missing. The "well the dollar has an army behind it" is only extremely narrowly relevant to anything, in that the US can force dollar settlement with the military. This is only necessary because people either don't trust the issuer or don't want to pay seigniorage fees to the US. Neither of these is relevant for btc.
- somethoughts 4y ago
  I'd throw out that if attempting to make analogies to crypto - as I understand it - the standard US bank has pretty specific rules, reporting and audits w.r.t. how high the ratio of L2 to L1 can go and to whom/how/what uses the L2 money can be the loaned out. The crypto exchanges do not have any such rules, reporting or auditing requirements and can self-report as L2 but in fact be some custom self-defined push the boundaries of acceptability Layer (a la FTX advertised as L2 but loaning the customer balances to its Alameda Research "hedge fund" partner).
akira2501 4y ago
If money only exists in the mind of people, how could there truly ever be a "science" of it? It strikes me, from a somewhat cynical point of view, that "economics" is a somewhat confused and lower resolution study of "psychology," which I think offers a the workable explanation for your final sentence.
- mattnewton 4y ago
  > economics" is a somewhat confused and lower resolution study of "psychology," Maybe sociology, since money matter because it can be exchanged between people, but personally I don't think you'd be wrong for thinking about economics as a narrow but important branch of sociology/psychology, in the same way you might think of biology as a narrow but important branch of chemistry and physics.
- plsbenice34 4y ago
  It's like game theory. Once you set rules and laws you can mathematically model and analyse players' behaviour in reaction to those incentives. Assuming players follow a selfish strategy can be a useful approximation of the psychology sometimes. Since it's 'just made up' societies can modify the rules.
- felix318 4y ago
  Numbers also only exist in our minds but that doesn't make mathematics a branch of psychology. There is a rational side to economics because money can be measured and the measurements are reliable. The unpredictable side of economics is of course the behaviour of the various economical agents, and regarding this I think economics is closer to astrology than to psychology.
- adamsmith143 4y ago
  Economics, flawed as it is, was never the science of money but the science of markets.
  - jrm4 4y ago
    But markets are just as made up as money? I fail to see the difference.
MrBuddyCasino 4y ago
In that case, this might blow your mind: https://graymirror.substack.com/p/the-inflation-economy https://graymirror.substack.com/p/the-inflation-economy

by jrm4 4y ago

anon291 4y ago

This post said nothing about fiat other than that people trust it. Fiat is not the L2 in this system. It is the L1 state issued currency. Bitcoin is analogous to fiat in the crypto world and the exchanges/custodial wallets the L2

igorkraw 4y ago
But in the real world, bitcoin and indeed all of crypto is a/are token/s without an army behind it or any form of legal promises except those conferred to them by $L1. Unless you want to go to El Salvador or that one other nation that made it legal tender, Bitcoin is L2 (and a shitty one at that looking at stability, fees and speed)
- TreeRingCounter 4y ago
  Bitcoin doesn't need petrodollar warfare like the dollar does.
  - ben_w 4y ago
    It has as much need for it as the dollar, which is either "both need it" if you're focusing on the warfare part and using "petrodollar" as rhetorical emphasis, or "neither needs it" if you're focusing on literally the support of petroleum and using "warfare" as rhetorical emphasis. "Both" is because guns beat bits. Or, to put it another way, if the USA had used Bitcoin instead of dollars in 1960, the Soviet Union would've been just as much a threat, and similarly the forced nationalisation in Cuba after the revolution would've happened no matter who recorded what on any blockchain. "Neither" is because petroleum is just one of the major energy sources of the last century, vital for the industrial strength of the US economy and its capacity to actually make things worth buying (in addition to uselessly trinkets), but not the power source of the next century.
    - TreeRingCounter 4y ago
      No, there is an asymmetry you are missing. The "well the dollar has an army behind it" is only extremely narrowly relevant to anything, in that the US can force dollar settlement with the military. This is only necessary because people either don't trust the issuer or don't want to pay seigniorage fees to the US. Neither of these is relevant for btc.
somethoughts 4y ago
I'd throw out that if attempting to make analogies to crypto - as I understand it - the standard US bank has pretty specific rules, reporting and audits w.r.t. how high the ratio of L2 to L1 can go and to whom/how/what uses the L2 money can be the loaned out. The crypto exchanges do not have any such rules, reporting or auditing requirements and can self-report as L2 but in fact be some custom self-defined push the boundaries of acceptability Layer (a la FTX advertised as L2 but loaning the customer balances to its Alameda Research "hedge fund" partner).

akira2501 4y ago

If money only exists in the mind of people, how could there truly ever be a "science" of it? It strikes me, from a somewhat cynical point of view, that "economics" is a somewhat confused and lower resolution study of "psychology," which I think offers a the workable explanation for your final sentence.

mattnewton 4y ago
> economics" is a somewhat confused and lower resolution study of "psychology," Maybe sociology, since money matter because it can be exchanged between people, but personally I don't think you'd be wrong for thinking about economics as a narrow but important branch of sociology/psychology, in the same way you might think of biology as a narrow but important branch of chemistry and physics.
plsbenice34 4y ago
It's like game theory. Once you set rules and laws you can mathematically model and analyse players' behaviour in reaction to those incentives. Assuming players follow a selfish strategy can be a useful approximation of the psychology sometimes. Since it's 'just made up' societies can modify the rules.
felix318 4y ago
Numbers also only exist in our minds but that doesn't make mathematics a branch of psychology. There is a rational side to economics because money can be measured and the measurements are reliable. The unpredictable side of economics is of course the behaviour of the various economical agents, and regarding this I think economics is closer to astrology than to psychology.
adamsmith143 4y ago
Economics, flawed as it is, was never the science of money but the science of markets.
- jrm4 4y ago
  But markets are just as made up as money? I fail to see the difference.

MrBuddyCasino 4y ago

In that case, this might blow your mind: https://graymirror.substack.com/p/the-inflation-economy https://graymirror.substack.com/p/the-inflation-economy