How can Bitcoin stabilize if it's a Keynesian Beauty Contest? • Hacker News Board

Re: How can Bitcoin stabilize if it's a Keynesian Beauty Contest?

#71

Post by api » Tue, Oct 23, 2018, 2:42 PM UTC

craigc wrote: post #70

api wrote: post #69

Earlier quoted context omitted.

This is really the fundamental disagreement: what is money? Is it a store of value or a medium of exchange? Until or unless agreement is reached on that, debating other points is kind of a waste of time. You're not going to agree if you disagree on the fundamental goal of money. I've personally gone over to the Keynesian/Monetarist side. IMHO the most important idea of Keynes by far is monetary velocity: that wealth…

Thank you. I think you are right. I think it’s impossible to reach any sort of consensus when two groups have fundamentally different views. I’m going to just try to stay out of it from now on. Not worth the time or energy. Especially when my view is the minority view. FWIW I don’t believe it is any sort of quest towards immortality. My biggest problem is how Keynesian economics tends to favor the central banks who a…

As I said I'm more on the Keynesian/Monetarist side, but you do have a valid point about how new money is introduced. Current central banks introduce new money in ways that disproportionately benefit banks, the rich, and of course the state. This is not surprising since banks, the rich, and the state chartered the central banks.

This is a separate point from the "what should money be?" debate.

There are other potential ways of introducing new money, especially in the digital age. I'm a fan of a smart version of the "money from helicopters" idea-- introduce money across the entire economy rather than just to the state (via bond purchases) or banks (via fed lending-to-lend).

Re: How can Bitcoin stabilize if it's a Keynesian Beauty Contest?

#72

Post by craigc » Tue, Oct 23, 2018, 2:47 PM UTC

api wrote: post #71

craigc wrote: post #70

Earlier quoted context omitted.

Thank you. I think you are right. I think it’s impossible to reach any sort of consensus when two groups have fundamentally different views. I’m going to just try to stay out of it from now on. Not worth the time or energy. Especially when my view is the minority view. FWIW I don’t believe it is any sort of quest towards immortality. My biggest problem is how Keynesian economics tends to favor the central banks who a…

As I said I'm more on the Keynesian/Monetarist side, but you do have a valid point about how new money is introduced. Current central banks introduce new money in ways that disproportionately benefit banks, the rich, and of course the state. This is not surprising since banks, the rich, and the state chartered the central banks. This is a separate point from the "what should money be?" debate. There are other potenti…

That’s an interesting idea. How could you see that working in practice?

Re: How can Bitcoin stabilize if it's a Keynesian Beauty Contest?

#73

Post by omegaham » Tue, Oct 23, 2018, 11:17 PM UTC

gebregl wrote: post #32

JumpCrisscross wrote: post #13

Earlier quoted context omitted.

> Would you consider USD also subject to a Keynesian Beauty Contest? No. The Fed puts its thumb on the scales. We've known since about the 19th century that growing economies and fixed-supply currencies don't play well together.

> We've known since about the 19th century that growing economies and fixed-supply currencies don't play well together. Can you give some examples? I don't know much about 19th century economics.

The late 1800s had some rather severe panics that were caused by deflation - specifically, the Panics of 1873 and 1893.

The problem with fixed-supply currencies is that if the economy is growing, and the supply of currency stays constant, currency is worth more.

If your debt is measured in that currency, your debt just increased, and you might no longer be able to pay it. Large numbers of foreclosures are bad.

Incidentally, one of the biggest political movements in response to these panics was a push to put the US onto the silver standard. Silver is more common, so it's easier for the supply of currency to increase (read: inflation) as the economy increases. A guy named William Jennings Bryan made a rather famous speech[1] about it.

Today, we eschew a metallic standard entirely and just focus on achieving a constant rate of inflation. Zero inflation would be fine, but it's hard to achieve, and any missteps might lead to deflation. So, the Fed aims for 2% inflation - low enough for the value of the dollar to be pretty stable, but high enough that if the economy does something weird, we don't enter a deflationary state.

[1] https://en.wikipedia.org/wiki/Cross_of_Gold_speech

Re: How can Bitcoin stabilize if it's a Keynesian Beauty Contest?

#74

Post by api » Wed, Oct 24, 2018, 3:04 AM UTC

craigc wrote: post #72

api wrote: post #71

Earlier quoted context omitted.

As I said I'm more on the Keynesian/Monetarist side, but you do have a valid point about how new money is introduced. Current central banks introduce new money in ways that disproportionately benefit banks, the rich, and of course the state. This is not surprising since banks, the rich, and the state chartered the central banks. This is a separate point from the "what should money be?" debate. There are other potenti…

That’s an interesting idea. How could you see that working in practice?

With a basic income you could make it variable and raise or lower the nominal basic income payment to vary the rate of money supply growth. This could run alongside the regular interest rate system. If inflation got too high you could raise the interest rate to vacuum up excess currency.