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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]

#231

Post by emiliobumachar »

SilasX wrote: post #227
emiliobumachar wrote: post #208

Earlier quoted context omitted.

How come? Now, they just sell more I.O.U.s to pay the ones that reach the due date. They could do exactly the same in BTC, gold, tulips, or whatever.

No one distinguishes between "original" USDs and accounting IOUs in a bank. In Bitcoin, people can and do distinguish between a real Bitcoin and IOUs for one.

People can and do distinguish between dollars and IOUs, the IOUs are called US Treasury Bonds.

Sure, they're traded at very close to face value, but that's because traders trust the US government to pay. That's different for governments considered at risk of default. That could also become different for the US government, if the economy really goes south or if enough people start talking about defaults.

I don't see how criptocurrencies would change any of that. For how much less than 1 BTC would people trade a 1 BTC IOU backed by the US government?

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

#232

Post by jchavannes »

subroutine wrote: post #148
moduspol wrote: post #117

Earlier quoted context omitted.

Well, whether or not it's a problem depends on who you're asking, but: Remember in the first Captain America movie when his first role in the military was on a tour raising money for the war? That was actually a thing at that point in time. You had to actually convince people to invest or give money to fund a war. The USD was tied to gold in the real world and they couldn't just create more. Nowadays, we don't have t…

Seems like a horribly inefficient national defense strategy. A country is on the brink of having a war levied against them by a belligerent, and plead for funds... some are scared for their life and donate their entire savings, others give nothing because they think/know their neighbors will. Anyway, this is not a primary reason for having fiat money, but it is a reason.

And yet somehow America didn't lose WWII. This type of rhetoric (that we need big government to make decisions for us) scares me a little.

Also, people don't need to be altruistic saviors, they can buy bonds.

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

#233

Post by neonnoodle »

jbrun wrote: post #170
DennisP wrote: post #141

Some of these arguments assume a single fixed-supply cryptocurrency, instead of the ecosystem of cryptocurrencies we actually have, which is more like Hayek's proposal for competing privately-issued currencies. He thought it would be stable without the need for active management. As a payment system I think cryptocurrency is vastly better; the more I use my hardware wallet, the more I'm horrified by legacy systems th…

We had privately created money in Europe for centuries. It was a disaster.

Yep, and we had it in the U.S. as well before the advent of the Constitution. Similarly a disaster.

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

#234

Post by DennisP »

simias wrote: post #192
DennisP wrote: post #175

Earlier quoted context omitted.

Hayek points out that you wouldn't choose an inflationary currency. He relies on that to limit overall inflation. But you also don't have the deflationary problems of the gold standard, since it's possible to make more money at will if you need it. Regarding payments: suppose we were starting from scratch, with two proposed systems: (1) user signs transactions that authorize transfers with specific recipients and amo…

>suppose we were starting from scratch "What-ifs" are always an interesting game but practically we're veeeery far from starting from scratch with the economy. But okay, I'll play. >user signs transactions that authorize transfers with specific recipients and amounts Great, but you've only secured one tiny part of the "earn money/spend money" loop. What if the service/goods you buy turns out to be a scam or something…

> What if the service/goods you buy turns out to be a scam or something defective?

Reputation systems reportedly have worked well on darknet markets, but it's also simple to do third-party arbitration; when the two parties agree, the arbitrator doesn't even have to be aware of the transaction (or get paid).

> What if my company stops paying me?

You sue or quit, just like now. Fiat has no particular protection here. I'm arguing for a payment system, not a new judicial system.

> What if the government starts unfairly taxing me and threatens to throw me in jail if I don't comply?

I don't advocate cryptocurrency as a way to avoid taxes. However, if they did make our existing taxes hard to collect, various other taxes could be used instead. E.g. I'm a fan of carbon taxes at major point sources; just count tons of coal coming out of the mine.

The remaining paragraphs argue with points I didn't make. However, I'll mention that capital controls and confiscation are not that uncommon in emerging markets, and while your money might not be your biggest problem in that scenario, it can sometimes help solve your other problems.

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

#235

Post by SilasX »

emiliobumachar wrote: post #231
SilasX wrote: post #227

Earlier quoted context omitted.

No one distinguishes between "original" USDs and accounting IOUs in a bank. In Bitcoin, people can and do distinguish between a real Bitcoin and IOUs for one.

People can and do distinguish between dollars and IOUs, the IOUs are called US Treasury Bonds. Sure, they're traded at very close to face value, but that's because traders trust the US government to pay. That's different for governments considered at risk of default. That could also become different for the US government, if the economy really goes south or if enough people start talking about defaults. I don't see h…

I’m not talking about bonds, but fractional reserve banking, where a bank will credit two accounts with $1 when it has only $1 in cash.

Edit: As it stands now, there is a "lender of last resort" that can create new money as needed to fill in the gaps if those two account holders want to get their money out, so there's no need to distinguish the original vs bank-created money. But you can't create new Bitcoins, so there is a reason to distinguish Bitcoins on the blockchain vs those IOUs.

