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The political case for a blanket cryptocurrency ban

stephendiehl.com

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Re: The political case for a blanket cryptocurrency ban

#461

Post by nyolfen »

bourgoin wrote: post #428
DickingAround wrote: post #53

This article seems to intentionally ignore the core reason for cryptocurrencies; escaping inflation and control. The article then proposes to use the law to bring those people back within the control of fiat and government oversight. I no longer think the environmental argument is really plausible here. Clearly crypto mining is emitting using a lot of power and some of that is CO2. But the competition is fiat; backed…

Why does it make a difference whether your wealth is denoted by USD, Bitcoin, milk caps, or Rai Stones? If tanks roll over your capital city and your countrymen are made to kneel in a row, what good is it that you can refuse to give up the private keys? And how does the medium of exchange have any bearing on nations going to war over control of oil, rare earth minerals, strategic islands? It seems to me you're implyi…

the US dollar is backed by the petrodollar arrangement: oil exporters accept dollars for oil in exchange for defense guarantees and other benefits. everyone needs oil, so everyone needs dollars. the dollar is inextricably tied to oil consumption and the US is strategically invested in it. add to this that the US military is the single largest institutional consumer of oil on the planet. there is no coherent argument that bitcoin is worse for the environment than this. bitcoin only wants cheap energy; it is agnostic about what generates it, and incentivizes renewables since they tend to be the cheapest.

Re: The political case for a blanket cryptocurrency ban

#462

Post by kbelder »

lottin wrote: post #369
samvher wrote: post #188

Earlier quoted context omitted.

> But the competition is fiat; backed by fighter jets and nukes; literally. How is it that someone can't steal your money? The bank makes sure. How is it the bank can be sure? The cops protect them. How is it the cops aren't overwhelmed? The military protects them. At first glance, I find this an interesting take and it makes me rethink some things. But I don't think I find it very convincing, or at least it's too ex…

> Fighter jets and nukes primarily protect physical property and institutions, not cash. This is basically it. I don't know how bitcoin advocates expect property rights (in fact, any right) to be upheld in the absence of a coercive state. They have become so removed from reality that they don't see the most obvious things.

I'm expecting that someday, my defense budget will be part of my Amazon Prime fees.

Re: The political case for a blanket cryptocurrency ban

#463

Post by karpierz »

ablekh wrote: post #441
karpierz wrote: post #258

Earlier quoted context omitted.

If your currency deflates, that means a dollar today is worth less than a dollar tomorrow. When you invest money (via loans or buying equity), you trade currency for tangible assets, like stocks or capital. In order for the investment to make sense, the growth on the asset needs to be larger than the growth of the value of the money, plus risk. So in a deflationary currency, loan interest rates must be higher to be w…

> The way to break the cycle is to have cash start to lose value, or inflate. Then the interest rates drop, and people start to spend their money. If people's money starts losing value, the last thing they would do is to be concerned with interest rates. With less valuable money, people would simply be able to afford a smaller consumption basket and, thus, spending will stay flat & consumption will decrease. > ... pe…

> If people's money starts losing value, the last thing they would do is to be concerned with interest rates. With less valuable money, people would simply be able to afford a smaller consumption basket and, thus, spending will stay flat & consumption will decrease.

If your money starts losing value, do you A) put it under the mattress or B) trade it for things that you can either use now or that retain/grow their value in the future?

Now, if you're talking about erosion of wages over, that's less of an issue of inflation, and more an issue of the power dynamic between owners of capital and owners of labour.

> Where did this come from? Just because the productivity would increase 10x / cost would decrease 10x, it does not mean that workers would receive 100% of the relevant benefits. Most likely, 90%, if not more, of those would be routed to business owners (and robots' owners, if the machines are leased instead of bought).

Sorry, I understand the confusion given I used the term 'salary'. I should have said something along the lines of 'value' or 'goods'. The split between workers and owners depends on the surrounding conditions.

