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Bitcoin and the U.S. Fiscal Reckoning

nationalaffairs.com

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Re: Bitcoin and the U.S. Fiscal Reckoning

#31

Post by jw1224 »

weavie wrote: post #5
DantesKite wrote: post #2

To those with hopes and dreams in Bitcoin I suggest reading Nassim Taleb’s black paper. It does a great job outlining every major problem and (while in its current version and even a few iterations from now) it won’t succeed as a currency.

Do you mean this one? https://www.fooledbyrandomness.com/BTC-QF.pdf

Wow — some hot takes in there!

> Why BTC is worth exactly 0: Gold and other precious metals are largely maintenance free, do not degrade over an historical horizon, and do not require maintenance to refresh their physical properties over time. Cryptocurrencies require a sustained amount of interest in them.

And? None of these reasons mean it is worth “exactly 0” (not to mention some of them are just plain wrong). Gold requires sustained interest too!

Bitcoin continues to be the only “currency” (regardless of how practical it is in everyday life) that’s free of direct influence from government monetary policy or insider control. That reason alone makes it totally unique and extremely valuable.

> The customary standard argument is that "bitcoin has its flaws but we are getting a great technology; we will do wonders with the blockchain". No, there is no evidence that we are getting a great technology — unless "great technology" doesn’t mean "useful". And at the time of writing —in spite of all the fanfare — we have done still close to nothing with the blockchain.

It’s a technology in its infancy, and it’s also clear that we are doing useful things with crypto:

• DeFi has incredible potential to upset the power imbalance of the banking industry. It is rapidly democratizing financial instruments which were previously only available to the big guys.

• NFTs, whilst something of a fad right now, have established means of recognising ownership of digital assets.

• A global currency like Bitcoin makes international payments possible in areas where it would not be otherwise.

Re: Bitcoin and the U.S. Fiscal Reckoning

#32

Post by throwdecro »

wyager wrote: post #30
throwdecro wrote: post #21

Earlier quoted context omitted.

> Which is widely available and effectively free What? Who is going to fight off people trying to obtain or destroy that USB drive to increase the value of their own holdings (i.e. speed up deflation by reducing available bitcoin), or extract the passcode from its owner, for free? EDIT: I realize this is the plot of Goldfinger, but the author did invoke Fort Knox, and the strategy of destroying stores of value to inc…

Conveniently, USB drives can be backed up.

Sure, but anyone holding that much wealth could expect some kind of "advanced persistent threat" working against them to either destroy all of the backups, or transfer the coins to /dev/null after extracting any passcode from the owner. The keys and anyone that knew how to use them would need a high level of physical security. The "costly militarized facilities" would still be necessary, contrary to the author's statement.

Re: Bitcoin and the U.S. Fiscal Reckoning

#33

Post by mohanmcgeek »

night862 wrote: post #24
JavaBatman wrote: post #3

> In other words, governments with fiat currencies — including the United States — have the power to expand the quantity of those currencies. If they choose to do so, they risk inflating the prices of necessities like food, gas, and housing. > In recent months, consumers have experienced higher price inflation than they have seen in decades. A major reason for the increases is that central bankers around the world —…

Word on the street is fed "printing money" = "inflation like Venezuela." I've had these conversations dozens of times this year. I'm not extra smart, but somehow almost everybody misses your point about demand. There is also the matter of where the money the fed "prints" ends up. Its not handing out singles, they're using other instruments like buying paper. I'm not educated enough to recount exactly what the mechani…

> Its not handing out singles, they're using other instruments like buying paper

Infact they're only buying paper.

The handouts are from the federal/state governments. The reserve has to buy the paper for the government to give out these handouts.

Re: Bitcoin and the U.S. Fiscal Reckoning

#34

Post by mohanmcgeek »

TekMol wrote: post #19

Every time I read about inflation, it is only attributed to governments via the central banks. I wonder how it works with the private banks. Say some entrepreneur goes to their bank and borrows $100k. They try to build a business, pay rent, employees, SAAS license costs, advertising and ... goes bankrupt. So the $100k never comes back to the bank. Did this create $100k?

Your company will need some kind of collateral or a cashflow in order for the bank to extend credit.

When you file bankruptcy, the assets are auctioned the bank gets back some of that money, if not the whole 100k

You created money when borrowed the 100k. The rest of it doesn't matter.

It's the case with the government and the central bank too. Money is created when the government borrows money from the bank by issuing bonds. The idea of government "printing" money is plain wrong.

