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Let me preface this by stating that I am not a crypto enthusiast and do not own any crypto. One thing that’s been fascinating to me as this banking crisis has

by dkrich 4y ago

Let me preface this by stating that I am not a crypto enthusiast and do not own any crypto. One thing that’s been fascinating to me as this banking crisis has unfolded is that the same people who swear cryptocurrencies have no intrinsic value and are therefore worthless continuously say “there is no problem because the government can simply create as much money as it wants out of thin air.” So they are implicitly saying that any currency has value because people believe it has value but don’t extend that generosity towards other assets where there is a clearly demonstrated group ascribing value to it. It’s also somewhat disconcerting that the government seems to show less and less restraint in exchange for instant gratification and short term benefits and as holders of its currency you really have no say as to how it is managed. Emergency measures are there for just that, emergencies, but it seems the bar for what qualifies for an emergency gets lower and lower.

dmn322 4y ago
What most people don't realize about this covid-related inflation is that it was a different beast... it wasn't due to excess demand, it was due to restricted supply. The fed using interest rates to beat inflation down could make sense when unemployment is at 2% in a normal economy, but when we're still experiencing global supply chain issues, you don't raise the rates. That's not the right way to beat inflation. Suppliers need loans to keep their doors open and expand capacity again. Raising the interest rates restricts access to these loans, and the shortages just stick around longer. Of course the people running the show know that, but they're using the excuse to raise rates to consolidate their share of the economy even though they know what will happen. The other thing that was driving the inflation was rich people using the PPP loans to speculate. If the goal was really just to control inflation, the fed rate isn't the only way. They could also have made the tax rate more progressive like it was in the 50s and 60s. But of course they haven't gone there in a long time.
- JKCalhoun 4y ago
  Maybe what's needed is a rejiggering of the supply chains instead. Shorter chains. i.e. bring back the local supply that we sold overseas decades ago. Obviously the fed can't make that change, but I was reacting to your implication that we just need to get back to where we were before Covid. I feel we were already losing altitude before Covid, the overhead airbags had already deployed. And just to further derail the conversation, was it really Covid itself that caused the supply chain disruption? Perhaps I could be convinced that somehow Covid got us into the current mess but I guess it would still follow then that if a Covid-like pandemic could take out the global economy for (checks watch) 3 years and counting, the problem still ultimately comes down to a dependency on an obviously fragile supply chain.
  - dmn322 4y ago
    I'm fine with that, but that rejiggering takes liquidity. Trying to rejigger without loans being available is just going to end up being de-jiggering. If we want to control inflation, that's fine, raise taxes
- xmcqdpt2 4y ago
  The frustrating thing with the inflation crisis is that a lot of it is an emotional response to eg food prices. This is totally valid! Vital goods going up in price is scary! Wages also have been going up, maybe not as fast as the price of some goods, but still pretty fast. The issue is that people are very quick to internalize a rise in wages (I did this! I changed jobs, got better at my current job, got promoted etc.) and externalize a rise in costs (gov spending is the reason eggs are expensive!) when really the two things are very connected. People are pushing their representatives to tackle inflation without thinking for a second that this might mean they'll get fired or take a paycut. All the gains they've made since 2020 are personal wins, all the inflation is due to government spending.
  - carlosjobim 4y ago
    Blaming wages for inflation is a misconception. Wages are always the last to increase with inflation - because the purpose of inflation is to exploit more resources from those who actually work and earn wages.
    - xmcqdpt2 4y ago
      I'm not blaming wages for inflation. Just noting that inflation is also responsible for a large proportion of many peoples raises and promotions etc. The government tackling inflation is going to repress wages.
jackmott 4y ago
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skyechurch 4y ago
As a fellow crypto non-enthusiast, I agree with all of this. I thought that the best way to look at cryptocurrency and the crypto ecosystem is as a satire of the world of finance, etc. This is still accurate, I believe, but it can be easy to overlook how subtle a satire it is.
Convolutional 4y ago
> “there is no problem because the government can simply create as much money as it wants out of thin air.” So they are implicitly saying that any currency has value because people believe it has value but don’t extend that generosity towards other assets where there is a clearly demonstrated group ascribing value to it. Prior to 1971, federal reserve notes were backed by gold. Their value was generated out of thin air even then - a piece of paper with a promissory of gold is not a bar of gold. Today the US holds thousands of tons of gold at Fort Knox and other places. Why? Why does it do this? I can assure you the 9 billion dollars worth of Dogecoin out there do not have thousands of tons of gold out there implicitly backing them. Beyond all of this, your point that countries don't have printing presses that can generate am infinite amount of value is valid.
itsthecourier 4y ago
Same people who say BTC is deflationary, ignore how many coins have been printed in five years (just check coinmarketcap).
mlcrypto 4y ago
Worst case scenario deposits are not safe in banks. Best case scenario all deposits are insured by 31T national debt. All roads lead to Bitcoin
- pcthrowaway 4y ago
