Ask HN: Do you care about sound money?
Bitcoiners care a lot about "sound money" (or "hard money"). They believe for a society to be sustainable, it is fundamental that its money is hard to debase.
Furthermore, they believe that only if a society uses hard money the prices in the market can accurately reflect the cost of production. Otherwise, the market will always end up with inefficiencies and worse quality.
Apart from all criticism with regards to bitcoin's energy consumption - do you care about sound money in that regard?
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[ 4.6 ms ] story [ 75.7 ms ] threadIf the internet goes down, we have bigger issues to think about?
As soon as you start thinking about "what's really hard money", you jump over money altogether and land on "what goods can I trade for other goods".
Bitcoin is just an example for an attempt to create hard money.
What happens to money in the long term doesn't matter much, what happens in the short term does. Investment vehicles short-term fluctuation matters less, but their long-term performance matters more.
> That leads to inefficiencies in the market, and in particular to less sustainable behaviour of people and less sustainable societies.
I see no reason to believe that the long-term smooth decline in the value of money does that at all compared to achievable alternative behaviors of money. In fact, one of the reasons money is typically managed with a goal of low-but-positive inflation with low volatility is that there is quite a lot of experience suggesting the opposite.
- Hard to transport (also not digital)
- Hard to verify authenticity
- Hard to split up
Also, the prices in the market reflect the cost of production (the cost curve) and the demand curve. I'm not sure that looking only at the production side tells you anything meaningful.
What tends to happen, though, is that people have borrowed money to buy things, and now dollars are more expensive to pay back those loans. Some of those who have borrowed are now underwater - they owe more than the value in dollars of the asset that they bought with the loan. Some of those will sell their assets (or the bank will do it for them). Now you have higher-than-normal selling, so the price goes down. Now more people are underwater, so it keeps going.
And some of those "people" are businesses, and some of them fail because of this. Now some people don't have jobs. Prices are lower, but that doesn't help you if you have no income.
This isn't just theory. Look at several of the financial panics in the 1800s, and you'll see this in action. When it happens, it's very destructive. It wipes out lots of people.
So, a slow, steady, predictable deflation might be a good thing - if it could be and remain stable. But there are lots of examples of it not being stable...
Money so sound that it lost 30% of its value since November? I know that it's massively up long term but it's still a volatile asset measured against actual currencies; it doesn't function as money.
If it has a chance of succeeding in any way, it's to be an asset that people are convinced enough that it's a reliable investment similar to gold (gold's actual usefulness is a small fraction of the value so the comparison is close enough). So maybe people will keep buying Bitcoin for it's own sake and making dollars with it, who knows. But the "sound money" argument is bullshit.
> Bitcoiners care a lot about "sound money"
I doubt that most of them care. It's just that when you have a strong financial interest in something like Bitcoin going up in price, it's very easy to start inventing and believing all kinds of arguments that don't make sense.
Additionally, having the FED controlling rates is a democratic, reasoned approach. BTC is not handled by a known, government controlled authority. I know that many BTC proponents don't like governments for $reasons but BTC _liberal_ alternative is more akin to a jungle than a civilised society :-)
No, I care about stable money, not “sound” money.
I don't give a fly fig about the value of gold on its own (and, consequently, as a benchmark for anything else.) I mean, except when I am considering gold as a potential investment vehicle.
Now, if you were to say that the value of the dollar loses value roughly exponentially, with a low and gradually changing exponent, compared to, say, the basket of services used to define the CPI or any other broad price measure, I’d say fine, that’s great. Low volatility is stable, and that's what I want in money. (Escalating value with higher volatility is acceptable in an investment vehicle, but currency should not be a primary investment vehicle; what is good in one is not good for the other, in either direction.)
Furthermore, most people's salaries don't increase as fast as the value of dollars deceases. That means for the average person it's likely that you are paid less every year.
Yes, they do. Real (that is inflation-adjusted) median hourly wages have overall pretty much been even since the 1970s; dropping a little bit through the 1980s and early 1990s and rebounding slowly since.
Individually, people generally move up in relation to the median over their career, so with the median generally flat (and recently tending to be slightly positive), they tend to get higher real wages over time.
(Now, wages haven't kept up with productivity, and that's a real problem, but it's different than the one you are inventing.)
I’ll answer this in the context of the gold standard—the ultimate hard currency/sound money. That history is very different than the one its proponents portray. Governments routinely had more currency in the circulation than they cover with their reserves, the money supply was effectively ceded to technological developments in mining, and we saw a period of social unrest in the back half of the 1800s as farmers got screwed by deflation. (See William Jennings Bryant’s ‘You shall not crucify mankind upon a cross of gold.’)
The money supply matters. Historically, the gold standard exacerbated swings in the business cycle. Economies would grow by exporting good and gold would flow in, people had more money so they spent more growing the economy more. But, if the economy was bad and there wasn’t gold down in the basement, the government and central banks were unable to issue the currency necessary to stimulate business activity to help end the problem. Milton Friedman made his name by looking at the money supply as the root cause for why the Great Depression was so bad.
Could the Federal Reserve do better? Absolutely. But if you compare the last 10-15 years to any other period in the last 150, things are as good as they’ve even been on the monetary front.
European central bank just announced they miscalculated how bad the inflation really is currently and that they expect it to get worse. The FED is pretty much in the same situation, no?