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There’s no natural state of money is there? I feel like characterizing monetary policy that way, as manipulative, is normative and kinda begs the question that

There’s no natural state of money is there? I feel like characterizing monetary policy that way, as manipulative, is normative and kinda begs the question that there’s a natural state of monetary policy. How could there be growth in the economy with a fixed pie of money? It is contradictory. There’d be a tremendously high bar for investment in any enterprise which could generate dollars if I could buy more tomorrow with the dollars I already have today. Think about how much bitcoin is being put to work in the productive economy versus hodled.

pdonis 3y ago
> There’s no natural state of money is there? If you mean there is no specific quantity of money that is "natural", that's true. Any quantity of money can work. But that does not mean that changing the quantity of money as a routine, common operation is a good thing. > How could there be growth in the economy with a fixed pie of money? It is contradictory. No, it isn't. Economic growth means producing more goods and services. With a fixed quantity of money, that means either the velocity of money increases (money goes around in a circle faster in order to facilitate an increased number of transactions) or average prices decrease (so less money is required on average per transaction)--or more likely a combination of both. Both of those things are perfectly possible. (And even that leaves out increasing quality of goods and services, which results in more value created even if quantity stays the same, and with a fixed quantity of money means more value for the same money even if nothing else changes.) > There’d be a tremendously high bar for investment in any enterprise which could generate dollars if I could buy more tomorrow with the dollars I already have today. If the quantity of money is fixed, what does "enterprise which could generate dollars" mean? It can only mean a productive enterprise, which produces goods or services that people will pay money for. You want to encourage such enterprises, not discourage them. Indeed, it is only in an environment where the quantity of money is not fixed--where people can scheme to be given the privilege of printing more--that people end up squandering resources on activities which produce no useful goods or services, but do result in more money going into their pockets. Which is the situation we have now, where the government prints money as a way of stealthily transferring wealth to financial institutions without those institutions having to produce useful goods or services. > Think about how much bitcoin is being put to work in the productive economy versus hodled. But that is because the quantity of Bitcoin is not fixed. People can mint more. So Bitcoin is irrelevant to analyzing the case where the quantity of money is fixed.
- chowchowchow 3y ago
  > Economic growth means producing more goods and services. How do you incentivize this? Your view seems fairly communist. Also how does a net new innovation factor into this framework. New pharmaceuticals for previously untreatable diseases for example. What slice of the fixed money pie do those get? > But that is because the quantity of Bitcoin is not fixed. People can mint more. Sorry pal this is sophistry. Your contention is people hodl bitcoin because the supply of btc is not fixed?
  - qwytw 3y ago
    > How do you incentivize this? Your view seems fairly communist. Also how does a net new innovation factor into this framework. New pharmaceuticals for previously untreatable diseases for example. What slice of the fixed money pie do those get? To be fair that did mostly work in the 1800s. The gold standard probably did have a significant negative impact on growth but to be fair I can't really think of a different system that might have worked back then considering how thoroughly corrupt and unstable pretty much all governments were back then.
    - chowchowchow 3y ago
      The 1800s USA also saw the gold rush and the comstock lode. So it seems even then many were incentivized into activities which created more money.
  - pdonis 3y ago
    > How do you incentivize this? Who needs to incentivize it? People already have an incentive to produce goods and services, because people want and need things in order to live whatever life they want to live (food, clothing, and shelter at a minimum, but of course there are lots of other things people want), so they have to either produce those things themselves or produce something that can be traded for them. Of course the latter is the most common alternative since much more wealth can be created by specialization and trade than by everyone producing only for themselves. So the natural state is for people to be doing specialization and trade in a free market. That is what you get when nobody tries to "incentivize" anything. > Your view seems fairly communist Not at all, it's the opposite of communist, since it involves no central planning (which doesn't work). > Your contention is people hodl bitcoin because the supply of btc is not fixed? My contention is that since the supply of Bitcoin is not fixed, Bitcoin is irrelevant to the discussion we are having, which is about the case where the supply of money is fixed. As far as why people hold Bitcoin instead of spending it, obviously that is because they expect its value in terms of other things they want to go up. I have made no claim about why that is. All I am saying is that it can't be because the supply of Bitcoin is fixed, since it isn't. Also note that the people who are holding Bitcoin are still spending money to get things they want, which means they are still having to earn money to get things they want. So the fact that they are holding Bitcoin does not mean they are holding money. They are not treating Bitcoin as money. They are treating it as an investment asset like stocks or bonds. So again their behavior regarding Bitcoin is irrelevant to a discussion of how people behave with money.