  As an actual crypto enthusiast, I fucking hope not. Can you imagine if the entire planet switched to using proof of work cryptocurrency? The energy usage of the network would dwarf that of the largest country.
  - mlcrypto 4y ago
    How much energy does it take to defend the US dollar currently?
    - pcthrowaway 4y ago
      Less than the Bitcoin network would use if the entire world switched to it. At it's current usage where maybe 2-3% of the global population has ever actually performed a transaction on the bitcoin network, and next to no one uses it as their primary network for transacting, it used the equivalent energy of the entire country of Brazil, which has half the U.S. population (though less than half the energy usage) To be clear, the energy usage is a function of price more directly than it is of actual usage, it just so happens that the price would continue to increase if people actually used it for real-world transactions.
      - mlcrypto 4y ago
        The energy usage is worth it compared to fiat that is defended by the military industrial complex: https://twitter.com/JasonPLowery/status/1491826850569637889?t=P3YCFbA-w6hBgaYRBHRhjg&s=19 https://twitter.com/JasonPLowery/status/1491826850569637889?... I also don't think there's anything inherently immoral about energy usage. Bitcoin can theoretically help us access remote natural sources of energy and convert it to wealth instantaneously with just an internet connection when otherwise it would be infeasible to transport
imtringued 4y ago
Fiat is created through loans, in other words, people contractually obligate themselves to accept the currency as payment and they implicitly agree to a certain price level. This means that the price level ends up very stable because there is predictable demand for fiat and people can't just dump it like a hot potato immediately. With cryptocurrencies there is hardly anyone that uses it for payments or loans. People mostly speculate with it. If people suddenly think it is worth much less then it will have a sudden change in its price level. Worst case, it can go to zero in a day. Creating money without loans is a bad idea because it makes it much easier to have high inflation as there is no mechanism to take the money back.
oivey 4y ago
Yes, crypto is fiat money just like government issued currency. The USD, though, is backed by the US (the government, military, economy, etc.) and generally monetary policy is an advantage of government issued currency. With crypto, usually be design, you actually have zero ability to alter how it is managed. It’s even less power than your vote gives over the USD.
- bolanyo 4y ago
  I don't think this is the correct interpretation of 'fiat currency'. 'Fiat' of course refers to making something come into existence simply by saying it, as G_d supposedly did with the words 'Let there be light'. My understanding of 'fiat currency' is that it is not the currency as a whole which comes into existence by fiat (which would seemingly apply to most currencies, including Bitcoin and metallic ones), but that individual units of the currency come into existence by fiat. The government (meaning the union of the Fed and the Treasury) can create additional dollars simply by writing 'X has Y dollars'. No one can create Bitcoin in this manner, so it is not a fiat currency.
- Osiris 4y ago
  Some people consider that a feature of crypto, not a bug. They want a currency that isn’t manipulated by governments. Of course they fail to realize that the manipulation just gets shifted to the core developers.
  - dkrich 4y ago
    The greatest feature of a centralized currency is the ability for the governing body to step in and become a lender of last resort when once a century crises hit to stave off a depression that could take decades to repair. The trouble is that once a century is becoming once a year now.
    - jkhdigital 4y ago
      We don’t have a lot of good history on this, but there’s basically only one instance of such a deep and lasting depression and it occurred after central banking was established, not before.
epgui 4y ago
> it seems the bar for what qualifies for an emergency gets lower and lower Maybe you're right about that, I don't know... But even if it was not the case, we'd still expect emergencies to occur more frequently today than in the past, and even more frequently again in the future. You know, climate change and inconsiderate usage of finite resources within a finite volume and always-increasing entropy and all. The link is direct.
yathaid 4y ago
>> any currency has value because people believe it There is no contradiction. Your rant is coming across like all currencies are the same, they are not. People tend to believe the U.S. Govt more than say Venezuela (no offence). Even amongst currencies, the USD is special due to the underlying tie to oil sales. See https://www.lynalden.com/what-is-money/ https://www.lynalden.com/what-is-money/ for a much better introduction than I could ever give.
- carlosjobim 4y ago
  The tie to oil sales is not exactly that. The USD is tied to the threat of military force by the Federal Reserve's government. You will get bombed if you don't trade your oil in USD.
snordgren 4y ago
The USD is valuable because the US government demands its taxes be paid in USD. If you want to operate in the world's largest consumer market, you need dollars.
mazurnification 4y ago
I am one of the guys that says money do not have intrinsic value. Or more precisely it "value" is due the fact that they enable trade and enable time shifting the trade (That is store value). My mental analogy is that money are lubricant. Too little everything grinds to a halt (deflation crisis) or too much and it burst seals and spills everywhere (inflation crisis). So there is clear signal to the population that something is wrong with money. Then if you live in democracy you have say on the policy. That is why democracies tend to have more stable currencies compared to autocracies. And lack of this stabilising feedback loop is main critique of cryptocurrencies. Note how unstable value of bitcoin is - it goes from massive inflation to deflation and back very often (single years time spans).
- dmn322 4y ago
