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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]

#101

Post by quincunx »

jbrun wrote: post #85
urza wrote: post #19

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…

No, that is not at all the argument. The argument is that you cannot have an economy run on a deflationary currency, which bitcoin is. An effective economy requires a bit of inflation and the ability to issue new money when necessary for socio-political reasons. Crypto currencies are a cult, though the underlying tech is interesting.

While I understand the desire to have 2% inflation across the economy, wouldn't the individual parties prefer to hold their cash in a deflationary currency?

Put differently and going fast forward; how can you have a mildly inflating currency (eg. EUR) when there's a deflationary currency (eg. BTC) as a viable alternative around?

Would you propose we prohibit crypto currencies? (What would you propose?)

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

#102

Post by guelo »

littlestymaar wrote: post #79
subroutine wrote: post #70

Earlier quoted context omitted.

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…

> 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). You are misinterpreting me. To be more explicit : cryptocurrencies suck for the exact reason you explained (if you look around in this discussion, that's exactly the point I'm making against a…

Economists talk about having two main tools: monetary and fiscal policies. Traditionally monetary policy is driven by the Fed and fiscal policy is driven by the government, this disconnect means that the two can work at cross-purposes, such as when the Fed is raising rates while the government is talking about boosting the economy with business tax cuts.

In reality the state has basically unlimited power to affect the economy, but it chooses to limit what levers are allowed to be used in order to provide stability and confidence. And also out of morality-driven ideology of the same sort the that gave rise to Bitcoin.

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

#103

Post by zeroxfe »

cryptodogemoon wrote: post #50
urza wrote: post #19

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…

Volitilty will be inherent with bitcoin, and any blockchain database where the supply has been distributed for low computational/energy/capital input to the small pool of users who aquire majority stake in the total supply, thus devaluing any long term inherent store of value. additionally, bitcoin and the exchanges can rapidly plummit to zero if and when there's a run to get out as the value requires demand from ano…

> Volatilty will be inherent with bitcoin... majority stake...

You're making a strong claim here -- and I think this applies to any scarce resource. Why is bitcoin different from, say, gold?

> additionally, bitcoin and the exchanges can rapidly plummit to zero if and when

Here too -- how is that different from any other traded instrument?

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

#105

Post by apo »

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…

Hey look, someone took the time to explain to cryptocurrency enthusiasts why the rest of us perceive money as working.

Most knowledgeable cryto enthusiasts I know already know that fiat currencies work well enough for many people.

Folks like McKenzie will see no value in Bitcoin and other cryptos because their money needs are already satisfied. Good for them, but their narrow perspective excludes many valid use cases.

Consider these problems, for which Bitcoin offers a unique solution (and which folks like McKenzie may not even acknowledge as problems):

- civil asset forfeiture;

- capital controls;

- black market trading (remember, what's illegal to a foreign government might be a fundamental human right to you);

- intense privacy invasion by governments;

- widespread privacy loss through corporations (Equifax, Verizon).

Bitcoin doesn't need to ape the services offered by the likes of Visa, PayPal, and Chase. It needs to address those unmet needs that can't be addressed by the incumbents.

That's going to be a niche audience, at least initially. But that's how all marketplace disruptions begin.

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

#106

Post by notahacker »

nadam wrote: post #32
pjc50 wrote: post #28

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).

When the economy does well you earn 20 CryptoUnits a year selling widgets. When the demand for widget falls the staff refuse to take a pay cut to 15 CryptoUnits a year and so the company introduces big layoffs instead. This is made worse because nobody's willing to lend the widget manufacturers part of the fixed supply of CryptoUnits, firstly because hoarding the coins is a less risky strategy with the same expected return even when the economy is doing well, and secondly because they're especially not keen to lend CryptoUnits when they're expecting goods to get cheaper in the future.

Recessions happen with fiat too, they just can be a lot deeper when nobody can intervene to stabilise things and induce the people holding Crypto into lending and spending again or accepting real terms wage cuts.

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

#107

Post by Asdfbla »

jbrun wrote: post #85
urza wrote: post #19

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…

No, that is not at all the argument. The argument is that you cannot have an economy run on a deflationary currency, which bitcoin is. An effective economy requires a bit of inflation and the ability to issue new money when necessary for socio-political reasons. Crypto currencies are a cult, though the underlying tech is interesting.

I don't disagree, but I suppose on a technical side it's possible to allow inflation in a cryptocurrency. The rate could possibly also be determined via some distributed consensus approach, though this again would likely not be particularly democratic without some central instance to keep track of voting identities (else you have to use stuff like proof-of-work which definitely isn't democratic in the least).

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

#108

Post by lightbyte »

apo wrote: post #105
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…

Hey look, someone took the time to explain to cryptocurrency enthusiasts why the rest of us perceive money as working. Most knowledgeable cryto enthusiasts I know already know that fiat currencies work well enough for many people. Folks like McKenzie will see no value in Bitcoin and other cryptos because their money needs are already satisfied. Good for them, but their narrow perspective excludes many valid use cases…

>- civil asset forfeiture;

How would cryptocurrencies prevent the police from seizing your private keys? They can already throw you in jail if you refuse to provide passwords, or the keys themselves.

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

#109

Post by notyourday »

urza wrote: post #19

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…

Crypto can remain in this initial state longer than you can remain solvent and longer than your wife will decide to tolerate your adventures in being right at some point.

Source: I was long certain CDS that eventually did pay off.

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

#110

Post by testvox »

dullgiulio wrote: post #93
sp4ke wrote: post #77

Earlier quoted context omitted.

Patrick McKenzie is fortunate enough to not be born in a country that is currently suffering from hyper-inflation neither is he living under a dictatorship that is putting capital controls and deciding how he should use his hard earned money .... yet :) In other words, "the rest of us" of Patrick's folks do not represent the people for whom crypto is a necessity and not a luxury. So if money is already working for yo…

Yeah but when that happens you probably look for weapons, not GPUs :)

Sure but how do you afford the weapons? https://www.theatlantic.com/magazine/archive/2017/09/big-in-...
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