The point is that dollars are tokens that represent goods produced, at the time they were produced. Not how much energy or effort went into those goods.

Re: The political case for a blanket cryptocurrency ban

#464

Post by louwrentius »

Jetrel wrote: post #386
samvher wrote: post #188

Earlier quoted context omitted.

> But the competition is fiat; backed by fighter jets and nukes; literally. How is it that someone can't steal your money? The bank makes sure. How is it the bank can be sure? The cops protect them. How is it the cops aren't overwhelmed? The military protects them. At first glance, I find this an interesting take and it makes me rethink some things. But I don't think I find it very convincing, or at least it's too ex…

One point of comparison that's a hell of a point in favor of fiat currencies, is the that because fiat is just based on a really nebulous 'general consensus' rather than any sort of 'hard store of value', the same thing that's a bogeyman (of authorities deciding to cancel out all of your assets by executive decision) can work in reverse. Most of our forms of fraud protection, like identity theft, bank robbery, etc, b…

Thank you for sharing this. I think many people may not know/understand this aspect /feature of our existing banking system and the role of government.

Or they deliberately try to ignore the entire safety mechanism because it goes against their narrative that government control is bad, it collides with this libertarian spiel. All to keep the grift going.

When not understanding or misunderstanding things makes you more money (let’s you recruit new ‘suckers’) a honest discussion will start to become impossible.

Re: The political case for a blanket cryptocurrency ban

#465

Post by chrischen »

celticninja wrote: post #450
boc wrote: post #445

Earlier quoted context omitted.

> Just last week, the United Nations alleged that North Korea was funding its nuclear weapons program using funds from hacked cryptocurrency exchanges, alongside other thefts. The U.N. believes that over $300 million in crypto assets have been stolen by various North Korean hackers.[1] > Iranian thinktanks have also emphasized the need for the nation’s government to use cryptocurrencies to circumvent US-led internati…

What's the issue with Iran using it? Or is it that Iran are just "bad guys" therefore if they use it must be bad. In that basis let's get rid of nuclear power because Iran use that. I think they also have the internet so while we are at it let's get rid of that.

> In that basis let's get rid of nuclear power because Iran use that.

That’s exactly what they did.

Re: The political case for a blanket cryptocurrency ban

#466

Post by thoughtstheseus »

majormajor wrote: post #209
DickingAround wrote: post #53

This article seems to intentionally ignore the core reason for cryptocurrencies; escaping inflation and control. The article then proposes to use the law to bring those people back within the control of fiat and government oversight. I no longer think the environmental argument is really plausible here. Clearly crypto mining is emitting using a lot of power and some of that is CO2. But the competition is fiat; backed…

The "backed by guns" argument ignores the more powerful backing force of a society's belief and actions. Things don't daily come to the point of us being forced to believe our currency is valuable with guns and nukes, we just created this system because it's one we wanted to live in, and having such a fiat currency makes a lot of things easier. Bitcoin, on the other hand, is using its energy constantly.

Backed by taxes. You’ll always need to pay taxes.

Re: The political case for a blanket cryptocurrency ban

#467

Post by endisneigh »

thorwasdfasdf wrote: post #436
biztos wrote: post #251

Earlier quoted context omitted.

Sure, people are using Bitcoin as a store of value, but I think a lot of those people think it will just keep going up. Which is not a super rational thing to believe about an asset whose value has no relation to anything in the real world, and nothing to prop it up but the people who believe the same thing. Bitcoin is up something like 800% for the year. It might be up another 800% in six months! Or it might go down…

>> Bitcoin is up something like 800% for the year. It might be up another 800% in six months! Or it might go down to $10000! That was the case in 2017. Not anymore, things have changed. the fundamentals of bitcoin are based on what people believe it will be worth and this has changed drastically in mid-2020. Mid 2020 is the year WallStreet "got" bitcoin. this fundamentally changed it's future path. You have all these…

Do you personally own any crypto?