  "Then if you live in democracy you have say on the policy." I've got some disappointing news for you my friend.
  - mazurnification 4y ago
    Then compare currency stability from democracies to autocracies. Turkey versus Germany for example. edit: missing word
    - dmn322 4y ago
      I was just referencing the fact that we have no democratic say over the fed rate in the US. Not trying to say democracy is bad, just that we don't really have it with respect to interest rate policy.
      - mazurnification 4y ago
        FED chairman is elected by POTUS and confirmed by Senate. With 4y term. That is your say - it is indirect but most (all?) things in modern democracies are indirect. Obviously on top of that there are more soft influences - such as public opinion.
pjc50 4y ago
People really do not understand the mechanics of money; to the extent that the Fed is "creating" "money" through credit, that's an intrinsic part of how credit works. It also works in crypto. We saw how in FTX: "crypto-on-an-exchange" behaves like a bank deposit, in that it's a debt from the exchange to you, and can be created by extending a loan to another organisation; it is then "un-created" when the loan is paid back or defaults.
sfifs 4y ago
A major part of the value of any fiat currency comes from the fact that the institution with a monopoly on violence collects its dues in that currency. If you don't pay your taxes and fines in your nations currency, you go to jail or worse. The desire to avoid this creates the demand for the fiat currency. Other similar laws mandate businesses accept the fiat for discharge of private debts with consequences for not doing so etc. The other piece that folks often conflate to extrapolate their intuition of how a household or a small business budget operates to how a country budget operates (the comment above on instant gratification). As a household, if you face a risky economic situation (economic depression, loss of jobs etc), the natural response is to reduce spending and increase savings. If you aggregate across households at a country level, this leads to lower demand, so reduction in jobs as less consumption which leads to further economic downturn, reduction in willingness of banks to lend, lower government income (as lower taxes) etc. The right government response is to spend more countercyclically and help create jobs to spur back demand through deficit spending. Then as economy improves, tax receipts go up and deficit goes down.
- gitfan86 4y ago
  The economy only works if you have a slightly inflationary, stable, highly liquid method of conducting transactions. Yes the govt has created a moral hazard where they can always just create more money to solve a problem, but inserting a ponzi scheme does not fix that
  - kodyo 4y ago
    Inflation is value confiscation. It's a tax. It reduces the burden of the greatest debtor (government) at the expense of everybody who holds dollars and produces value. What do I get out of it?
    - gitfan86 4y ago
      You get to live in a functioning economy. If you want to live in a society were the banks and wealthy individuals can make significant income by doing literally nothing, that is fine, but the rest of us would like to live in a world where goods and services are produced at a rate similar to how they are produced today.
Aunche 4y ago
>cryptocurrencies have no intrinsic value If you get paid $20/hr, you can think of $20 being intrinsically worth an hour of your labor until you quit or get a raise. The dollar isn't actually intrinsically valuable, but it's mostly treated as such anyways because no matter how the currency changes due to inflation or exchange rates, you're still only getting $20. On the other hand, if you get paid in crypto, you'd get paid $20 worth of that crypto. Today it may be 1 coin, tomorrow it could be 2, and in a month it could be .1 coins. In that case, how many coins you get paid in this crypto completely depends on the supply and demand on this crypto. >the government seems to show less and less restraint in exchange for instant gratification The good news is that. Raising interest rates is the opposite of short term gratification, which is why so many people want it to stop. >Emergency measures are there for just that, emergencies, but it seems the bar for what qualifies for an emergency gets lower and lower. Agreed. But you can't blame the the cardiovascular surgeon for performing a triple bypass surgery. The blame falls under the patient who is addicted to eating barrels of pork.
- x-complexity 4y ago
  > >cryptocurrencies have no intrinsic value > If you get paid $20/hr, you can think of $20 being intrinsically worth an hour of your labor until if you quit or get a raise. The dollar isn't actually intrinsically valuable, but it's mostly treated as such anyways because no matter how the currency changes due to inflation or exchange rates, you're still only getting $20. On the other hand, if you get paid in crypto, you'd get paid $20 worth of that crypto. Today it may be 1 coin, tomorrow it could be 2, and in a month it could be .1 coins. In that case, how many coins you get paid in this crypto completely depends on the supply and demand on this crypto. Piggybacking on this, the same example can be extended towards other currencies & assets: That $20 could've also been paid in pounds / euros / yen / gold / silver / seashells / MTG cards. The first 3 are less volatile than the rest, mainly because of the per-unit density of liquidity that can absorb the exchanges in between A & B (ex. USD-yen, yen-euro). For the currencies, they have much deeper liquidities to exchange with/against concentrated around narrower price ranges, and as such prices are not as volatile as commodities & assets. The exception to this however is if the currency in question is perceived as weak.
dmn322 4y ago
