51–60 of 275 posts
> Fiat currencies are not “backed by nothing”. They are backed by the labor and assets of all the humans who have obligations to pay in fiat So when we "print" more money, we print more labour?
No, but if there is an increase in productivity and you don’t print money there will be deflation.
> Fiat currencies are not “backed by nothing”. They are backed by the labor and assets of all the humans who have obligations to pay in fiat So when we "print" more money, we print more labour?
When cryptoenthusiasts "print" money, they burn electricity in exchange for digital tokens which they hope more people will want in future, but nobody is under any obligation to need any of the newly minted tokens at any point in future. (there probably is a niche cryptocurrency out there which only issues coins as repayable debt, and there definitely should be, but it's not the prevailing economic model)
Earlier quoted context omitted.
The expansion and contraction of the real economy causes a change in the demand for money , resulting in changes in the price level. This is usually summarised in the equation "MV=PQ"; see the economics literature for more detail on this. (This is independent of what the money actually is, and was a big problem with price fluctuations under the gold standard)
Let's say we have a huge global cryptocurrency, that the whole world uses. If I understand well, when the economy expands, you can buy more BigMac for one unit, when the economy shrinks, you can buy less BigMac for one unit. What I am wondering now is whether is it something that needs to be avoided at all, (or can it be avoided in the long term at all).
So the argument basically comes down to that crypto is too volatile and not usable as unit of account? 1. Crypto is still in its initial stage, where capital is flowing into it. Once it is there, it will be less volatile. You can already see this in Bitcoin[1], where relative volatility is dropping every year. 2. There are projects coming that will enable decentralized trustless peg of fiat currencies into blockchian…
Whereas bitcoin has a proven track record of almost a decade of... existence?
Anyway, why would anybody preserve value in cash over those time scales? The alternative isn't bitcoin or US$ or gold, it's stocks or bonds or real estate or fuck them let's spend it on blow.
Bitcoin is now at the peak of the hype cycle. A lot of the 23 year old traders don't know anything but a bull market. When it inevitably goes through a bear market, like every other asset, when there is $50 billion of sellers higher ready to sell on every uptick, what brings bitcoin back? Stocks very rarely come back from 70-80% declines, unless the stock is Amazon or similar. All the hodlers are going to turn into b…
2- It has already been on a very long bear market (2013-2015) where everyone said pretty much the same thing (fad, tulip, the experiment failed .... ). So yeah the new holders will go through rough times but your argument that it reached the peak of the hype cycle has no logical facts to support it since you could have said the same in the peak of 2013.
If anyone knew when the peak is(was or will) would not be here commenting on HN or talking about it but rather selling this knowledge ... and this holds true for any investment.
Even the most stable currencies of developed world can be influenced by a black swan. For example, see Swiss Franc or British Pound. If some cryptocurrency is adopted for mainstream use (big if), it won't have this risk, inherent to a centrally controlled currency.
This kind of exchange risk is nothing to do with central control, but to do with which economy the currency is associated with?
Earlier quoted context omitted.
What is a "unit of human work", and how much is it worth? Why are people paid differently for the same work?
>What is a "unit of human work" Money, obviously? > Why are people paid differently for the same work? Do you want me to do a crash course on history of economics in a HN comment?
Q. What is money?
A. It's a unit of human work.
Q. What is a unit of human work?
A. Money.
If you cannot provide a concrete definition of either 'money' or 'a unit of human work', I have no idea how valuable 1 of your 'moneys' are.
Let's call your money 'CRYPTOS'. One may assume 'a unit of human work' is like a person doing some defined task for 1 hour; and the value of 1 CRYPTO is established as number of CRYPTOS (1) you would be willing to give someone for doing that task for 1 hour. Naturally, for this to work, there would also need to be someone willing to perform this task for exactly 1 CRYPTO per hour; and nobody willing to do it for less. Is that basically what you are talking about when you say 'money' is 'a unit of human work'?
Above you scoff at the idea of money representing a unit of 'value', and say that value is subjective. So let me again point out the obvious - people paid different amounts of money for the same work. If you pay people different amounts for the same 1 hour of human work, then a unit of human work isn't always worth same number of CRYPTOS. So explain to me precisely how you are defining 'a unit of human work' and how it equals X amount of 'money', without introducing some subjective concept of value or worth.
Bitcoin is now at the peak of the hype cycle. A lot of the 23 year old traders don't know anything but a bull market. When it inevitably goes through a bear market, like every other asset, when there is $50 billion of sellers higher ready to sell on every uptick, what brings bitcoin back? Stocks very rarely come back from 70-80% declines, unless the stock is Amazon or similar. All the hodlers are going to turn into b…
So the argument basically comes down to that crypto is too volatile and not usable as unit of account? 1. Crypto is still in its initial stage, where capital is flowing into it. Once it is there, it will be less volatile. You can already see this in Bitcoin[1], where relative volatility is dropping every year. 2. There are projects coming that will enable decentralized trustless peg of fiat currencies into blockchian…
I'm a big advocate of cryptocurrency but am unconvinced that stable value coins can work. The Sai was recently released: https://blog.makerdao.com/2017/06/05/introducing-sai/ and BitUSD has been out for years: https://bitshares.org/technology/price-stable-cryptocurrenci... but neither have a significant amount of value riding on them and I personally wouldn't trust them with significant value. The problem with any st…
That's about what kind of risks and rewards you want for your investments or savings. If you consider the unit of account for a debt, it seems unlikely that you'll have the same preference.
If a trustworthy stablecoin arrives, you will probably want to collateralize some of your other assets to lend stablecoin just to participate in trades and contracts. Most people don't want stuff to be priced in a volatile unit.
Of course I have to believe this because I do some work on Maker!
By the way, Maker's idea of a stablecoin (the dai, the planned successor to sai) isn't pegged. The dai value floats on exchanges while the issuance system reacts to the market prices and tweaks its own parameters to incentivize medium term stability. In the longer term, the stablecoin might be somewhat deflationary or inflationary even compared to its own stability anchor (the SDR currency basket).
Earlier quoted context omitted.
This kind of exchange risk is nothing to do with central control, but to do with which economy the currency is associated with?
The Black Swans I'm talking about are about failed attempts to control the exchange rate by central bank. Fiat currencies are stable until they aren't. https://en.wikipedia.org/wiki/Black_Wednesday https://en.wikipedia.org/wiki/Swiss_franc#End_of_capping