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

#236

Post by CryptoPunk »

mbrock wrote: post #59
CryptoPunk wrote: post #40

Earlier quoted context omitted.

I'm a big advocate of cryptocurrency but am unconvinced that stable value coins can work. The Sai was recently released: https://blog.makerdao.com/2017/06/05/introducing-sai/ and BitUSD has been out for years: https://bitshares.org/technology/price-stable-cryptocurrenci... but neither have a significant amount of value riding on them and I personally wouldn't trust them with significant value. The problem with any st…

I would rather bear the greater volatility of holding the underlying cryptocurrency, and get to enjoy the upside potential, than hold a stable value coin that has no potential to appreciate and a greater than zero probability of going to zero. That's about what kind of risks and rewards you want for your investments or savings. If you consider the unit of account for a debt, it seems unlikely that you'll have the sam…

>>That's about what kind of risks and rewards you want for your investments or savings.

True, if I were a retailer and not looking to invest long-term in cryptocurrency for example, I might prefer to receive a stable coin rather than a cryptocurrency, and then eventually liquidate it for fiat it or exchange it for goods/services.

>>If a trustworthy stablecoin arrives, you will probably want to collateralize some of your other assets to lend stablecoin just to participate in trades and contracts.

That's true, but that's a big 'if' in my opinion.

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

#237

Post by runeks »

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…

> 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).

In such a scenario, the US government cannot continue all other operations as it does currently, as its activities are financed by issuing practically risk-free USD bonds (if the US government defaults on its bonds, the USD is gone).

In a market with decentralized money, the US government would have to issue bonds on equal footing with profitable, private enterprises, and would consequently have to pay market interest rates. No market would lend out to a government in a decentralized currency when that government is unwilling or unable to pay back, thus removing the option of issuing more bonds to pay dividends on current bond issue. It just wouldn’t work as it does now.

No wonder the US can be the world super power when it can start a war and have the rest of the world finance it by buying the bonds the US government issued to pay for it.

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

#238

Post by XR0CSWV3h3kZWg »

strgrd wrote: post #206
rothbardrand wrote: post #200

These arguments against bitcoin have been the same since 2010. They seem to ignore the point of bitcoin (it is impossible to counterfeit, unlike fiat which is counterfeited as a matter of course by the central bank to pay the federal government so it can buy bombs).... and all the features of bitcoin which are increased privacy, better control over your funds, better security, etc. At any rate, the past 7 years has s…

Bitcoin isn't the internet of money, it is an internet for money. With this distinction in mind, it would be foolish to think that the first cryptocurrency would be the last. It took many implementations and iterations of wide area networks to arrive at the Internet Protocol we have today. While Bitcoin doesn't share the same set of problems as fiat currency, it has its own burdens, and has proven completely ineffect…

Bitcoin will never be the most interesting w.r.t technology, but it has the potential for having the highest market cap. It has a huge network effect, and currently stands as the major conduit for fiat to any other cryptocurrency.

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

#239

Post by mcguire »

DennisP wrote: post #175
simias wrote: post #163

Earlier quoted context omitted.

>instead of the ecosystem of cryptocurrencies we actually have, which is more like Hayek's proposal for competing privately-issued currencies. That's interesting, it's the first time I hear about this concept. I just barely skimmed a few articles about the concept but I'm not sure how this would solve the problems in TFA. In particular deflation: if I need to invest in a currency why would I even elect to use an infl…

Hayek points out that you wouldn't choose an inflationary currency. He relies on that to limit overall inflation. But you also don't have the deflationary problems of the gold standard, since it's possible to make more money at will if you need it. Regarding payments: suppose we were starting from scratch, with two proposed systems: (1) user signs transactions that authorize transfers with specific recipients and amo…

"Hayek points out that you wouldn't choose an inflationary currency. He relies on that to limit overall inflation. But you also don't have the deflationary problems of the gold standard, since it's possible to make more money at will if you need it."

Ideally, you'd want your currency to expand (or contract, heaven forbid) at the same rate as the economy. But that's a little hard to do. A deflationary currency is way bad. (By definition, you're economically irrational if you spend it.) On the other hand, uncontrolled inflation is way bad, too. "Controlled" (in some, hopefully meaningful, sense of the word) inflationary currency is probably the best of the options.

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

#240

Post by mcguire »

rothbardrand wrote: post #196
simias wrote: post #192

Earlier quoted context omitted.

>suppose we were starting from scratch "What-ifs" are always an interesting game but practically we're veeeery far from starting from scratch with the economy. But okay, I'll play. >user signs transactions that authorize transfers with specific recipients and amounts Great, but you've only secured one tiny part of the "earn money/spend money" loop. What if the service/goods you buy turns out to be a scam or something…

That's not the whole argument, by a long shot. The dollar has lost %99.99 of its value, and in my opinion has had %100 inflation in the past 10 years (not each year but over the decade) so is effectively half as valuable again. This is theft from the people. Even Keynes recognized this. Bitcoin is an exit from that system. It has lot of other features like the ability to send money across borders which is harder to s…

"If you're pro-tax, you're pro-murdering brown people. fullstop."

Is there any chance we could keep this civil?

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