(except in a physical sense when the mints print your currency notes)

Re: Bitcoin and the U.S. Fiscal Reckoning

#35

Post by night862 »

mohanmcgeek wrote: post #33
night862 wrote: post #24

Earlier quoted context omitted.

Word on the street is fed "printing money" = "inflation like Venezuela." I've had these conversations dozens of times this year. I'm not extra smart, but somehow almost everybody misses your point about demand. There is also the matter of where the money the fed "prints" ends up. Its not handing out singles, they're using other instruments like buying paper. I'm not educated enough to recount exactly what the mechani…

> Its not handing out singles, they're using other instruments like buying paper Infact they're only buying paper. The handouts are from the federal/state governments. The reserve has to buy the paper for the government to give out these handouts.

Yeah the states and local municipalities don't have the fed for handouts (whatever you mean by that exactly, I am assuming it is the unemployment benefits) State/local has to balance their budgets for the most part aside from federal redistribution to "poor" states with less tax revenue.

Re: Bitcoin and the U.S. Fiscal Reckoning

#37

Post by CarelessExpert »

TekMol wrote: post #19

Every time I read about inflation, it is only attributed to governments via the central banks. I wonder how it works with the private banks. Say some entrepreneur goes to their bank and borrows $100k. They try to build a business, pay rent, employees, SAAS license costs, advertising and ... goes bankrupt. So the $100k never comes back to the bank. Did this create $100k?

The short answer is: yes. Loans expand the money supply.

Re: Bitcoin and the U.S. Fiscal Reckoning

#38

Post by throw0101a »

jw1224 wrote: post #13
DantesKite wrote: post #2

To those with hopes and dreams in Bitcoin I suggest reading Nassim Taleb’s black paper. It does a great job outlining every major problem and (while in its current version and even a few iterations from now) it won’t succeed as a currency.

> it won’t succeed as a currency Whilst I can appreciate why people think it might not succeed as a mainstream consumer currency — do you recognise how successful it is becoming as an asset , like gold? Worth a read: https://www.lynalden.com/gold-and-bitcoin/

> do you recognise how successful it is becoming as an asset, like gold?

And why would anyone want to own gold? It's certainly not to protect against inflation, which seems to be what everyone talks about:

> While gold objects have existed for thousands of years, gold's role in diversified portfolios is not well understood. We critically examine popular stories such as 'gold is an inflation hedge'. We show that gold may be an effective hedge if the investment horizon is measured in centuries. Over practical investment horizons, gold is an unreliable inflation hedge. […]

* https://www.nber.org/papers/w18706

Re: Bitcoin and the U.S. Fiscal Reckoning

#39

Post by throw0101a »

TekMol wrote: post #19

Every time I read about inflation, it is only attributed to governments via the central banks. I wonder how it works with the private banks. Say some entrepreneur goes to their bank and borrows $100k. They try to build a business, pay rent, employees, SAAS license costs, advertising and ... goes bankrupt. So the $100k never comes back to the bank. Did this create $100k?

> I wonder how it works with the private banks. […] Did this create $100k?

Central banks do not create money, contrary to popular opinion. Money is created in two ways: by the Treasury/Mint via bills and coins, and via private banks with credit.

See Roche:

> This paper provides a general understanding of the workings of the modern fiat monetary system in the United States within the context of the global economy. The work is primarily descriptive in nature and takes an operational perspective of the monetary system using the understandings of Monetary Realism.

* https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1905625

Re: Bitcoin and the U.S. Fiscal Reckoning

#40

Post by throw0101a »

longhand wrote: post #36
TradingPlaces wrote: post #8

Another article premised on “sound money” and the money supply theory of inflation that understands neither.

What's it missing? You're apparently a delicate genius so enlighten us all please.

It's missing the fact that central banks don't create money:

> A major reason for the increases is that central bankers around the world — including those at the Federal Reserve — sought to compensate for Covid-19 lockdowns with dramatic monetary inflation. As a result, nearly $4 trillion in newly printed dollars, euros, and yen found their way from central banks into the coffers of global financial institutions.

Central banks create reserves, which are only good in the inter-bank system, and never enter general circulation. Money is created by private banks via credit. See Roche:

* https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1905625

And no, reserves don't determine credit creation. The 'money multiplier' hasn't been true for several decades:

* https://research.stlouisfed.org/publications/page1-econ/2021...?

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