[danield9tqh]

> Even if demand for the dollar plummeted, the Fed could in principle keep burning money until a dollar is scarce enough to be worth the “right” amount

This seems like the crux of the argument of the difference between the dollar and Bitcoin in the author's view. To me though this statement doesn't make sense and is very misleading, and someone please correct me if I'm wrong. The Fed CANNOT just keep burning dollars because they don't have all the dollars. Individuals hold those dollars. Yes, if individuals just started burning their dollars the value of the dollar would adjust to the "right" amount, but who in their right mind would burn their money for the greater good? In light of this, the Fed doesn't at all seem like a "check" on inflation or deflation. The dollar is still subject to the same supply and demand properties of Bitcoin.

[osrec]

"Burning dollars" can be done in other ways. For example, the powers that be can issue less debt going forward, which would shrink the money supply.

[danield9tqh]

This makes sense to me, that's something I hadn't thought of so thanks for sharing.

But I still don't see how it differentiates BTC from USD. Because issuing any debt in the first place would inflate the value. So then when you stop issuing debt, the value would get deflated to what it would have been originally. I think this is how the Fed tries to control deflation as well. They print more money, not to distribute it but just so that they can hold it and burn it when they need to control inflation. Either way, both of these scenarios seems like a wash to me. You're just making money so that you can destroy it later.

The only argument I can see here is the idea of having 'wiggle room' within the money supply. In essence a way to control the irrational volatility of the market. If everyone is screaming sell sell sell!, the Fed has a limited amount of room to destroy some money and calm people down before panic takes over. BTC doesn't have that. But even this seems to me like a much weaker 'check' than the author suggests.

[UncleEntity]

Most of the money in existence doesn't actually exist, it is an illusion created through fractional reserve banking.

If the Fed wants to inflate the currency they print more and 'give' it to banks who create even more on top of this and if they want to deflate the currency they can simply change the minimum reserve value so less money is created out of thin air by the banks. Totally oversimplifying here but that's the general idea.

Anything short of 100% reserve banking and you have illusionary money in existence that gets spent just as well as a paper bill but with no actual paper bill backing it.

[RobertoG]

Or higher taxes, effectively retiring money from the economy.

[projektfu]

Burning dollars is achieved by issuing more bonds.

[keithnoizu]

They could simple increase the required reserve rate to reduce the amount of money supply banks can generate. They could also apply negative interest rates across the board so that any amount of money stored in any account decreases over time.