
Why isn’t Bitcoin banned everywhere? - ALee
https://hackernoon.com/why-isnt-bitcoin-banned-everywhere-32a2caec90
======
manfredo
Potentially unpopular opinion: cryptocurrencies haven't been widely banned
because they aren't actually all that impactful. The things you can do with
crypto that governments don't like (harder to trace transactions,
circumvention of asset transfer laws, etc.) have always been possible. If the
government wanted to stop criminal transactions, banning cash would be way
more impactful than banning Bitcoin. Furthermore, the decentralized nature of
a lot of cryptocurrencies is not a good thing for a real currency. Being able
to manage the money supply and enforce monetary policy is important. While
some governments go bonkers and cause hyperinflation, most do a good job of
managing the stability of their currency.

The author's latter explanation, that governments don't really care, is the
most compelling. The only ones that do are ones that enforce onerous asset
transfer laws (e.g. PRC).

~~~
beatgammit
Is it really that important to manage the money supply directly? Sure we had
fluctuations in value when the US was on the gold standard, but was it really
that bad?

I'm not saying we should go back to gold, I'm merely pointing out that a
decentralized system can work just fine, it just needs to be reasonable
stable. Bitcoin isn't stable because most of the coin owners are speculators
and the price fluctuates with market sentiment.

If a cryptocurrency can be made popular for actual transactions but not get
overtaken by investors, I think it'll have a solid chance as an alternative
currency. I don't know the solution here, and perhaps crypto currency isn't
the right tool, but I'm totally down with alternative currencies that don't
rely on centralized monetary policy.

~~~
manfredo
The gold standard was worse - there's a reason why we abandoned it. And
regardless, Bitcoin is fundamentally a lot less stable than the gold standard.
Gold production can be managed. Countries hold vast reserves of gold to adjust
the money supply when needed. It's harder to mange the supply of gold than
paper money that isn't pegged on any commodity, but it's possible. It is
subject to manipulation, though, and the French exchanging large amounts of
dollars for the stated gold value prompted the US to abandon it.

Bitcoin is a whole different story. Unless there's a mechanism to easily
change the amount of bitcoin in circulation, there's going to be perpetual
deflation. The thing that a lot of gold standard and bitcoin proponents don't
realize (not saying you're among these people) is that the total amount of
wealth in the world isn't fixed. As countries industrialize, new more goods
are produced, and services are available the global amount of wealth rises.
Simply put, there's a growing amount of _stuff_ in the world that can be
bought and sold. The maximum number of bitcoins in circulation is fixed at 21
million BTC, so once that number is reached the cost of a bitcoin will (in
theory) perpetually deflate.

TL;DR: A fixed supply of currency doesn't guarantee zero inflation. It
guarantees negative inflation (AKA deflation) as the total pool of wealth
rises. Deflation is widely considered to be worse than inflation, reasons for
which we can discuss if so desired.

~~~
ShorsHammer
> Deflation is widely considered to be worse than inflation, reasons for which
> we can discuss if so desired.

I'd love to discuss it. Questions:

Why is a 3% inflation rate desirable yet 15% is catastrophic?

Why is the 2-3% inflation goal set in stone and unable to be ever changed?

Many developed countries keep targeting this rate despite being unable to
achieve it. Is someone going to mention the emperors clothing eventually?

Why is deflation itself bad? Why is cheaper food, shelter and consumer items a
bad thing for society as a whole? People save more, consider their purchases
more carefully and tend to be more cautious about their money. Some examples
of deflationary products are computer hardware and new cars. People tend to
take these purchasing decisions quite seriously and research far more than
not, is that a bad thing?

~~~
manfredo
Deflation doesn't mean cheaper food and shelter. Remember, deflation reduces
the dollar value of labor, too. But the dollar-value of all other goods and
services decreased tenfold as well so in the end nothing has changed. However,
there's one big factor you're missing: debt.

Simply put, inflation favors debtors while inflation favors creditors. Imagine
you bought your house with bitcoin, and took out a mortgage of 500 bitcoins to
pay for said house, back when bitcoin was $500. Total debt, $250k. Now, the
price of bitcoin is over $6,000. Did your loan magically shrink from 500
bitcoin to ~42 bitcoin? No, your loan is still 500 bitcoin. So your $250k
mortgage has become a $3 million mortgage.

So inflation hurts people that loan out more money than they owe: mostly banks
and rich people. Deflation hurts people that owe more money than the loan out:
poor and middle class people. Benefiting the wealthy at the expense of the
poor is broadly considered to be immoral. An ideal world might see zero
inflation and zero deflation, but predictions are always off so the Fed plays
it safe and targets ~2% inflation.

~~~
ShorsHammer
> Deflation doesn't mean cheaper food and shelter.

It's the literal definition of it.

[https://seekingalpha.com/article/4085479-food-deflation-
hurt...](https://seekingalpha.com/article/4085479-food-deflation-hurts-
grocery-industry)

> So inflation hurts people that loan out more money than they owe: mostly
> banks and rich people.

General controlled inflation doesn't hurt banks at all, they simply put their
margin on top and that's the interest rate. In fact people are far more likely
to use their services in a high inflationary environment.

"Rich people" and large corporations are far more indebted than the average
person, they disproportionally benefit compared to a simple wage earner
purchasing a house or running a small business.

Also the headline inflation rate and individual sectors are two entirely
different beasts. If wage inflation moves nowhere but overall inflation goes
up it's absurd to claim this benefits the poor and workers. It only encourages
more people to borrow and speculate on assets in a feedback loop.

Inflation is not some magical gift from the financial heavens bestowed upon
the masses to balance out society, in fact it's the opposite.

