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Bitcoin is stable in reference to itself, just as USD is stable in reference to itself.



There is a powerful entity (the Fed) focused on keeping it stable in reference to consumer goods and services.


Right, and how is that going for them? The average home cost around $3,400 in 1913 (when the FED was created), and today is around $200,000. And $1 is still worth $1.


It's actually going very well for the US. Inflation has been been low and stable. The real economy is larger than it's ever been. Unemployment is very low. Out of all the countries and currencies on Earth over the past 100 years, the US and its dollar have had a better track record than almost any other.

A few corrections to some possible misconceptions:

(1) Fed is short for Federal Reserve. It's not an acronym.

(2) The goal of the Fed is not 0% inflation. Because downside risks are worse than upside risks, the Fed's explicit long-term target is 2%

(3) House prices aren't great to use as a metric of inflation. A house built today is far, far better than house built in 1913. According to the consumer price index, $3,400 in 1913 has the rough buying power of $88,000 today.

https://www.bls.gov/cpi/

In my opinion, if you want to make a serious argument against the Fed, you should (a) do more work than rhetorically asking how the past century has gone for us, and (b) at least be familiar enough with the thing to spell its name correctly.


Thanks. I am well aware of all the things you pointed out. I think we just have a different opinion of what stable is or should be.

I think a currency that has $1.00 worth of purchasing power when I am given it should not lose 99% of its value over the next 100 years if I do not spend it. I am aware that that is impossible due to inflation, and that is why things like gold are much better stores of value than the dollar.


A good currency is focused on being a good medium of exchange, not a good store of value.


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 is a verb, not a noun. To be wealthy is to have much activity. The desire for idle stores of wealth reflects a very deep and very ancient wish for a stability that does not exist in this world. In this world things are either alive, moving, and changing, or dead.

Austrians want "hard money" that can act as an inert store of value for the same reason the Egyptians elaborately mummified their dead and piled vast stores of wealth in tombs. It's a very ancient and unfortunately very misguided quest for immortality through stopping of avoiding time. It doesn't work. The mummies were just corpses, the tombs were raided, and with enough time the pyramids will be dust.

If there is ever any kind of immortality to be had, it will be by embracing change and using science and technology to modify our biology or even transfer consciousness and intelligence itself into another medium ("mind uploading"). Those kinds of sci-fi things would require immense technological progress, and that's far more likely to occur in a world of dynamic economic systems biased toward investment rather than stuffing money into mattresses.


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 are able to create money out of nothing.


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).


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.


Are you planning to hold on to that dollar for a hundred years? Do you think you'll be alive then? Do you not think that perhaps if you want it to maintain or grow its value you should put it to work, rather than just sitting on it? Why should society value whatever it is you did to earn a buck today the same in 100 years?


I understand that that is the driving force behind Keynesian economics, and I think you have a valid point.

That said, when you consider the way inflation actually works most of the new money pumped into the system disproportionately benefits big businesses and banks at the expense of the rest of the population. It is essentially a hidden tax on the rest of us.

Central banks pumping more money into the economy actually helps them because it equates to more interest payments they can collect and puts more people and governments in their debt. Also they don’t have to do any work to create the money so could you explain how that is considered a fair system?

Some elite bankers are able to just summon new money out of thin air to serve their interests but money that I worked hard to earn is going to lose its value if I hold onto it for too long?

Why do you think there is such a huge gap in income inequality that began as soon as we broke off completely from the gold standard in 1971?


some amount of inflation is a desired property to have in a currency, and this result is for the most part the intended result


USD is also stable in reference to almost everything else.

Bitcoin isn't.


Would you consider USD also subject to a Keynesian Beauty Contest?


Yes, there's a 24/5 FX market where people decide what it's worth in relation to other currencies.


The prices fluctuate not due to mere speculation (on the beauty of currencies) but the need to convert currencies to run a company or live your life (e.g. you have dollars and you need to pay your supplier in yuan).


FX markets are open all night but close on weekends?


To paraphrase Jimmy Buffet, It is always between 9:00 AM and 5:00 PM somewhere.


agreed


> 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


Along with most stocks. I think the key isn't whether something is/isn't a KBC, but how much other stuff exists that helps anchor it to some kind of objective reality.


Bitcoin has been pretty stable around $6500 for the past month. And for six months has been way more stable than The Shitcoins (BTC has gone from 30% to 50+% of total market cap in that time).

Humorous summary of price fluctuations since 2010: https://www.youtube.com/watch?v=XbZ8zDpX2Mg


You're talking 6 months. Would you want to be paid in BTC for your full time job, or start a business that pays its employees that way?


Absolutely.


This comparision is empty because anything exchange into the same results with the same. in other words: nobody exachange dollar into dollar unless they are not sound-minded.

Fiat currency is at its best second degree KBC because other countries decide on accepting or rejecting US economical indicators by temporarily betting on their short term future and set currency exchange point for the next 24 hours or so. Nobody buys US dollar because american flag is pretty or english is second broadest language in the world or some other “pretty face” indicator, as currency exhange dollar versus everything for the last 25 years clearly shows USD strenghtening +500% and weakening even 50% all the time.

No, Feds do not decide on this beauty contest. May be suprise to you but only 20% of printed dollar remains in usa. 80% is being shipped out for all sorts of purposes such as balancing countries oil wallets (aka petrodolar) to aiding other countries ending on fact that many countries prefer intra-use of greenbacks to its own currency. So Feds at its best control pretty face of dollar on its local playground aka USA, but in reality they dont because again dollar strength comes from evonomical indicators, not from how much feds prints.


True, but not relevant. The dollar is relatively stable as measured by everything-in-the-entire-economy-that-is-not-dollars. Bitcoin? Not at all.

"When they measure themselves by themselves and compare themselves with themselves, they are not wise." - 2 Corinthians 10:12 (NIV)




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