"the government seems to show less and less restraint in exchange for instant gratification and short term benefits" I'm not sure whether you're talking about raising the rates or reducing them. But the idea that reducing rates is just instant gratification is just false. The rates simply dictate how willing banks will be to loan money out. It's a tool. Countries have used this to spur foreign demand of their goods for years. Portugal Italy and Greece used to do it all the time. Once they joined the Euro and they were no longer able to inflate at will, their economies tanked. It's better to think of money like shares. The total amount of shares outstanding doesn't really affect much... it's the relative proportions that people control and the percentage of equity that those shares represent that matters.
- carlosjobim 4y ago
  > It's better to think of money like shares. The total amount of shares outstanding doesn't really affect much... it's the relative proportions that people control and the percentage of equity that those shares represent that matters. Inflation is not evenly distributed. Newly created money goes to the rulers first, then to their lords and vassals etc. The people who actually produce in the economy are the last to receive the new money after it has been completely diluted.
- chrischattin 4y ago
  This comment is wrong on all points.
  - dmn322 4y ago
    Well I got the info from a talk by the head of Italy's central bank 12 or 13 years ago.
realharo 4y ago
Usually when people say that about crypto, what they mean is that close to 100% of the demand for it is based purely on the expectation that it will go up in value. Remove that expectation and almost all of the demand disappears.
otikik 4y ago
One difference is that countries know reasonably well how many citizens they have, and how many “trust the system” (however you want to define it). Those “other assets” that mention are obscure by definition. You can claim that “your cryptocurrency has millions of users”. Are those real people? Or are those two guys in a data center with a shellscript? Compound that with the extensive marketing, posturing, hyping and gaslighting and the “people believe in it” argument loses strength. Besides, the main criticism has never been “people don’t trust on them”, it was “there’s no regulation”. The continued rug pulls, scams and steals should already make it clear how this is a problem. And this is by design.
mcv 4y ago
> the same people who swear cryptocurrencies have no intrinsic value and are therefore worthless continuously say “there is no problem because the government can simply create as much money as it wants out of thin air.” So they are implicitly saying that any currency has value because people believe it has value but don’t extend that generosity towards other assets where there is a clearly demonstrated group ascribing value to it. I don't know if I'm one of those people, but I'd say that no currency has any intrinsic value. Land, labour and production capital have intrinsic value, but I don't even see gold as having intrinsic value; it only has value because we agreed to consider it valuable. The value of any currency comes from the economy that uses it to pay for stuff. Dollars are used to pay for a lot of stuff. Bitcoin was supposed to be used to pay for a lot of stuff, but it seems to have turned into an investment toy. Actually using it to pay for stuff is slow and expensive, and only really worth it for transactions where anonymity is important enough to make the cost worth it. And that seems to be mostly market for crime. But please correct me if this is outdated and there's now a thriving economy of people buying all sorts of goods with Bitcoin.
- jkhdigital 4y ago
  We shouldn’t conflate money with payment systems. Like 90% of my daily expenses are through a credit card. The unit of account for these transactions is my local currency (happens to be JPY) but yen is not being exchanged. What happens is that I give an IOU to the bank and the bank gives an IOU to the merchant. These IOUs are settled on a recurring basis, at which point actual money might be involved. In the strict sense only physical banknotes, coins, and reserves at the Fed are money. Everything else involves a counterparty and some level of trusted intermediation. If there is ever a significant amount of economic activity that is priced and settled in Bitcoin, we can be sure that most of it will be through trusted intermediaries just like every other currency.
  - mcv 4y ago
    So as a new type of money is introduced, at first, the money itself is the payment system (you take coins and banknotes from your pocket and give them to the marchant), and as economic activity and technology grow, the payment system gets taken over by bank transactions and stuff like that. And in a way we currently see that already for bitcoin: lots of people keep their money not in their own wallet, but in that of an exchange, so it can be more easily traded. The downside of that is that you don't control your money anymore, and there's no legal framework to protect your ownership of that money, so people have been losing a lot of money to fraudulent and incompetent exchanges. But that change also kinda defeats the original purpose of bitcoin.
scott_w 4y ago
This comment is a prime example of something that makes sense on the face of it because the rebuttal requires knowledge on how money actually works. For example, you completely glossed over the fact most economists agree that, for money to have value, it needs to be a good: 1. Medium of exchange 2. Unit of account 3. Store of value To achieve this, a currency needs a certain level of stability and to be accepted by the institutions you need to do business with i.e. governments. Money & Macro has some great videos on this topic. This one on China's attempt to replace the US Dollar as the reserve currency is a good starting point: https://www.youtube.com/watch?v=49iLl-V4xos&t=653s https://www.youtube.com/watch?v=49iLl-V4xos&t=653s
- jkhdigital 4y ago
  I’d say this is the high school textbook version of the story. Money is simply the “best” medium of exchange in a given context. Stable value and fungibility (“unit of account”) are attributes that make something better at this role, because it becomes suitable for a wider range of transactions across time and scale. Ludwig von Mises has a lot more to say about this.
  - scott_w 4y ago
    > the rebuttal requires knowledge on how money actually works. I don't think we disagree at all. I'm not an economist or finance expert, after all ;-)

