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Comment by seregine | Hacker News Reader

>> Eventually, the currency becomes worthless - historically, every fiat currency ever created as eventually lost 100% of its value. It's less a question of "if" and more a question of "when".

This is trivially true (all civilizations end, the sun burns out, nothing is permanent) but the relevant timeframe is usually one's lifetime, and the stability of the currency over that timeframe is more important.

>> you're paying compound annual interest to the central bank in exchange for nothing

You're paying that "interest" in exchange for a more stable currency, a supply of liquidity that allows for progress/growth . If the central bank is doing its job reasonably well, that is. You may also be paying for the "feature" of money that allows you to transfer value to your future self with relatively little risk.

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"This is trivially true (all civilizations end, the sun burns out, nothing is permanent) but the relevant timeframe is usually one's lifetime, and the stability of the currency over that timeframe is more important."

Not sure it is Trivially, fait can go to zero, gold for example can not as there are other uses for it... Perhaps, like good design, the more timeless option might be the better:-)

You're paying that "interest" in exchange for a more stable currency" who pays for whom might be the better question with who is to benefit.

Well, a physical dollar bill has intrinsic value as well; if nothing else, you could burn it for energy. The intrinsic value is a minuscule fraction of the "official" value, but still nonzero.

The intrinsic value of gold is a lot greater, but probably still only a small fraction of its general market value; its very reputation as synonymous with tangible wealth serves to paradoxically inflate its value.

And the Deutsche Mark made great wallpaper. The intrinsic value of an object created for a lost purpose is worth less than the materials it's made out of.

Gold, on the other hand, has a naturally limited supply and has notable uses. It's reputation as a symbol of wealth is not only because of the cost, but also because there's not enough for everybody. If there was a limited supply of denim, we'd see a big comeback in Storm Riders.

It's like owning a Tesla - it's not just a $100k car, it implies that you're a somebody.

You're actually paying that "interest" as actual interest to people who buy treasury bills.

Where did you think the interest on t-bills comes from?

So "who it benefits" is simple: Whoever buys treasury bills.

The US has effectively defaulted, twice, since 1932. Once when gold was outlawed in 1933, and again when Nixon closed the gold window.

Assuming you count the current economic problems as a fiat/currency crisis, it was a period of 35-40 years - 1933 to 1971 is 38 years, 1971 to 2009 is 38 years.

That is a lot less time than a civilization declining or the sun burning out.

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