Gold standard was bad, but Bitcoin standard is even worse • Hacker News Board

Re: Gold standard was bad, but Bitcoin standard is even worse

#31

Post by grandalf » Sat, Jan 11, 2014, 2:05 PM UTC

dcc1 wrote: post #4

Ah jebus another blogger who misunderstands bitcoin ecosystem, technology and its users. Who is looking for attention for his blog since its good linkbait. Well he/she got it. Economists (including the armchair variety like this blogger) should be delighted bitcoin exists, it gives them something to compare and measure and write about for their dismal "science" In meantime some of us continue to build for bitcoin and…

Great points. What I think would be interesting is if the Treasury did something like create a variety of your "Bit-dolla" crypto-currencies and let the markets/users decide which ones to use for which purposes. Each would have fixed rate of inflation.

$BD0: 0% annual inflation

$BD1: 1% annual inflation

$BD2: 2% annual inflation

$BD3: 3% annual inflation

etc., maybe up to 15%

That way market expectations of inflation and demand for price stability (and maybe actual laws) would dictate the overall usage patterns of the currencies, without the typical psychological risk associate with central banking systems.

Prices of goods would always be expressible be in terms of each currency, and conversion between them at any point in time would be easy and automatic. Prices of things like flash memory would go down in BD0 but would appear stable in BD4.

Just as businesses/industries settle on accounting practices (FIFO, LIFO, etc.) they could choose which currency to pay employees in, which to store cash in, and which to use to track the value of inventory.

The nice thing about this kind of system would be that we'd actually have much more price transparency, since inflation hides information (such as decreasing real wages).

Laws could be made to require pension funds to use BD2, for example, or to require all taxes to be paid in BD4, or student loans to be issued in BD10.

Treasury bills could be sold against each BD type which would add discipline and certainty to that market as well.

I know this is a sort of silly idea but it's fun to think about.

Re: Gold standard was bad, but Bitcoin standard is even worse

#32

Post by yummyfajitas » Sat, Jan 11, 2014, 2:05 PM UTC

daveungerer wrote: post #27

yummyfajitas wrote: post #11

So much pop Keynesianism spreading real misunderstandings. I really wish people who argued against deflation would take the time to understand the underlying theories. Deflation means, that the most fundamental law of finance is broken. The law, that says: It is much better to be given one dollar today, than to have one dollar next year. Deflation does not break this law. It is always better to be given one bitcoin n…

> It is always better to be given one bitcoin now than one bitcoin in the future. A counter-example: Your pot dealer says you can have 4 bags of pot now, and you have 1 year to pay the 1 BTC you owe him. Being a man of better impulse control than you, and a prudent financial manager of his drug enterprise, he values 1 BTC in a year more than 1 BTC today. That is, of course, assuming the expected value (after applying…

Your counterexample makes no sense. If I pay him 1 bitcoin today and he puts the bitcoin under his mattress, he has 1 bitcoin in 1 year with 0 probability of non-payment.

    1 x 1 > 1 x P(payment)

He also has the option to invest in his business or anything else, which has value.

Your claim amounts to the idea that giving someone a loan at 0% interest can be profitable. It can't.

Re: Gold standard was bad, but Bitcoin standard is even worse

#33

Post by grondilu » Sat, Jan 11, 2014, 2:06 PM UTC

Well, the good news is that there will probably never be a "bitcoin standard". The gold standard consisted in Nations basically enforcing the convertibility of currencies into gold (or indirectly into dollars, which were convertible into gold). So it was an authoritative enforcement of what money was supposed to be.

Bitcoin is a free currency. You're free to use it, or not. You're free to fork it, to create an other one with different monetary rules. And people do. Bitcoin is thus not exactly a "standard" as gold was. If you worry about the fixed aggregate idea, just don't. If there is no more bitcoins to create, and if the economy needs additional monetary units, then they will appear in the exchange market, as the price of other cryptocurrencies will rise, or others being created.

Re: Gold standard was bad, but Bitcoin standard is even worse

#34

Post by betterunix » Sat, Jan 11, 2014, 2:09 PM UTC

seanhandley wrote: post #10

Fractional reserve banking is the root of all evil. It's why the US national debt stands so high and why it can only keep growing. http://www.brillig.com/debt_clock/ https://www.youtube.com/watch?v=lrQX4CF6Bxs

Right, it's not like we were ever on track to pay it off at the beginning of the 21st century or any such nonsense...