by dkrich 4y ago

dmn322 4y ago

What most people don't realize about this covid-related inflation is that it was a different beast... it wasn't due to excess demand, it was due to restricted supply. The fed using interest rates to beat inflation down could make sense when unemployment is at 2% in a normal economy, but when we're still experiencing global supply chain issues, you don't raise the rates. That's not the right way to beat inflation. Suppliers need loans to keep their doors open and expand capacity again. Raising the interest rates restricts access to these loans, and the shortages just stick around longer. Of course the people running the show know that, but they're using the excuse to raise rates to consolidate their share of the economy even though they know what will happen. The other thing that was driving the inflation was rich people using the PPP loans to speculate. If the goal was really just to control inflation, the fed rate isn't the only way. They could also have made the tax rate more progressive like it was in the 50s and 60s. But of course they haven't gone there in a long time.

JKCalhoun 4y ago
Maybe what's needed is a rejiggering of the supply chains instead. Shorter chains. i.e. bring back the local supply that we sold overseas decades ago. Obviously the fed can't make that change, but I was reacting to your implication that we just need to get back to where we were before Covid. I feel we were already losing altitude before Covid, the overhead airbags had already deployed. And just to further derail the conversation, was it really Covid itself that caused the supply chain disruption? Perhaps I could be convinced that somehow Covid got us into the current mess but I guess it would still follow then that if a Covid-like pandemic could take out the global economy for (checks watch) 3 years and counting, the problem still ultimately comes down to a dependency on an obviously fragile supply chain.
- dmn322 4y ago
  I'm fine with that, but that rejiggering takes liquidity. Trying to rejigger without loans being available is just going to end up being de-jiggering. If we want to control inflation, that's fine, raise taxes
xmcqdpt2 4y ago
The frustrating thing with the inflation crisis is that a lot of it is an emotional response to eg food prices. This is totally valid! Vital goods going up in price is scary! Wages also have been going up, maybe not as fast as the price of some goods, but still pretty fast. The issue is that people are very quick to internalize a rise in wages (I did this! I changed jobs, got better at my current job, got promoted etc.) and externalize a rise in costs (gov spending is the reason eggs are expensive!) when really the two things are very connected. People are pushing their representatives to tackle inflation without thinking for a second that this might mean they'll get fired or take a paycut. All the gains they've made since 2020 are personal wins, all the inflation is due to government spending.
- carlosjobim 4y ago
  Blaming wages for inflation is a misconception. Wages are always the last to increase with inflation - because the purpose of inflation is to exploit more resources from those who actually work and earn wages.
  - xmcqdpt2 4y ago
    I'm not blaming wages for inflation. Just noting that inflation is also responsible for a large proportion of many peoples raises and promotions etc. The government tackling inflation is going to repress wages.

jackmott 4y ago

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skyechurch 4y ago

As a fellow crypto non-enthusiast, I agree with all of this. I thought that the best way to look at cryptocurrency and the crypto ecosystem is as a satire of the world of finance, etc. This is still accurate, I believe, but it can be easy to overlook how subtle a satire it is.

Convolutional 4y ago

> “there is no problem because the government can simply create as much money as it wants out of thin air.” So they are implicitly saying that any currency has value because people believe it has value but don’t extend that generosity towards other assets where there is a clearly demonstrated group ascribing value to it. Prior to 1971, federal reserve notes were backed by gold. Their value was generated out of thin air even then - a piece of paper with a promissory of gold is not a bar of gold. Today the US holds thousands of tons of gold at Fort Knox and other places. Why? Why does it do this? I can assure you the 9 billion dollars worth of Dogecoin out there do not have thousands of tons of gold out there implicitly backing them. Beyond all of this, your point that countries don't have printing presses that can generate am infinite amount of value is valid.

itsthecourier 4y ago

Same people who say BTC is deflationary, ignore how many coins have been printed in five years (just check coinmarketcap).

