[_7fvc]

Bitcoin, Ethereum, and cryptocurrency spawn a generation of people who worship Austrian economics. This ETH upgrade is making ETH even more deflationary. People are obsessed with price and want to pump the numbers. These wars are not doing anything to advance adoption and bring freedom to people. Crypto builders are pumping the coins under the banners of freedom and decentralization.

The problem with crypto is volatility. The whole market moves in one direction or another, usually with Bitcoin. Scarcity is not the only thing that makes up the economy. We need also need inflation. Stop engaging in these ideological wars. Let's fix the problem and drive adoption.

https://bitflate.org/post/2020/04/26/we-need-inflationary-cr...

[Barrin92]

If you already come to the very sane and correct conclusion that deflationary and volatile cryptocurrencies are effectively useless as a means of exchange and as a primary tool to run an economy then you should just ditch decentralized currencies altogether because then you also get rid of the meaningless complications around mining, energy efficiency or user-friendliness and go to a digital central-bank currency directly which actually has the proper tools to do monetary policy and all you need is a database.

[gruez]

>If you already come to the very sane and correct conclusion that deflationary and volatile cryptocurrencies are effectively useless as a means of exchange and as a primary tool to run an economy then [...]

What about as a store of value? Gold is still around despite being heavy and hard to transact with.

[bluecalm]

Wanna store value? Buy actual value - that is things that make the wealth. Stocks in major companies, real estate, land in places people want to live in. The concept that buying promises is a good way to store value is a bizarre concept to me.

[from]

This has always perplexed me too. There's a nice Buffett quote on this (https://www.berkshirehathaway.com/letters/2011ltr.pdf):

"Today the world’s gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce – gold’s price as I write this – its value would be $9.6 trillion. Call this cube pile A.

Let’s now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world’s most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money (no sense feeling strapped after this buying binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B?

Beyond the staggering valuation given the existing stock of gold, current prices make today’s annual production of gold command about $160 billion. Buyers – whether jewelry and industrial users, frightened individuals, or speculators – must continually absorb this additional supply to merely maintain an equilibrium at present prices.

A century from now the 400 million acres of farmland will have produced staggering amounts of corn, wheat, cotton, and other crops – and will continue to produce that valuable bounty, whatever the currency may be. Exxon Mobil will probably have delivered trillions of dollars in dividends to its owners and will also hold assets worth many more trillions (and, remember, you get 16 Exxons). The 170,000 tons of gold will be unchanged in size and still incapable of producing anything. You can fondle the cube, but it will not respond.

Admittedly, when people a century from now are fearful, it’s likely many will still rush to gold. I’m confident, however, that the $9.6 trillion current valuation of pile A will compound over the century at a rate far inferior to that achieved by pile B."

I have noticed that people who advocate for this "store of value" idea have this tendency to insinuate that cash is the only alternative to gold or bitcoin or whatever it is. There has always been alternatives to letting your savings be eroded by inflation (stocks, bonds, etc) and part of the reason for inflation is to incentivize people to invest their money in these productive things.

[dmingod666]

Gold held it's value before we started counting the years from the death of christ.

It was valuable when britain was pairing criminals and prostitutes in handcuffs and shipping them to the US to populate the damn place.

It is valuable even today when there are people willing to risk death just to reach its shore..

I am willing to bet it will remain being valuable even when America becomes an irrelevant once-was in a few decades..

I want to know which asset class will survive the collapse of the US dollar and the fall of US influence...?

If your answer to that question is, "that's just absurd, never going to happen in my lifetime.." I can just smile and wish you all the best..

[delaaxe]

> britain was pairing criminals and prostitutes in handcuffs and shipping them to the US to populate the damn place

What can I Google to know more about this? I though it was also the case about Australia

[helen___keller]

Farmland has also been valuable that long

[literallycancer]

If you bought Exxon Mobil in 2011, oof. It's down 25% while gold is up 25%. Warren Buffett is irrelevant, literally the old man shouting at sky. His ideas are garbage and lose money, what other proof you need?

[d0gbread]

Share this quote with someone in Venezuela with a straight face. Or the countless unbanked that have access to a divisible digital gold but not stocks, bonds, gold, or enough to direct invest.

[from]

I can definitely agree that Bitcoin is a step in the right direction for expanding access to the financial system and I think the whole DeFi space on Ethereum is pretty incredible too (Uniswap, Curve, etc). It's outrageous that there are hundreds of millions of people who can't even open a bank account because they have no form of ID. I recognize that theoretically everyone can have a Bitcoin address and obviously there is tremendous value in that. But it's unlikely that these people will have real access to Bitcoin either when you consider that most Bitcoin users get it through centralized exchanges like Coinbase who must comply with whatever AMC/KYC garbage FINCEN and the rest of the American regulatory apparatus put out.

