Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Bitcoin is fiat money, too

economist.com

Post reply on HN
Print view View original

271–280 of 355 posts

Re: Bitcoin is fiat money, too

#271

Post by ersii »

ptc wrote: post #201

Can you actually spend Bitcoin in physical stores outside of the Bay Area? Bitcoin just seems like an investment vehicle/security rather than a currency. How many people actually use Bitcoin for buying toilet paper?

There is plenty of Bitcoin debit cards, which will sell Bitcoin proportionally to the amount of USD/EUR/whatever you purchased for. One of them being TenX.com.

This allows you to spend at any store which accepts cards in general.

That said, there are stores which accepts plain Bitcoin. As one anecdata, the electronics chain webhallen.com in Sweden accepts pure Bitcoin-transactions.

Re: Bitcoin is fiat money, too

#272

Post by seanmcdirmid »

meric wrote: post #219
ryan_j_naughton wrote: post #216

Earlier quoted context omitted.

Knowing that there will be better hard drives in the future for less money has some effect on your willingness to purchase. Expectations of the future matter. The US Treasury is getting considerably less revenue right now from capital gains than usual because tons of financial entities are holding off on realizing returns from their investments now and are holding them until possible tax reform in the hopes of paying…

You can make a positive return in terms of hard disk space. Refrain from swapping USD for hard disk space, and you can get more hard disk space in the future. This applies to all sorts of goods, like TV's, music players, etc. The value of USD is increasing against these goods, yet people still make the trade of USD for goods. I suppose if we increase the inflation of USD such that the price of hard disk space increas…

Production can't easily saved in grain silos, so money must be used to buy it, or it should be lent to someone that will use that production productively. If no one needs to buy hard drives ATM, then the hard drive company goes under and there is no better next generation.

Money is a means of allocating production. If it is just stored under a mattress, it isn't being useful and production is being wasted. We capture the negative effects of that waste with inflation.

Deflationn is basically a death spiral for an economy, as everyone consumes only essentials because everything will be cheaper tomorrow; lots of production is wasted because it can't be saved easily for tomorrow, people are laid off, companies go out of business, it sucks. Wars have even been started over silver and gold's deflationary tendencies (e.g. See the opium wars).

Don't confuse inflation with hyperinflation, the latter of which just destroys trust in the currency and makes it useless to save at all, causing runs on all production and starving investment. A bit of inflation is all that is needed to put money's use into a positive state without flipping in the other direction.

Re: Bitcoin is fiat money, too

#273

Post by b1daly »

noddy1 wrote: post #145

Had a chat with a high ranking public tax official last week who said that the age of secret offshore bank accounts is over - mass leaks resulting from bounties mean that any rogue employee with a USB of account information can get a 7 figure payout from major goverments. So where to now for high net worth people/families? I would absolutely be piling my wealth into anonymous cryptocurrencies - zcash, monero, and wel…

This is ridiculous. If any of these crypto currencies became a significant way to hide wealth from the government, all the government has to do is make the crypto currency illegal to use or hold. If the US did this, it could easily pop the speculative bubble in crypto coins, and your wealth would vanish.

Re: Bitcoin is fiat money, too

#274

Post by b1daly »

alexmat wrote: post #179
alexasmyths wrote: post #120

Earlier quoted context omitted.

"mean CREATE money out of nothing." No, this is not true. Central banks do 'create' money, but they trade it on the market for real assets. The Fed creates dollars and exchanges them for an equal amount of US Tbills (bought at market rates). $1 created = $1 in Tbills on their balance sheet. They're not just creating money and keeping it, or giving it away. The practice of 'fractional lending' by retail/commercial ban…

"Distilled to its roots, the Fed has been manufacturing “savings” from thin air for the better part of a decade. When the financial crisis hit in 2008, American savings were depleted, so the Fed had to step in to produce savings (to finance huge government deficits). Now the Fed is attempting to remove that “savings” at a time when: 1) The private sector is experiencing falling savings. 2) The government is likely on…

Why can't the fed just hold onto said toxic assets indefinitely?

Re: Bitcoin is fiat money, too

#275

Post by b1daly »

mrb wrote: post #165
alexasmyths wrote: post #120

Earlier quoted context omitted.

"mean CREATE money out of nothing." No, this is not true. Central banks do 'create' money, but they trade it on the market for real assets. The Fed creates dollars and exchanges them for an equal amount of US Tbills (bought at market rates). $1 created = $1 in Tbills on their balance sheet. They're not just creating money and keeping it, or giving it away. The practice of 'fractional lending' by retail/commercial ban…

« The Fed creates dollars » Exactly what the parent said. The fact it is used to buy TBills is irrelevant: the Fed creates money out of thin air. Period.

I think the reason the system has evolved this way is because politically it is hard for the treasury to "print" money, even though they have the legal right to.