mlcrypto 4y ago

Worst case scenario deposits are not safe in banks. Best case scenario all deposits are insured by 31T national debt. All roads lead to Bitcoin

pcthrowaway 4y ago
As an actual crypto enthusiast, I fucking hope not. Can you imagine if the entire planet switched to using proof of work cryptocurrency? The energy usage of the network would dwarf that of the largest country.
- mlcrypto 4y ago
  How much energy does it take to defend the US dollar currently?
  - pcthrowaway 4y ago
    Less than the Bitcoin network would use if the entire world switched to it. At it's current usage where maybe 2-3% of the global population has ever actually performed a transaction on the bitcoin network, and next to no one uses it as their primary network for transacting, it used the equivalent energy of the entire country of Brazil, which has half the U.S. population (though less than half the energy usage) To be clear, the energy usage is a function of price more directly than it is of actual usage, it just so happens that the price would continue to increase if people actually used it for real-world transactions.
    - mlcrypto 4y ago
      The energy usage is worth it compared to fiat that is defended by the military industrial complex: https://twitter.com/JasonPLowery/status/1491826850569637889?t=P3YCFbA-w6hBgaYRBHRhjg&s=19 https://twitter.com/JasonPLowery/status/1491826850569637889?... I also don't think there's anything inherently immoral about energy usage. Bitcoin can theoretically help us access remote natural sources of energy and convert it to wealth instantaneously with just an internet connection when otherwise it would be infeasible to transport

imtringued 4y ago

Fiat is created through loans, in other words, people contractually obligate themselves to accept the currency as payment and they implicitly agree to a certain price level. This means that the price level ends up very stable because there is predictable demand for fiat and people can't just dump it like a hot potato immediately. With cryptocurrencies there is hardly anyone that uses it for payments or loans. People mostly speculate with it. If people suddenly think it is worth much less then it will have a sudden change in its price level. Worst case, it can go to zero in a day. Creating money without loans is a bad idea because it makes it much easier to have high inflation as there is no mechanism to take the money back.

oivey 4y ago

Yes, crypto is fiat money just like government issued currency. The USD, though, is backed by the US (the government, military, economy, etc.) and generally monetary policy is an advantage of government issued currency. With crypto, usually be design, you actually have zero ability to alter how it is managed. It’s even less power than your vote gives over the USD.

bolanyo 4y ago
I don't think this is the correct interpretation of 'fiat currency'. 'Fiat' of course refers to making something come into existence simply by saying it, as G_d supposedly did with the words 'Let there be light'. My understanding of 'fiat currency' is that it is not the currency as a whole which comes into existence by fiat (which would seemingly apply to most currencies, including Bitcoin and metallic ones), but that individual units of the currency come into existence by fiat. The government (meaning the union of the Fed and the Treasury) can create additional dollars simply by writing 'X has Y dollars'. No one can create Bitcoin in this manner, so it is not a fiat currency.
Osiris 4y ago
Some people consider that a feature of crypto, not a bug. They want a currency that isn’t manipulated by governments. Of course they fail to realize that the manipulation just gets shifted to the core developers.
- dkrich 4y ago
  The greatest feature of a centralized currency is the ability for the governing body to step in and become a lender of last resort when once a century crises hit to stave off a depression that could take decades to repair. The trouble is that once a century is becoming once a year now.
  - jkhdigital 4y ago
    We don’t have a lot of good history on this, but there’s basically only one instance of such a deep and lasting depression and it occurred after central banking was established, not before.

epgui 4y ago

> it seems the bar for what qualifies for an emergency gets lower and lower Maybe you're right about that, I don't know... But even if it was not the case, we'd still expect emergencies to occur more frequently today than in the past, and even more frequently again in the future. You know, climate change and inconsiderate usage of finite resources within a finite volume and always-increasing entropy and all. The link is direct.

yathaid 4y ago

>> any currency has value because people believe it There is no contradiction. Your rant is coming across like all currencies are the same, they are not. People tend to believe the U.S. Govt more than say Venezuela (no offence). Even amongst currencies, the USD is special due to the underlying tie to oil sales. See https://www.lynalden.com/what-is-money/ https://www.lynalden.com/what-is-money/ for a much better introduction than I could ever give.

carlosjobim 4y ago
The tie to oil sales is not exactly that. The USD is tied to the threat of military force by the Federal Reserve's government. You will get bombed if you don't trade your oil in USD.

snordgren 4y ago

The USD is valuable because the US government demands its taxes be paid in USD. If you want to operate in the world's largest consumer market, you need dollars.

mazurnification 4y ago

I am one of the guys that says money do not have intrinsic value. Or more precisely it "value" is due the fact that they enable trade and enable time shifting the trade (That is store value). My mental analogy is that money are lubricant. Too little everything grinds to a halt (deflation crisis) or too much and it burst seals and spills everywhere (inflation crisis). So there is clear signal to the population that something is wrong with money. Then if you live in democracy you have say on the policy. That is why democracies tend to have more stable currencies compared to autocracies. And lack of this stabilising feedback loop is main critique of cryptocurrencies. Note how unstable value of bitcoin is - it goes from massive inflation to deflation and back very often (single years time spans).

