[joejohnson]

Amazing that someone so naive could be given such a platform. Oh, silicon valley :)

>> A tricky part of this would be how to balance letting the network have control over itself and letting the government have some special degree of input on ‘monetary policy’. It’s certainly ok for the government to have some, but I think the network needs to be mostly in charge (e.g., the government couldn’t be allowed to arbitrarily inflate the currency when it wanted to).

Being able to "arbitrarily inflate" the currency is one of the many tools governments use to stabilize the economy ("monetary policy"). In the US, this ability has been hard fought (removal of the gold standard) and regardless of how you may feel about this, control of the money supply is viewed as a necessary power of the government by the vast majority of macro economist across the political spectrum. So good luck getting the US or any government to adopt a cryptocurrency that removes this control.

[_5ysi]

It may be naivety, but perhaps it's just clever marketing. As pointed out, any government has a short term incentive to retain maximum control over its currency . But if its citizens think the currency is being mismanaged and increasing inequality unfairly, then there's an incentive to come out with an alternative currency on the FEDs terms rather than being blindsided by some clever currency hatched by a private group. Silicon Valley style first mover advantages sounds more positive than fear of alternative cryptocurrencies though.

Thoughts are my own, not my employers.

[nobrains]

There are two problems with this control (QE) that the citizens are concerned about:

1. It reduces their cash savings by the ratio of the amount of new money injected to the total supply

2. It is unfair, as the first receipients of this new money get free money. (Inflation increases as that money flows through to everyone, however, the first receipients of this money don't get to face the inflation).

The second issue is solvable. The money should be distributed equally to all citizens, via some tax break or something.

[nostrademons]

#2 is actually significantly harder to solve, although I do think that distributing new money directly to consumers rather than to banks who are supposed to make loans to consumers would help the situation.

Inflation doesn't affect all firms equally. Excess money tends to pool at bottlenecks within the economy: industries where a single firm has monopoly power over its suppliers or customers. It ends up receiving all the new cash that is circulating within the economy, but has little incentive to pay out that cash to suppliers because they have few other buyers but plenty of competitors should they try to raise prices proportionally. As a result, prices rise upstream of the monopoly, but remain constant downstream, with the added money going into asset purchases that the monopoly firm believes will give it a bigger moat. The Fed, meanwhile, tends to look at prices downstream (in the broader economy), sees that they are remaining stubbornly low, and keeps adding money into the economy, which all collects as cash on the balance sheets of monopoly firms or asset prices for things they want to buy.

Warren Buffett has remarked on this effect in a few of his annual reports, and his entire investment thesis is based upon it. It's also why the FANG stocks have been on a tear (each of them owns a local monopoly in their consumer-based industry), and why software engineering salaries for Big Tech have been skyrocketing (on the supply-side, each of these companies isn't quite a monopsony, as engineers can choose to work for another one), and why land in the Bay Area is unaffordable (all these engineers need to live somewhere, and the supply of land is fixed). It also manifests as a plummeting velocity of money and recurrent asset bubbles, which we've also seen.

Distributing money directly to taxpayers would help - at the very least, it'd let the Fed more accurately measure the impact of new money on prices, as consumer price levels would jump immediately rather than waiting for the money to cycle back as salaries, which it never does unless they're in an industry where they have bargaining power over their employers. But ultimately, fixing it requires doing something about monopoly concentration within the economy and ensuring there's healthy price competition at all levels of the value chain.

[AnimalMuppet]

> It reduces their cash savings by the ratio of the amount of new money injected to the total supply

No. That is, it can, but it doesn't have to. Their cash savings are only affected if the value of money changes, not if the quantity of money changes. The Fed's mandate is for stable value, not stable quantity.

And if you're going to ask what the difference is: Velocity. There may be other things as well, but definitely velocity.

But even my argument here isn't needed to defend QE. QE injected 4 trillion dollars into the US economy. Why did the Fed do that? Because $4 trillion had just evaporated in the meltdown of 2008. That wasn't even changing the quantity of money, it was trying to prevent a change in the quantity of money.

[fra]

Which cash savings? The median savings for a US family is ~$5000. What you're really saying is "it inconveniences the rich".

[kenpomeroy]

Inflation hurts the poor far more than the rich. Rich people invest their money rather than simply holding cash and losing value through inflation. Poor people have no choice but to keep their money in cash. Also, wage increases are often much slower than the rate of inflation.

[atarola]

Poor people don't keep cash, they spend it on living expenses almost immediately.

[searine]

Or you just peg USDC to the dollar so traditional monetary controls still apply. I don't know how exactly you'd do that but I'm sure you could figure out something clever.

The advantage here is triple-ledger system, not the mining/anonymity features of other crypto. Having a pseudo-dollar cryptocoin creates a digital cash that is inherently traceable and avoids all the nasty bits of international money changing. It's a governments wet dream.

[freeone3000]

Why peg it to the dollar? Most dollars aren't physical, so we could "simply" shift the dollar financial systems to this process.

[AnimalMuppet]

So far, the dollar has had a much more stable value than any cryptocurrency. We'd like to keep that feature.