I would guess that Venezuelans mostly want a stable currency. There's plenty of reports (https://www.reuters.com/article/us-venezuela-economy/dollars..., https://www.npr.org/2020/02/19/807488229/use-of-u-s-dollar-i..., https://www.bloomberg.com/news/articles/2019-12-03/there-are...) of Venezuelans using USD and there are plenty of other developing countries (Lebanon, Zimbabwe, etc) that have a widespread black market for dollars. From Feb 21 to Feb 27 Bitcoin's dollar value dropped by 25%. From Feb 27 to today Bitcoin's value has increased by almost 30%. Even with all the inflation fear going on now safe-haven currencies like the Swiss Franc do not have this level of volatility. If you just want to avoid hyperinflation there are much safer (and [accessible](https://assets.bwbx.io/images/users/iqjWHBFdfxIU/iaETafdC5WN...)) places to park your savings.

[imtringued]

I have read about too many hyperinflation stories that I forgot the specifics of Venezuela but the vast, vast majority of them are caused by food shortages which themselves are caused by government repossession of productive assets. The problem is that the government is stealing your land, your company and your gold. The problem isn't that money is getting less valuable, it's that there is nothing to spend it on.

[cachvico]

Fantastic post.

[wmf]

I do think CBDCs are the digital cash that most people want but a decentralized implementation of Keynesian monetary policy would be interesting to see (for the half-dozen people who care).

[treelovinhippie]

Lookup mutual credit cryptocurrencies (eg what Holochain plans to do with the HOT swap).

In that model supply breathes directly instep with underlying demand. The users themselves are the agents that cause the supply to expand or contract.

Tada: maximum velocity with no incentive to hoard.

[_7fvc]

I don't think cryptocurrencies will replace fiat completely. They're still crypto. They have fixed rules. We still need currency "bridge" between crypto and the real world. Cryptocurrencies offer decentralized options which can address problems with money distribution.

[CameronNemo]

Why can't they replace fiat? Why can't crypto be minted to represent real world assets (like batches of nuts or nickel, not magic pieces of paper)?

[_7fvc]

Because real world assets don't get minted like crypto. They are tied to physical world. They are volatile. Bitcoin produces a block every 10 minutes. It's a fairly precise schedule. On the other hand, real world assets grow and contract at unpredictable rates. Even gold mining fluctuates. The real world is volatile. The BTCUSD peg is free floating. It's also volatile.

Crypto is rigid. Real world is volatile. It's hard to create a stable peg between crypto and the real world. So some kinds of bridge currencies are necessary. Fiat or some forms of digital fiat will continue to exist.

Bitcoin is a deflationary (disinflationary) asset. The BTCUSD peg is volatile. We need better money instruments to reduce volatility. I think an inflationary crypto can help.

[CameronNemo]

I'm not saying it will be an exact peg. I am saying that colored coins can represent specific batches of a real world asset. For example gold mined from a specific mine by a specific company from date x to date y. That company would also create the colored coins that represent a claim to the gold mined. They could even mint the coins ahead of time and they would act as futures on the output of the mine during that time.

[_7fvc]

It's difficult to build layers on top of the Bitcoin blockchain. The base asset, Bitcoin, is volatile. Its volatility affects the assets on 2nd layers. There isn't a one-one peg between the 2nd layer and the base chain. You'd need to trust an oracle. In your gold example, you'd need to trust the miner for authenticity and their books. For use-cases with oracles, it's more efficient to use a database. There's no need to use a blockchain.

Some projects on Ethereum, like DAI, have explored these use-cases. I think they have not been successful. DAI requires high reserve ratio (1-1.5) to manage the volatility of the base chain. You're using 1.5 USD to get 1 USDDAI. It's not very efficient. I'm less excited about assets on blockchain. I think the market is not ready. We need to reduce volatility first.

[delaaxe]

BTCUSD is a pair, not a "peg"

[_7fvc]

Sorry, it's not a guaranteed peg. It's more like a conversion.

[whitepaint]

> The problem with crypto is volatility.

https://en.wikipedia.org/wiki/Dai_(cryptocurrency)

[zionic]

Are you unaware of stable coins such as DAI that run on ETH?

[csomar]

> We need also need inflation.

Why?

[rsj_hn]

Because people incur nominal debt contracts which causes wages to be sticky downwards --> they can go up more easily than down. With inflation, if wages are too high, you can let inflation eat away at them. If there were no inflation, the downward stickiness would lead to a lot of market failures (bankruptcies and unemployment) when wages were too high.