pdonis 3y ago

> There’s no natural state of money is there? If you mean there is no specific quantity of money that is "natural", that's true. Any quantity of money can work. But that does not mean that changing the quantity of money as a routine, common operation is a good thing. > How could there be growth in the economy with a fixed pie of money? It is contradictory. No, it isn't. Economic growth means producing more goods and services. With a fixed quantity of money, that means either the velocity of money increases (money goes around in a circle faster in order to facilitate an increased number of transactions) or average prices decrease (so less money is required on average per transaction)--or more likely a combination of both. Both of those things are perfectly possible. (And even that leaves out increasing quality of goods and services, which results in more value created even if quantity stays the same, and with a fixed quantity of money means more value for the same money even if nothing else changes.) > There’d be a tremendously high bar for investment in any enterprise which could generate dollars if I could buy more tomorrow with the dollars I already have today. If the quantity of money is fixed, what does "enterprise which could generate dollars" mean? It can only mean a productive enterprise, which produces goods or services that people will pay money for. You want to encourage such enterprises, not discourage them. Indeed, it is only in an environment where the quantity of money is not fixed--where people can scheme to be given the privilege of printing more--that people end up squandering resources on activities which produce no useful goods or services, but do result in more money going into their pockets. Which is the situation we have now, where the government prints money as a way of stealthily transferring wealth to financial institutions without those institutions having to produce useful goods or services. > Think about how much bitcoin is being put to work in the productive economy versus hodled. But that is because the quantity of Bitcoin is not fixed. People can mint more. So Bitcoin is irrelevant to analyzing the case where the quantity of money is fixed.

chowchowchow 3y ago
> Economic growth means producing more goods and services. How do you incentivize this? Your view seems fairly communist. Also how does a net new innovation factor into this framework. New pharmaceuticals for previously untreatable diseases for example. What slice of the fixed money pie do those get? > But that is because the quantity of Bitcoin is not fixed. People can mint more. Sorry pal this is sophistry. Your contention is people hodl bitcoin because the supply of btc is not fixed?
- qwytw 3y ago
  > How do you incentivize this? Your view seems fairly communist. Also how does a net new innovation factor into this framework. New pharmaceuticals for previously untreatable diseases for example. What slice of the fixed money pie do those get? To be fair that did mostly work in the 1800s. The gold standard probably did have a significant negative impact on growth but to be fair I can't really think of a different system that might have worked back then considering how thoroughly corrupt and unstable pretty much all governments were back then.
  - chowchowchow 3y ago
    The 1800s USA also saw the gold rush and the comstock lode. So it seems even then many were incentivized into activities which created more money.
- pdonis 3y ago
  > How do you incentivize this? Who needs to incentivize it? People already have an incentive to produce goods and services, because people want and need things in order to live whatever life they want to live (food, clothing, and shelter at a minimum, but of course there are lots of other things people want), so they have to either produce those things themselves or produce something that can be traded for them. Of course the latter is the most common alternative since much more wealth can be created by specialization and trade than by everyone producing only for themselves. So the natural state is for people to be doing specialization and trade in a free market. That is what you get when nobody tries to "incentivize" anything. > Your view seems fairly communist Not at all, it's the opposite of communist, since it involves no central planning (which doesn't work). > Your contention is people hodl bitcoin because the supply of btc is not fixed? My contention is that since the supply of Bitcoin is not fixed, Bitcoin is irrelevant to the discussion we are having, which is about the case where the supply of money is fixed. As far as why people hold Bitcoin instead of spending it, obviously that is because they expect its value in terms of other things they want to go up. I have made no claim about why that is. All I am saying is that it can't be because the supply of Bitcoin is fixed, since it isn't. Also note that the people who are holding Bitcoin are still spending money to get things they want, which means they are still having to earn money to get things they want. So the fact that they are holding Bitcoin does not mean they are holding money. They are not treating Bitcoin as money. They are treating it as an investment asset like stocks or bonds. So again their behavior regarding Bitcoin is irrelevant to a discussion of how people behave with money.