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Fiat is Effective: fiat for the crypto crowd [pdf]

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Re: Fiat is Effective: fiat for the crypto crowd [pdf]

#61

Post by sek »

ttoinou wrote: post #49
ahakki wrote: post #47

Earlier quoted context omitted.

No, but if there is an increase in productivity and you don’t print money there will be deflation.

Is deflation an awful situation ?

It is believed to be the primary reason for the great depression.

https://en.wikipedia.org/wiki/Causes_of_the_Great_Depression

Deflation or Hyperinflation on the other side is nothing compared to the crises we have today.

They are both a path for disaster, this is the primary fear of economists.

Good explanation: https://www.quora.com/Why-is-2-the-ideal-inflation-rate

Re: Fiat is Effective: fiat for the crypto crowd [pdf]

#62

Post by Spivak »

nadam wrote: post #12

Re price stability: A cryptocurrency adopted on a mainstream level (at tens of trillions of dollars market cap) for means of everyday payment would be very stable, more stable than any fiat today. Re effectiveness: Bitcoin itself is not really fast, scalable and transaction fees are not that small anymore, but something like Dash for example can be much more effective than Fiat even at a large scale. (I mean small la…

In your hypothetical wouldn't BTC would have to be at least as volatile as the world's RGDP?

Re: Fiat is Effective: fiat for the crypto crowd [pdf]

#63

Post by Spivak »

sp4ke wrote: post #51
ahakki wrote: post #47

Earlier quoted context omitted.

No, but if there is an increase in productivity and you don’t print money there will be deflation.

And how do I verify that the money printed is not more than the increase in productivity ? Effectively stealing from my productivity through price inflation ?

First, that already occurs to the tune of of about 2% annually. The Fed aims for about 1-2% inflation annually to encourage investment.

But to answer your other question, in order to verify this you would need a complete-ish picture of the entire economic output of the country: how much it grew (Growth Rate), and how much currency was destroyed (Destruction Rate). With those metrics you can determine how much currency you need to print.

Re: Fiat is Effective: fiat for the crypto crowd [pdf]

#64

Post by subroutine »

In the words of Patrick McKenzie's tweet linking to this pdf‏, "Hey look, someone took the time to explain to cryptocurrency enthusiasts why the rest of us perceive money as working".

For those singing the praises of cryptocurrency I pose this question:

Say the United States decides to allow decentralized cryptocurrencies to become the dominant medium of exchange in the US; say it even gets rid of the $USD. What problem do you think this would solve? (assuming the US gov desires to continue all other operations in exactly the same manner as it does currently).

Re: Fiat is Effective: fiat for the crypto crowd [pdf]

#65

Post by mbrock »

KGIII wrote: post #35
zodiac wrote: post #20

Earlier quoted context omitted.

There are project like MakerDAO that indeed use smart contracts (plus fiat price oracles and some other things) to implement monetary policy without any "pilot".

I think one of the problems is that there are now, what, a few thousand cryptocurrencies? The optics of the multitudes of ICOs? Those aren't good. No, no they are not. A part of me wonders if this popularity boom might actually be the reason it dies out. How many hacks, thefts, and scams have there been? Sure, those happen with real money but real money isn't the one needing to work on its optics. We already accept r…

Maybe it's like the internet. There used to be a lot of different websites, and a lot of them were scams. Now there's just a handful of websites, so it's easier for people to understand what to do... And of course there's still a long tail of weird niche sites with new experiments.

The UN recognizes 180 different currencies, by the way. That's 180 different units of accounts, but the amount of forms of money is much larger, and then you have to consider the derivative forms of money, and the various credit systems. It's already an immense, staggering, crazy cornucopia.

I don't think it's realistic that world governments will just eradicate cryptocurrency through legislation. Banking, insurance, finance, the internet itself, all of those things were really chaotic in the beginning, but businesspeople recognized them as useful and transformative, so states didn't want to ban them, even though they were dangerous.

The IMF director is already saying that cryptocurrency will be massively disruptive and that they expect to play a part in regulating the ecosystem and that it's conceivable that the IMF would issue their own cryptocurrency.

https://www.cnbc.com/2017/10/13/bitcoin-get-serious-about-di...

