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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]

#241

Post by mcguire »

simias wrote: post #213
rothbardrand wrote: post #196

Earlier quoted context omitted.

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…

TFA points out that it's true that the dollar lost 99% of its value over the last century. "However, if you held your money in anything interest-bearing, including short-term Treasury bills with no-credit-risk, you’ve at least almost doubled the purchasing power of your money!" I'm not sure I agree with the argument that inflation is theft from the people, or at least we have to define what's "the people". Poor peopl…

"And while it's not a perfect match, salaries now are definitely not what they were in 1920. A quick google gives the average salary in 1920 at $1236 although I can't seem to find a decent source for that."

Interesting.

This: https://www.irs.gov/pub/irs-soi/20soirepar.pdf looks like a fascinating document with lots o' fun data. It gives $3269 for the 7million who filed income tax returns.

A couple of inflation calculators at https://inflationdata.com/inflation/inflation_calculators/in... give $41,000-42,000 for the inflation adjustment.

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

#242

Post by mcguire »

moduspol wrote: post #117
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…

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…

"And even then, that money might simply be borrowed (adding systemic risk)..."

https://en.wikipedia.org/wiki/War_bond

Cap, in the movie, was selling war bonds; i.e. getting people to loan money to the government. Nobody donated money to pay for WWII. (Donating metals, though, was a thing.)

In fact, my personal feeling is that retail war bonds were more a war propaganda/patriotism thing and the majority of the funding was through the normal commercial bond market.

I suspect your idea of the power of the executive branch is significantly and unrealistically inflated.

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

#243

Post by mcguire »

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.

Nobody donated money (well, ok, maybe....), people bought treasury bonds of varying flavors, and intentionally devaluing your currency by "printing money" to pay for war expenses is essentially always the last thing you do before your government goes down in flames, one way or another---either you just lost the military war, or you destroyed your economy.

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

#244

Post by tootie »

adventured wrote: post #207
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…

> unlike fiat which is counterfeited as a matter of course by the central bank to pay the federal government so it can buy bombs While I agree with your underlying premise, you're comically off mark in your criticism. Fiat (in this case we're obviously talking about the US Dollar) is mostly counterfeited by the US Government to buy votes, pay for welfare programs, shore up hemorrhaging entitlement programs, and to pa…

If you're talking about debt in nominal terms and equating money supply with debasement in the absence of actual inflation, then you are talking rot. The fact that we can finance massive amounts of debt when needed and easily recover (see WWII) is a testament to incredible dependability of fiat currency.

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

#245

Post by mcguire »

nwah1 wrote: post #195
moduspol wrote: post #139

Earlier quoted context omitted.

The benefit is a more free society and less systemic risk. It doesn't benefit the sovereign authority directly, but neither does freedom of speech, religion, etc.

The gold standard, in the same way, formerly removed much of the ability to conduct monetary policy, and it was supplanted because it turned out that counter-cyclical policy was very useful. Cryptocurrency is similar except that it wastes a lot more energy to accomplish the same thing. The government, of course, retains unlimited power to tax, so the ability to fund whatever it wants is retained in all cases.

"Cryptocurrency is similar except that it wastes a lot more energy to accomplish the same thing."

Out of curiosity, what's the carbon footprint of bitcoin mining as compared to gold mining (and then parking the gold in a depository vault)?

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

#246

Post by nwah1 »

mcguire wrote: post #245
nwah1 wrote: post #195

Earlier quoted context omitted.

The gold standard, in the same way, formerly removed much of the ability to conduct monetary policy, and it was supplanted because it turned out that counter-cyclical policy was very useful. Cryptocurrency is similar except that it wastes a lot more energy to accomplish the same thing. The government, of course, retains unlimited power to tax, so the ability to fund whatever it wants is retained in all cases.

" Cryptocurrency is similar except that it wastes a lot more energy to accomplish the same thing. " Out of curiosity, what's the carbon footprint of bitcoin mining as compared to gold mining (and then parking the gold in a depository vault)?

Gold mining is ecologically destructive, but varies based on the form. When gold becomes absurdly expensive, as would happen under a renewed gold standard, it would be very likely that the proposals to mine the sea floor would be pursued, and could have major ecological damage. As for carbon footprint, specifically, I don't know.

Thankfully, USD is not based on gold at all.

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

#248

Post by mcguire »

ThomPete wrote: post #188
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…

This is the wrong way to look at it. All functioning currencies are about trust. Both Bitcoin and fiat currency has trust. Bitcoin has more trust than some governments fiat currencies and less than others. Bitcoin is the first truly international wire transfer system all others are based on contracts between banks in an international network. It's an international currency with no country or bank owning it. That alon…

"That alone makes it extremely valuable."

More or less valuable than the electrical generating capacity dedicated to creating bitcoins?

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

#249

Post by ThomPete »

mcguire wrote: post #248
ThomPete wrote: post #188

Earlier quoted context omitted.

This is the wrong way to look at it. All functioning currencies are about trust. Both Bitcoin and fiat currency has trust. Bitcoin has more trust than some governments fiat currencies and less than others. Bitcoin is the first truly international wire transfer system all others are based on contracts between banks in an international network. It's an international currency with no country or bank owning it. That alon…

" That alone makes it extremely valuable. " More or less valuable than the electrical generating capacity dedicated to creating bitcoins?

More/hard to say

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

#250

Post by mcguire »

quincunx wrote: post #101
jbrun wrote: post #85

Earlier quoted context omitted.

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?)

"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?"

Typically, they'd prefer not to hold currency; they'd prefer to make an investment that gives a supra-inflationary return. This is, in general, good for the economy and the society.

"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?"

I dunno, why isn't everyone parking their money in gold?

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