[jmnicolas]

With fiat you KNOW you're getting poorer by the minute, but with crypto you have the hope you will earn more.

Fwiw I have a grand total of 300€ "invested" (or "lost" if you're a pessimist) in crypto, so I'm not exactly a crypto fanatic.

[astrange]

The point of money is to be spent, not to hold it. You can't have an asset that's both good to hold over the short and long term. (I forget where this is stated.)

That's because the point of an economic system is to trick other people into making food for you, and holding money instead of trading it obviously isn't going to lead to that.

[danuker]

> The point of money is to be spent, not to hold it.

Why? Why prioritize spending now rather than later? If I can't defer consumption, I will always need to work, and I can't retire. That would be financial oppression.

> You can't have an asset that's both good to hold over the short and long term.

I am abnormally curious why this is the case.

> That's because the point of an economic system is to trick other people into making food for you

I'd rather they make food for me when I'm old, instead of when I'm young and I can make it for myself. How is this an argument against saving?

> holding money instead of trading it obviously isn't going to lead to that.

While it's true that if everyone saved in the short term, we'd see persistent recessions, it's bound to end, as people start to want to spend their earned money.

In "Die with Zero", an argument is made to allocate and spend everything you've made, because this life is all you've got to do so. I agree with this book.

Even in extreme deflation, people buy things they need. For example, technology prices have been in exponential free fall for decades, yet today the world's largest companies have a lot to do with selling computers, phones, and/or software.

The only reason for government currency inflation is balancing the (wasteful) budget, after the government spends beyond its means. This allows soft-defaults (government paying bond coupons in a diminishing currency) instead of hard-defaults (government failing to pay bond coupons). But both kinds of defaults should be seen as bad, by investors.

To get an idea of the scale of the misallocation, compare the tax revenue to GDP with government spending to GDP. The US government pays for 44% of the yearly domestic product, while only taxing 9.9%. This amounts to a LARGE benefit to those printing money and spending it before price inflation hits.

- https://data.worldbank.org/indicator/GC.TAX.TOTL.GD.ZS

- https://tradingeconomics.com/country-list/government-spendin...

[astrange]

> Why? Why prioritize spending now rather than later? If I can't defer consumption, I will always need to work, and I can't retire. That would be financial oppression.

I should've said spent or invested. You can save by turning money into I bonds or stocks for retirement, and that works because it funds something productive (stocks/corp bonds) or the government would like you to defer consumption due to inflation (I bonds).

But remember money (vaguely) represents stored up labor. In nature you can't retire because you can't save up labor; saving money isn't just like a squirrel storing nuts for later, it's also like if the squirrel could put off gathering them at all.

> I am abnormally curious why this is the case.

https://en.wikipedia.org/wiki/Risk–return_spectrum

Long term investments (stocks) are better for retirement because they're riskier.

> I'd rather they make food for me when I'm old, instead of when I'm young and I can make it for myself. How is this an argument against saving?

By "other people" I meant farmers, so you're probably not doing that work yourself. There will probably be farms because other people are continually buying enough from them to keep them producing, but if nobody buys something for long enough it won't get cheaper, the market will cease to exist because nobody will produce it anymore. Saving money/retiring in this way is kind of parasitic.

An example would be FOGBANK, which the government didn't produce for so long it forgot how to do it: https://en.wikipedia.org/wiki/Fogbank

> Even in extreme deflation, people buy things they need.

There was a Great Depression where people stopped being able to do that, you know. Deflation really upsets people. Deflation in Germany also got the Nazis elected.

It's not good to think about "the government spending beyond its means" as if it was a household. The government's the one that invented the money in the first place. A fixed money supply doesn't make sense on a planet with an increasing population that all want to use your money because of how awesome the US financial empire is.

And not only did the US fail to get inflation despite best efforts from ~1980-2020, other countries are seeing inflation now without extra deficits.

[danuker]

You are making a lot of interesting arguments. Thanks!