That makes me think it's really unlikely to just go away.

Re: Fiat is Effective: fiat for the crypto crowd [pdf]

#66

Post by soniman »

sp4ke wrote: post #55
soniman wrote: post #48

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…

1- Bitcoin is not stock so comparing with stock has no weight in your argument 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…

You're right, I have no idea when the top is going to be. My point is that bear markets have a very different feel and can be emotionally devastating if you're in the middle of one and bitcoin has not been through that and made it to the other side. Are the bitcoin boys ready for that? Because it's coming, sooner or later.

Re: Fiat is Effective: fiat for the crypto crowd [pdf]

#68

Post by littlestymaar »

subroutine wrote: post #64

In the words of Patrick McKenzie's tweet linking to this pdf‏, "Hey look, someone took the time to explain to cryptocurrency enthusiasts why the rest of us perceive money as working". For those singing the praises of cryptocurrency I pose this question: Say the United States decides to allow decentralized cryptocurrencies to become the dominant medium of exchange in the US; say it even gets rid of the $USD. What prob…

I don't think cryptocurrencies are a solution to anything, but saying that the current system is «working» is dubious to say the least: the Fed has been controlling the money supply by targeting low inflation but the money supply grew much quicker than growth nonetheless (probably linked with the decline in money velocity, probably caused by the concentration of wealth. Disclaimer, this is a personal interpretation, not a fact). Inflation for consumption goods was kept low, but the asset prices grew up a lot in the past decades : in the late 90s the stock market was inflated and collapsed (the internet bubble), in the mid 2000s the overpricing of real estate in the US was responsible for the financial crisis, nowadays the stock market is inflated again, how bad will it end this time ?

Re: Fiat is Effective: fiat for the crypto crowd [pdf]

#69

Post by roenxi »

neilwilson wrote: post #43
pjc50 wrote: post #9

Nice summary. The author has correctly observed that so much of the finance industry is really about clearing and settlement, and that what circulates are claims on money. This is present in the crypto world too. When you wire money to an exchange and use it to buy cryptocurrency, it doesn't immediately turn into a crypto transaction - you get a claim on that cryptocurrency. Sometimes exchanges are unable to meet tho…

Zimbabwe had little to do with supply of currency, and more to do with supply of stuff. They forgot that our economies rely upon the magic of the pin factory. Unsurprisingly if you take land from a specialist farmer and give it to a load of people who have no such specialism, then you get a collapse in production. The result of that is obvious unless you ramp up taxes to colossal levels to kill the excess money circu…

Are you suggesting that a government, having regulated against specific capable farmer running farms, should raise taxes to colossal levels if they observe food shortages?

I suspect you want to rephrase your comment. That argument seems to have a non-sequitur in it.

Re: Fiat is Effective: fiat for the crypto crowd [pdf]

#70

Post by subroutine »

littlestymaar wrote: post #68
subroutine wrote: post #64

In the words of Patrick McKenzie's tweet linking to this pdf‏, "Hey look, someone took the time to explain to cryptocurrency enthusiasts why the rest of us perceive money as working". For those singing the praises of cryptocurrency I pose this question: Say the United States decides to allow decentralized cryptocurrencies to become the dominant medium of exchange in the US; say it even gets rid of the $USD. What prob…

I don't think cryptocurrencies are a solution to anything, but saying that the current system is «working» is dubious to say the least: the Fed has been controlling the money supply by targeting low inflation but the money supply grew much quicker than growth nonetheless (probably linked with the decline in money velocity, probably caused by the concentration of wealth. Disclaimer, this is a personal interpretation,…

What do you think the Fed was attempting to do? Or let me put it another way - it sounds like you are advocating there be no way for an agency of a democratic government to dynamically adjust money supply (or interest rates). Say we went all-in on crypto and 10-years-in for whatever reason the crypto supply generation rate we set a decade ago wasnt working (the US economy was crumbling). What then?

This is an honest question: Say north korea suddenly waged total was on US, or a massive natural disaster happens, but the government didnt have huge reserves of money to pay for defense or aid? Should they suddenly issue a tax on their citizens to raise capital, and hope they pay in a timely manner?

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