Re: The political case for a blanket cryptocurrency ban

#468

Post by imtringued »

pas wrote: post #364
jasode wrote: post #263

Earlier quoted context omitted.

>But I don't think I find it very convincing, or at least it's too exaggerated. Fighter jets and nukes primarily protect physical property and institutions, not cash. Typically, the concept of "military force" like fighter jets, aircraft carriers, etc in criticism about fiat currency (especially $USD) is about connecting the dots to explain the strength of that currency. E.g., USA gets Saudi Arabia to sell oil denomi…

Not just denominated, settled. They literally want USD for their oil instead of SAR (riyal). (Sure, SAR is pegged to USD.) Here's a very thought provoking article about the "dollar system": https://phenomenalworld.org/analysis/the-class-politics-of-t...

The "exorbitant privilege"? You mean the exorbitant privilege to create government debt to cancel out a savings glut? I've never understood this argument. I always heard how the USA is "riding" or "abusing" the US to achieve some nefarious goal when from my perspective it was always the inverse.

Since I lacked the necessary knowledge I tried to think about how the effects work from first principles and I always came to the same conclusion. When it helps it does nothing and when it hurts the downsides are grave and a strong economy is necessary to just be able to counteract the effects of the exorbitant burden. This is compared to the misguided idea that the dollar having the global reserve "status" as some benefit that helps the USA.

Global reserve status is basically equivalent to a partial currency union similar to the eurozone. There are two potential effects. Either your currency becomes stronger than the average currency in the currency union or your currency becomes weaker. Germany is "riding" the effect of a weaker euro to export goods and thus creates a savings glut in the nations it is exporting goods to. The reserve situation is that your currency becomes stronger than it should be. You get nations like Greece or Spain that are struggling with debt because additional savings can only exist if there is a debt somewhere to balance savings and investments.

Once I started reading up on the downsides [0] of having your currency be a major global reserve currency it pretty much confirmed everything and it made the situation completely hopeless. There are no good answers here. The hands of the USA are tied and the situation is pretty dire.

The USA obviously has a stronger currency than it would usually have. This means importing products from overseas becomes the obvious choice and domestic consumption is avoided. The weak demand causes unemployment and now you are at the ultimate economic dilemma. Do you create government debt to create investments for the savings glut or do you let people become unemployed so that domestic savings go down to make room for foreign savings? The only choice is to just do endless deficit spending thanks to the "exorbitant privilege". It's not really a choice.

[0] https://carnegieendowment.org/chinafinancialmarkets/56856

Re: The political case for a blanket cryptocurrency ban

#469

Post by seibelj »

baq wrote: post #376
seibelj wrote: post #347

Earlier quoted context omitted.

That's your opinion - I don't see any source. My opinion is that it doesn't cause less jobs - I think it would eventually cause more sustainable jobs as malinvestment is removed from the economy.

Deflationary crises were common before the invention of the central bank and fiat currencies. Instead of believing go read some history.

The historical incidents of deflation are insignificant and very few. The incidents of hyperinflation are common, and incidents of high inflation are guaranteed with fiat currencies with very few exceptions.

Re: The political case for a blanket cryptocurrency ban

#470

Post by louwrentius »

Fern_Blossom wrote: post #434
DickingAround wrote: post #53

This article seems to intentionally ignore the core reason for cryptocurrencies; escaping inflation and control. The article then proposes to use the law to bring those people back within the control of fiat and government oversight. I no longer think the environmental argument is really plausible here. Clearly crypto mining is emitting using a lot of power and some of that is CO2. But the competition is fiat; backed…

First, I'd like to really understand why people say crypto "escapes inflation". The only argument has been the artificial scarcity mechanisms built in the currency. Scarcity is a seasoning to the concept of value, not the main course. I don't know of anyone in economics in the last 100 years that has ever pushed forward the idea that scarcity is all you need to create value... except for Youtube economic cartoons. "F…

Thank you for this. I am serious. I wish you would put this on a blog somewhere and not let this gem die in de depths of H... HN.
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