But then why do people incur nominal debt contracts? Because production occurs throughout time but must be settled in some medium. The farmer needs to know how much he will get for his wheat, the shipper needs to know, so someone needs to promise to buy wheat next year for $X and for that contract to be useful, everything else needs to be priced in terms of $ as well, so that the farmer can buy fertilizer for $ today, and agree to hire workers to work the field for $ from today to harvest time, etc. In this way, the farmer can estimate what he will get next year, what he will pay throughout the year, and what investments he needs to make right now. It is nothing special about the dollar -- if everyone used bitcoin for real contracts then wages would be downward sticky in terms of bitcoin, too. But as there is no way of expanding the supply of bitcoin, this downward stickiness would lead to a lot more market failures, and thus a lot more unemployment. We would then be effectively back on the gold standard, but at least with the gold standard, you'd occasionally find lots of gold in a mountain and this would stimulate the economy and increase employment. With BTC, you'd have all the financial crises of sticky prices but without the occasional gold discovery.

[kubanczyk]

You don't need inflation with gold but you do need inflation to run the economy.

Because no one sane lends money at 0%. Or at -1%, with deflation.

Lack of lending brings investements down.

Lack of investments brings growth down.

The old companies keep grinding old way. The rich pocket money as a super safe way to get even richer. Stagnation.

See: Keynes

[seibelj]

What does “worship” mean? I am a believer of the Austrian theory of economics. Are Keynesian / Monetarists also “worshippers” of a theory? Modern economics is not that old. I fundamentally believe printing as much money as we are across the rich world is going to lead to disaster, just as it has time and again in the developing world (see Venezuela, Zimbabwe, Argentina, Brazil, etc.).

If anything, Austrian economics is a reversion to the standard theory of economics for thousands of years. The “innovation” of Keynesian economics is one of the greatest evils ever perpetuated on society. But again - what do I know - I don’t have a PhD from an Ivy. I just protect my assets in a zero-interest world by avoiding government threat.

[wmf]

Austrian economics is a reversion to the standard theory of economics for thousands of years.

Thousands of incredibly poor years by today's standards.

[CryptoPunk]

The gold standard's deflation was associated with pretty good results:

https://www.nber.org/papers/w10329

In any case, in a multi-currency world with low-friction electronic exchanges available, it stands to reason that deflation is less likely to be damaging, since the switching costs to more inflationary currencies are low.

[_7fvc]

Keynesians think money grows on tree. It is true in some senses. Apples grow on tree. At the extreme, they think money is imaginary. They can print as much as they want.

Austrians think money grows from hard money. It is also true in some senses. Money is made from money. It's circular and Ponzi-like. It requires you to believe in what hard money is. Austrian thinking leads to some cult-like behaviors. At the extreme, they'd be rent-seeking their precious Store of Value. It's just as evil as the Keynesians.

Money is data (Keynesian) with some kind of illusions (Austrian). The money that we need is between the Keynesians and Austrians.

[imtringued]

Keynesians believe that stimulating the right part of the economy will increase the speedup of recovery. When you fail to stimulate the right part of the economy that's not Keynesian economics. Most proponents of Keynesian politics are in favor of fiscal stimulus. Namely infrastructure investments and jobs programs. Where do you see this happening?

Meanwhile Austrian economics is just some meme that is anti Keynesian and doesn't even attempt to solve any problem other than get rid of Keynesian economics. This is especially telling when they are extra loud when no Keynesian economics are being done so they feel justified in their criticism.

What we have right now is closer to trickle down economics. Douse the rich in money with the hope that some drops reach the poor.

[imtringued]

>I fundamentally believe printing as much money as we are across the rich world is going to lead to disaster, just as it has time and again in the developing world (see Venezuela, Zimbabwe, Argentina, Brazil, etc.).

When will the US government repossess farms and corporations? Once that happens I can guarantee that hyperinflation is going to happen. Another way is to just bomb the USA's means of production.

Those are the primary ways hyperinflation happens. By destroying the ability to exchange currency for products and services the perceived value of the currency becomes worthless. It doesn't even take an increased money supply for it to happen, it merely accelerates hyperinflation by adding additional money into an economy where the velocity of money is at its peak.

>If anything, Austrian economics is a reversion to the standard theory of economics for thousands of years. The “innovation” of Keynesian economics is one of the greatest evils ever perpetuated on society. But again - what do I know - I don’t have a PhD from an Ivy. I just protect my assets in a zero-interest world by avoiding government threat.

According to Keynesian economics we would have to print significantly less money. Whatever is happening right now is neither Keynesian economics nor MMT. It's a pump and dump for rich people.

[colinmhayes]

>I fundamentally believe printing as much money as we are across the rich world is going to lead to disaster

You are fundamentally wrong. Austrian has worshippers because it's a cult. It has no basis in reality.