> In nature you can't retire because you can't save up labor

That is true. What I can do, I guess, is ensure that I will have what I want in the future. If I don't know what I want, then I want to buy a small piece of everything (index funds).

> are better for retirement because they're riskier.

From the very article you linked: "Having no earnings and paying no coupons, rents or dividends, but instead representing stake in an entirely new monetary system of questionable potential, cryptocurrencies are undoubtedly the highest risk investment known to man."

Of course, here it seems Wikipedia is a bit opinionated, and gambling would be an even higher risk investment. But at that point I'm sure the risk-return relationship would break down.

The Kelly criterion is the optimal to size up how much risk to take over time. If there's even the slightest chance that losing a bet/investment will leave you with zero wealth, then you may not place all your wealth on that bet.

> Saving money/retiring in this way is kind of parasitic.

As some people save, others spend. As I mentioned with "Die with Zero", I will spend all my money eventually. If people do not synchronize their spending with the rest of the economy, the effects will average out, and one individual does not matter. Unfortunately, people tend to buy high and sell low, going on trends. And I've noticed both national and cryptocurrencies go through this - albeit with the interest rate mechanism, national currencies don't drop 80-90% from time to time.

> A fixed money supply doesn't make sense on a planet with an increasing population that all want to use your money because of how awesome the US financial empire is.

The world population is growing at around 1% per year, yet the money supply in the majority of countries grew by 13% (median): https://data.worldbank.org/indicator/FM.LBL.BMNY.ZG?most_rec...

The US, China and India are all above 10%.

> There was a Great Depression where people stopped being able to do that, you know.

You are right. I was exaggerating, because a bit of deflation doesn't hurt. Sever deflation does - as we're seeing right now in China also.

> It's not good to think about "the government spending beyond its means" as if it was a household.

And why not? Incurring debt will only impoverish future members of the "family". As interest rates rose, interest payments are about to exceed the military budget: https://edition.cnn.com/2022/11/01/economy/inflation-fed-deb...

As the population growth slows, or capital reaches diminishing returns as some other finite resource is depleted, it is only responsible to think of the economy as a household, and the money as a reflection of real, existing goods and services, rather than future ones, because future ones might not exist, and debt will become less "productive".

I distinguish between "productivity" of a debt and its yield. Taking on debt means signing up to pay future interest. But the resources you receive in exchange might make it worth paying interest, or might not. This is what I call "productivity" for lack of a better vocabulary. And interest rates or yields are orthogonal to this.

> The government's the one that invented the money in the first place.

The government merely partly captured the monetary velocity multiplier effect caused by fractional reserve.

Fractional reserve was invented by private banks, which create most of the money supply. In spite of their enormous power, and the enormous profits in fees and interest as a result of money creation, banks still go bankrupt by abusing their power, requiring bail-outs (with public money) or bail-ins (with depositors' money).

One such bail-out was immortalized in Bitcoin's first block ("The Times 03/Jan/2009 Chancellor on brink of second bailout for banks").

Khan Academy has a great course on fractional reserve: https://www.khanacademy.org/economics-finance-domain/macroec...

> And not only did the US fail to get inflation despite best efforts from ~1980-2020

In 1980-2020, the CPI went from 82.4 to 258.8, or a ~3.14-fold increase, or a 3.14^(1/40) ~= 2.9% compounded average growth rate. That is not failure to get inflation, it is overinflating by 45% compared to the 2% objective.

What we are seeing now (>10% inflation) is the result of irresponsible pandemic government budgets being mopped-up by the central banks.

By the way, PPP cost $170,000 to $257,000 per retained job-year. I bet employees on payroll during the pandemic were not paid that much.

https://www.investopedia.com/where-ppp-money-went-5216725

[three_seagrass]

Yep. A good currency is meant to have low volatility and an expected value in the future.

Confusing or conflating good currencies with investment assets is a common crypto evangelist move.