11–20 of 90 posts
Overall I like the article, but a few points of disagreement: 1. The US dollar has intrinsic value. That intrinsic value is that the US government accepts it as payment for taxes. Regardless of what currency you conduct your business in, the USG accepts its cut only in dollars. That creates intrinsic demand for dollars, and links that intrinsic demand directly to the US GDP. 2. Bitcoin also has intrinsic value. That…
This seems like the crux of the argument of the difference between the dollar and Bitcoin in the author's view. To me though this statement doesn't make sense and is very misleading, and someone please correct me if I'm wrong. The Fed CANNOT just keep burning dollars because they don't have all the dollars. Individuals hold those dollars. Yes, if individuals just started burning their dollars the value of the dollar would adjust to the "right" amount, but who in their right mind would burn their money for the greater good? In light of this, the Fed doesn't at all seem like a "check" on inflation or deflation. The dollar is still subject to the same supply and demand properties of Bitcoin.
> It’s pretty easy to understand that if the government were to suddenly double the number of dollars in circulation, the value of a dollar would go down by approximately half. Just because it's easy to understand doesn't mean it's correct. For example, the US money supply more than doubled in the last 10 years, yet the value of a dollar has not halved. M0 quadrupled in 10 years: https://imgur.com/a/L9mDx M1 tripled:…
Note that this was done in response to the velocity going down for reasons unrelated to the money supply, and largely because the government completely dropped the ball on fiscal stimulus so the central bank was left pushing the one lever it has, even though the circumstances were such that that lever was obviously not well suited to move the economy in the intended direction.
Overall I like the article, but a few points of disagreement: 1. The US dollar has intrinsic value. That intrinsic value is that the US government accepts it as payment for taxes. Regardless of what currency you conduct your business in, the USG accepts its cut only in dollars. That creates intrinsic demand for dollars, and links that intrinsic demand directly to the US GDP. 2. Bitcoin also has intrinsic value. That…
That can be argued to be an abstract utility for the US Dollar, but it is not an argument for the value (or "intrinsic value", whatever that means) of the US dollar in that the value of it is what determines the tax obligation. That is, if I own taxes on a non-USD transaction (say capital gains for BTC sales), the amount of those taxes is dependent on the value of USD. There's no forcing function -- if USD is valuable, I owe fewer dollars, if USD is cheap then I owe more dollars. There's no net demand.
To summarize -- tax obligations create no net demand for USD, thus are not a factor in the value of USD.
The exception to this is things like fees and (in the short-term) specific value taxes (like property taxes). These are not a significant factor in US government revenue, so I think we can safely discount them, although many municipalities rely on them to a greater degree.
I don't understand why this tired old meme keeps getting circulated -- it makes me want to write an angry letter to David Graeber. I think it's an interesting thesis for the origin of money, as early taxes were more like fees, tariffs, and tolls rather than ad valorum, and serves as a useful counterpoint to the Mises regression theorem, but stating it as a fact for the current state of things rather than a historical vestige requires a gross misinterpretation of the facts.
Fiat is better as a standard of value because an institution controls its quantity precisely to keep inflation in check (in other word, keep money supply in line with goods and services produced).
One thing the article doesn't mention is that a country's taxes need to be paid in that country's fiat. That's another source of value for fiat (which cryptocurrencies don't have).
I think people forget that there is a lot of value to a censorship resistant currency.
Before Bitcoin was worth hundreds or thousands of dollars it was being used in the black market at whatever rate it was floating at. That rate is a non zero value. There is no other way, other than another crypto currency, to do business in these black market places.
Now blow that out exponentially to places like China where your money isn't exactly your money. Or places where its ok to seize someones property, depending on whose in power.
This then starts to give you an idea that even when the bubble crashes we will still have Bitcoin.
> Even if demand for the dollar plummeted, the Fed could in principle keep burning money until a dollar is scarce enough to be worth the “right” amount This seems like the crux of the argument of the difference between the dollar and Bitcoin in the author's view. To me though this statement doesn't make sense and is very misleading, and someone please correct me if I'm wrong. The Fed CANNOT just keep burning dollars…
> It’s pretty easy to understand that if the government were to suddenly double the number of dollars in circulation, the value of a dollar would go down by approximately half. Just because it's easy to understand doesn't mean it's correct. For example, the US money supply more than doubled in the last 10 years, yet the value of a dollar has not halved. M0 quadrupled in 10 years: https://imgur.com/a/L9mDx M1 tripled:…
Presumably the demand and market forces have changed for the dollar in that time. If the central bank doubled the supply in one day, don't you think that would have an (approximately) halving impact on the value?