dmn322 4y ago
"Then if you live in democracy you have say on the policy." I've got some disappointing news for you my friend.
- mazurnification 4y ago
  Then compare currency stability from democracies to autocracies. Turkey versus Germany for example. edit: missing word
  - dmn322 4y ago
    I was just referencing the fact that we have no democratic say over the fed rate in the US. Not trying to say democracy is bad, just that we don't really have it with respect to interest rate policy.
    - mazurnification 4y ago
      FED chairman is elected by POTUS and confirmed by Senate. With 4y term. That is your say - it is indirect but most (all?) things in modern democracies are indirect. Obviously on top of that there are more soft influences - such as public opinion.

pjc50 4y ago

People really do not understand the mechanics of money; to the extent that the Fed is "creating" "money" through credit, that's an intrinsic part of how credit works. It also works in crypto. We saw how in FTX: "crypto-on-an-exchange" behaves like a bank deposit, in that it's a debt from the exchange to you, and can be created by extending a loan to another organisation; it is then "un-created" when the loan is paid back or defaults.

sfifs 4y ago

A major part of the value of any fiat currency comes from the fact that the institution with a monopoly on violence collects its dues in that currency. If you don't pay your taxes and fines in your nations currency, you go to jail or worse. The desire to avoid this creates the demand for the fiat currency. Other similar laws mandate businesses accept the fiat for discharge of private debts with consequences for not doing so etc. The other piece that folks often conflate to extrapolate their intuition of how a household or a small business budget operates to how a country budget operates (the comment above on instant gratification). As a household, if you face a risky economic situation (economic depression, loss of jobs etc), the natural response is to reduce spending and increase savings. If you aggregate across households at a country level, this leads to lower demand, so reduction in jobs as less consumption which leads to further economic downturn, reduction in willingness of banks to lend, lower government income (as lower taxes) etc. The right government response is to spend more countercyclically and help create jobs to spur back demand through deficit spending. Then as economy improves, tax receipts go up and deficit goes down.

gitfan86 4y ago
The economy only works if you have a slightly inflationary, stable, highly liquid method of conducting transactions. Yes the govt has created a moral hazard where they can always just create more money to solve a problem, but inserting a ponzi scheme does not fix that
- kodyo 4y ago
  Inflation is value confiscation. It's a tax. It reduces the burden of the greatest debtor (government) at the expense of everybody who holds dollars and produces value. What do I get out of it?
  - gitfan86 4y ago
    You get to live in a functioning economy. If you want to live in a society were the banks and wealthy individuals can make significant income by doing literally nothing, that is fine, but the rest of us would like to live in a world where goods and services are produced at a rate similar to how they are produced today.

Aunche 4y ago

>cryptocurrencies have no intrinsic value If you get paid $20/hr, you can think of $20 being intrinsically worth an hour of your labor until you quit or get a raise. The dollar isn't actually intrinsically valuable, but it's mostly treated as such anyways because no matter how the currency changes due to inflation or exchange rates, you're still only getting $20. On the other hand, if you get paid in crypto, you'd get paid $20 worth of that crypto. Today it may be 1 coin, tomorrow it could be 2, and in a month it could be .1 coins. In that case, how many coins you get paid in this crypto completely depends on the supply and demand on this crypto. >the government seems to show less and less restraint in exchange for instant gratification The good news is that. Raising interest rates is the opposite of short term gratification, which is why so many people want it to stop. >Emergency measures are there for just that, emergencies, but it seems the bar for what qualifies for an emergency gets lower and lower. Agreed. But you can't blame the the cardiovascular surgeon for performing a triple bypass surgery. The blame falls under the patient who is addicted to eating barrels of pork.

x-complexity 4y ago
> >cryptocurrencies have no intrinsic value > If you get paid $20/hr, you can think of $20 being intrinsically worth an hour of your labor until if you quit or get a raise. The dollar isn't actually intrinsically valuable, but it's mostly treated as such anyways because no matter how the currency changes due to inflation or exchange rates, you're still only getting $20. On the other hand, if you get paid in crypto, you'd get paid $20 worth of that crypto. Today it may be 1 coin, tomorrow it could be 2, and in a month it could be .1 coins. In that case, how many coins you get paid in this crypto completely depends on the supply and demand on this crypto. Piggybacking on this, the same example can be extended towards other currencies & assets: That $20 could've also been paid in pounds / euros / yen / gold / silver / seashells / MTG cards. The first 3 are less volatile than the rest, mainly because of the per-unit density of liquidity that can absorb the exchanges in between A & B (ex. USD-yen, yen-euro). For the currencies, they have much deeper liquidities to exchange with/against concentrated around narrower price ranges, and as such prices are not as volatile as commodities & assets. The exception to this however is if the currency in question is perceived as weak.

dmn322 4y ago

"the government seems to show less and less restraint in exchange for instant gratification and short term benefits" I'm not sure whether you're talking about raising the rates or reducing them. But the idea that reducing rates is just instant gratification is just false. The rates simply dictate how willing banks will be to loan money out. It's a tool. Countries have used this to spur foreign demand of their goods for years. Portugal Italy and Greece used to do it all the time. Once they joined the Euro and they were no longer able to inflate at will, their economies tanked. It's better to think of money like shares. The total amount of shares outstanding doesn't really affect much... it's the relative proportions that people control and the percentage of equity that those shares represent that matters.

