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> The reason the banking industry is so big is that it is close to the source of the made up dollars. If currency is gold backed, you could imagine something si

by nico 2y ago

> The reason the banking industry is so big is that it is close to the source of the made up dollars. If currency is gold backed, you could imagine something similar happening to the mining industry instead. However, the mining industry is real! It uses steel and aluminum to build physical things This is an interesting thought. I don’t like mining too much, as it has a lot of negative externalities. But the comparison of the two industries and how money is created is something to think about

RealityVoid 2y ago
I agree with his assessment as to what happens to the "source of value" but I think the gold standard is unbelievably stupid. At least crypto is no pretending to have any sort of intrinsic value and you know you get virtual value.
corimaith 2y ago
The banking industry is big because global economies are big and business need ways to finance and issue debt. There's not a single tower or factory or mine or business I would imagine that has been financed via dome form of debt coming from elsewhere, because if we're waiting for raw cash to build things we'd be missing out of most business opportunities and the entire economy would slow.
stephen_g 2y ago
Here's a thought experiment - would the amount of gold a country has be expected to correspond to the amount of money that country's economy needs? I believe the answer is - absolutely not. So we can set some conversion rate to get things started with the correct kind of corresponding amounts. Great. But - over time, both the amount of commodity available and held, and the amount of money the economy needs will shift. Can we expect the conversion rate to stay the same then? Again, the answer is no. That's why pegs to commodities (i.e. gold backed currency) or other currencies always fail eventually - they can start off fine but will always drift away and you either have increasingly large inflation or deflation when things don't match up (which ironically is exactly what the proponents of commodity-backing claim it prevents, but the history is pretty clear). It doesn't matter then about whether the mining industry is 'real' and if the financial industry is 'artificial', as interesting as the argument is. Practically gold-backing always tends to fail, so it's a moot point.

by nico 2y ago

RealityVoid 2y ago

I agree with his assessment as to what happens to the "source of value" but I think the gold standard is unbelievably stupid. At least crypto is no pretending to have any sort of intrinsic value and you know you get virtual value.

corimaith 2y ago

The banking industry is big because global economies are big and business need ways to finance and issue debt. There's not a single tower or factory or mine or business I would imagine that has been financed via dome form of debt coming from elsewhere, because if we're waiting for raw cash to build things we'd be missing out of most business opportunities and the entire economy would slow.

stephen_g 2y ago

Here's a thought experiment - would the amount of gold a country has be expected to correspond to the amount of money that country's economy needs? I believe the answer is - absolutely not. So we can set some conversion rate to get things started with the correct kind of corresponding amounts. Great. But - over time, both the amount of commodity available and held, and the amount of money the economy needs will shift. Can we expect the conversion rate to stay the same then? Again, the answer is no. That's why pegs to commodities (i.e. gold backed currency) or other currencies always fail eventually - they can start off fine but will always drift away and you either have increasingly large inflation or deflation when things don't match up (which ironically is exactly what the proponents of commodity-backing claim it prevents, but the history is pretty clear). It doesn't matter then about whether the mining industry is 'real' and if the financial industry is 'artificial', as interesting as the argument is. Practically gold-backing always tends to fail, so it's a moot point.