Having the Fed inject money into the system is a dodge, but effectively the same thing. It gets the treasury off the hook, because they can say they are "borrowing" rather than "printing" money.

It's unclear to me why this bothers people so much?

Re: Bitcoin is fiat money, too

#276

Post by b1daly »

julian_1 wrote: post #67
psyc wrote: post #54

Earlier quoted context omitted.

It doesn't work at all without the peer network. However, you might be able to construct an "IOU" of sorts by creating a signed transaction offline, to be fed to the network later. (I'm not 100% sure whether anti-replay features make this impractical.)

Offline signing is common, so theoretically you could print the transactions and private-key to the account/utxo on paper and use them as physical promissory/bearer notes. Unfortunately though, it's the network that verifies the absence of double spends, so there's no guarantee of uniqueness. With the no internet, and limited interbank settlement, I would still bet on the value of crypto over the fiat inflation that…

Crypto would only retain its value in such a situation if a significant market system, in real goods, had been developed around it. Meaning you could exchange your crypto for the things you need. (Meaning the seller would have confidence they could do the same.)

It seems like this could work, hypothetically, but given the need we have for the currency of our country, it's hard for me to imagine that crypto would hold its value in the face of some kind of massive computer failure.

Re: Bitcoin is fiat money, too

#277

Post by ketzu »

sonink wrote: post #257
8973417983461 wrote: post #241

Earlier quoted context omitted.

> But there are countries in Africa who can already do better by simply leapfrogging to bitcoin and ditching their national currencies. I doubt this would do any good for them. * Their currency would be totally exposed to 3rd parties. * They would loose the control over the rates, which are an important tool to attract investments, if are stable and controlled well. * AFAIK some Chinese private companies control larg…

Everything that you mentioned is most likely a shortcoming of the current version of Bitcoin. That being said, it is not a big leap of faith that each of these will be rectified in due course. If not with updates to Bitcoin, then with another coin. My post wasnt just about Bitcoin specifically, but around the entire blockchain ecosystem.

You specifically talked about "already" and "bitcoin":

> But there are countries in Africa who can already do better by simply leapfrogging to bitcoin and ditching their national currencies.

Also: The concern about infeasability in everyday life is network based and not a shortcoming of bitcoin. So it's not dependent on the coin you are using.

All other points seem to be inherent to public blockchains, so it is quite the leap of faith to believe they are fixed in any public blockchain cryptocurrency.

Re: Bitcoin is fiat money, too

#278

Post by 0x445442 »

rblatz wrote: post #193
aviv wrote: post #75

Earlier quoted context omitted.

Right, the same people telling you it's going to $100K are the ones saying this is a digital currency that should be spent. Well, I sure ain't about to spend $100K to buy 2 MacBook Pros.

And that’s why the fed ensures we have a mildly inflationary currency. If it deflated spending would drop, cutting the velocity of money, and cutting out economic growth.

"If it deflated spending would drop"

That statements not a given. If it were so, people would not use credit cards.

Re: Bitcoin is fiat money, too

#279

Post by alexasmyths »

wallace_f wrote: post #229
alexasmyths wrote: post #122

Earlier quoted context omitted.

No. Before 1971 dollars were backed by Gold, now they are backed by US Tbills (and some real-estate since 2008). It's not that different. Gold and US TBills are both valuable assets.

No, he is right. What the OP meant by creating money out of nothing was fiat currency, which we do have now. If you decide to use a commodity also as money, that's fundamentally different, and econ textbooks can confirm this for you. T-Bills are backed by fiat currency, not by a commodity. The Fed, and also the banks through fractional reserve banking, genuinely do create "money out of nothing." Check out A Monetary…

"T-Bills are backed by fiat currency, not by a commodity."

What?

No.

TBills just bonds. They are 'backed' by the US Governments credibility to pay back the loan.

USD is generally backed by an asset - fractional reserving not withstanding.

Re: Bitcoin is fiat money, too

#280

Post by alexasmyths »

mrb wrote: post #165
alexasmyths wrote: post #120

Earlier quoted context omitted.

"mean CREATE money out of nothing." No, this is not true. Central banks do 'create' money, but they trade it on the market for real assets. The Fed creates dollars and exchanges them for an equal amount of US Tbills (bought at market rates). $1 created = $1 in Tbills on their balance sheet. They're not just creating money and keeping it, or giving it away. The practice of 'fractional lending' by retail/commercial ban…

« The Fed creates dollars » Exactly what the parent said. The fact it is used to buy TBills is irrelevant: the Fed creates money out of thin air. Period.

"The fact it is used to buy TBills is irrelevant:"

Heyzeus its extremely relevant.

HNers are having conspiracy issues with this.

* Obviously if there is going to be more money in circulation, it needs be 'created' somehow *

But that it is traded for a specific asset, which is kept on a balance sheet - and the 'reverse' can be done to pull the currency out of circulation - is * hugely relevant *.

Post reply on HN