carlosjobim 4y ago
> It's better to think of money like shares. The total amount of shares outstanding doesn't really affect much... it's the relative proportions that people control and the percentage of equity that those shares represent that matters. Inflation is not evenly distributed. Newly created money goes to the rulers first, then to their lords and vassals etc. The people who actually produce in the economy are the last to receive the new money after it has been completely diluted.
chrischattin 4y ago
This comment is wrong on all points.
- dmn322 4y ago
  Well I got the info from a talk by the head of Italy's central bank 12 or 13 years ago.

realharo 4y ago

Usually when people say that about crypto, what they mean is that close to 100% of the demand for it is based purely on the expectation that it will go up in value. Remove that expectation and almost all of the demand disappears.

otikik 4y ago

One difference is that countries know reasonably well how many citizens they have, and how many “trust the system” (however you want to define it). Those “other assets” that mention are obscure by definition. You can claim that “your cryptocurrency has millions of users”. Are those real people? Or are those two guys in a data center with a shellscript? Compound that with the extensive marketing, posturing, hyping and gaslighting and the “people believe in it” argument loses strength. Besides, the main criticism has never been “people don’t trust on them”, it was “there’s no regulation”. The continued rug pulls, scams and steals should already make it clear how this is a problem. And this is by design.

mcv 4y ago

> the same people who swear cryptocurrencies have no intrinsic value and are therefore worthless continuously say “there is no problem because the government can simply create as much money as it wants out of thin air.” So they are implicitly saying that any currency has value because people believe it has value but don’t extend that generosity towards other assets where there is a clearly demonstrated group ascribing value to it. I don't know if I'm one of those people, but I'd say that no currency has any intrinsic value. Land, labour and production capital have intrinsic value, but I don't even see gold as having intrinsic value; it only has value because we agreed to consider it valuable. The value of any currency comes from the economy that uses it to pay for stuff. Dollars are used to pay for a lot of stuff. Bitcoin was supposed to be used to pay for a lot of stuff, but it seems to have turned into an investment toy. Actually using it to pay for stuff is slow and expensive, and only really worth it for transactions where anonymity is important enough to make the cost worth it. And that seems to be mostly market for crime. But please correct me if this is outdated and there's now a thriving economy of people buying all sorts of goods with Bitcoin.

jkhdigital 4y ago
We shouldn’t conflate money with payment systems. Like 90% of my daily expenses are through a credit card. The unit of account for these transactions is my local currency (happens to be JPY) but yen is not being exchanged. What happens is that I give an IOU to the bank and the bank gives an IOU to the merchant. These IOUs are settled on a recurring basis, at which point actual money might be involved. In the strict sense only physical banknotes, coins, and reserves at the Fed are money. Everything else involves a counterparty and some level of trusted intermediation. If there is ever a significant amount of economic activity that is priced and settled in Bitcoin, we can be sure that most of it will be through trusted intermediaries just like every other currency.
- mcv 4y ago
  So as a new type of money is introduced, at first, the money itself is the payment system (you take coins and banknotes from your pocket and give them to the marchant), and as economic activity and technology grow, the payment system gets taken over by bank transactions and stuff like that. And in a way we currently see that already for bitcoin: lots of people keep their money not in their own wallet, but in that of an exchange, so it can be more easily traded. The downside of that is that you don't control your money anymore, and there's no legal framework to protect your ownership of that money, so people have been losing a lot of money to fraudulent and incompetent exchanges. But that change also kinda defeats the original purpose of bitcoin.

scott_w 4y ago

This comment is a prime example of something that makes sense on the face of it because the rebuttal requires knowledge on how money actually works. For example, you completely glossed over the fact most economists agree that, for money to have value, it needs to be a good: 1. Medium of exchange 2. Unit of account 3. Store of value To achieve this, a currency needs a certain level of stability and to be accepted by the institutions you need to do business with i.e. governments. Money & Macro has some great videos on this topic. This one on China's attempt to replace the US Dollar as the reserve currency is a good starting point: https://www.youtube.com/watch?v=49iLl-V4xos&t=653s https://www.youtube.com/watch?v=49iLl-V4xos&t=653s

jkhdigital 4y ago
I’d say this is the high school textbook version of the story. Money is simply the “best” medium of exchange in a given context. Stable value and fungibility (“unit of account”) are attributes that make something better at this role, because it becomes suitable for a wider range of transactions across time and scale. Ludwig von Mises has a lot more to say about this.
- scott_w 4y ago
  > the rebuttal requires knowledge on how money actually works. I don't think we disagree at all. I'm not an economist or finance expert, after all ;-)