4 ms·
What form of currency isn't a Mirage?
by LouisSayers 13y ago
What form of currency isn't a Mirage?
- kaonashi 13y agoWell, usually with state currencies, their worth is directly tied to the states ability to levy taxes (which is often very real). With independent currencies, no such obligation exists.
- atom-morgan 13y agoTheir worth is not tied to the government's ability to levy taxes. The currency's advantage over others may be that the government only accepts that form of payment but that still doesn't give the currency value. Look at any country with hyperinflation that still collected taxes and you'll see the true worth of the currency. The government's backing of a currency, even through taxes, does not inherently give it value as we've seen before.
- kaonashi 13y agoHyperinflation is a symptom of a collapse in output. Taxes bind the value of the currency to that output. If the output goes, also goes the value of the currency; we are in agreement.
- HarryHirsch 13y agoLet's face it: catastrophic devaluations as seen in Weimar Germany or Zimbabwe are actually rare and preceded by political instability. With currencies you know where you stand, the political history of a nation tells you.
- atom-morgan 13y agoRare? Quite the contrary. The average life expectancy of a fiat currency is 27 years [1]. This is across 775 currencies. [1] http://georgewashington2.blogspot.com/2011/08/average-life-expectancy-for-fiat.html http://georgewashington2.blogspot.com/2011/08/average-life-e...
- dllthomas 13y agoI expect that's dominated by "infant mortality", because situations that cause currencies to die aren't fixed by rolling out a new currency. If that's the case, it tells us very little about the safety of well established currencies.
- atom-morgan 13y agoThey aren't fixed by rolling out a new currency if they're just repeating the previous process (printing money aka inflation, backed by nothing, etc).
- dllthomas 13y agoSure, but the ones rolling out a new currency here are bitcoin, which fixes only some of the issues. Incidentally "printing money" is not "aka inflation" - it causes inflation if the money supply grows faster than demand for the money but they are different things.
- mpyne 13y agoA figure that might actually mean something, if we were able to assume that any given fiat currency was the same as another.
- atom-morgan 13y agoWell they're almost all monopoly currencies (not a reference to the game) that are run by people who can increase the money supply.
- mpyne 13y agoSo basically we can just plug your 27 year figure into a probability density function to find out how many more years we can expect the USD to be kicking around? How many years does it have left, at varying levels of probability?
- 13y ago
- VMG 13y agoYou might want to brush up on that list of yours: http://en.wikipedia.org/wiki/Hyperinflation#Examples_of_hyperinflation http://en.wikipedia.org/wiki/Hyperinflation#Examples_of_hype... Anyways, insuring against political instability is not a bad idea
- dllthomas 13y ago"Anyways, insuring against political instability is not a bad idea" So, because A precedes B, we're assuming B causes A?
- pjc50 13y agoMoreover, that kind of currency collapse is connected to balance of payments; in the case of Weimar, having to ship a substantial amount of gold continuously to France, and in the case of Zimbabwe a collapse of local agriculture due to land confiscation and redistributing to people who couldn't farm.
- dllthomas 13y ago"having to ship a substantial amount of gold continuously to France," And having to print Marks to buy that gold, at whatever price was being asked, from people who had no particular need for Marks.
- Ma8ee 13y agoOne that I can pay my taxes with.
- jtbigwoo 13y agoIf your standard high enought to make fiat money a mirage, most of what modern people do is also a mirage (e.g. software, sales, finance, art, music, insurance). Buffet is setting his standards a bit lower than that. Bitcoin at the moment does not have the utility to offset its price.