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Comment by JohnJamesRambo | Hacker News Reader

"The root problem with conventional currency is all the trust that's required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts." -Satoshi Nakamoto

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I think this is a useful point, but the lived experience of a lot of us is that you can sleep relatively soundly at night knowing that your salary is negotiated and paid in U.S. Dollars or Euros or other currencies that are backed by stable governments.

About ten years ago I had a friend who had been convinced by blogs that we were on the path to hyperinflation. He started buying gold and silver like crazy. Back then you could read a lot of smart-sounding people who would tell you all about how the inflation apocalypse was imminent (Fed balance sheets, stimulus, etc.) I almost bought into it too, but I didn't really have any money to sink into gold and silver. Really glad in hindsight.

I think Satoshi, who ever he was or is, was a brilliant engineer and cryptographer but his skepticism of fractional reserve banking and his general distrust of the financial system makes me believe that he only really dabbled in macroeconomics and banking.

We should all be really, really glad that previous innovators did believe in fractional reserve banking, credit markets, and fiat currency. If you like modern life, I mean.

> We should all be really, really glad that previous innovators did believe in fractional reserve banking, credit markets, and fiat currency. If you like modern life, I mean.

Was there no innovation during the free banking period of 1860-1920? I seem to recall at least one ground-breaking invention that happened during then.

The US economy expanded from subsistence farming in 1800 to superpower in 1914 conclusively shows that fiat money is not a requirement for that.

What fiat money is good for is so the government can spend whatever it wants to without needing to tax it or balance its books. Fiat money makes financing of wars possible, for example.

The notion that fiat money makes for stable financial markets is obviously false, although it is persistent.

The US economy expanded from subsistence farming to superpower mostly because of high quality coal and oil reserves, an excellent river transport network, and excellent topsoil. Ideas about monetary policy don't figure. Might as well wonder about the monetary policies of the Mongols.

The rivers weren't remotely good enough, which is why the Erie Canal was dug. For the first 70 years, commerce east to west had to go around the horn of S. America, and the economy still boomed.

The explosion of the railroad system solved those problems, but that was around 1870.

Massive oil, gas and coal reserves are hardly unique to America. Oil, for example, has made Saudi Arabia very wealthy, but not an economic powerhouse.

The canals and rails are the expected endogenous result of a unified european or east asian people blessed with such land, after being formed by a thousand years of scarcity and warfare. It's not a monetary policy or tax thing.

These people just don't get that civilization is energy flows and culture, not laissez-faire economic policies.

Why didn't it happen in S. America, Central America, Africa, etc.? The only consistent pattern distinguishing prosperity from poverty is free markets.

Anyhow, my point was fiat money was not a necessary condition for such prosperity.

Yea, I understand the historical stability and trust. But why not hedge against the off-chance fiat currency goes belly up? We have the ability to do so now with crypto. In my opinion, any prudent investor would use it to their advantage. It’s not all or nothing, it’s a hedge.

There were always options to hedge against that eventuality. E.g. property, stocks, Krugerrands. Sure, your could add Bitcoin to that list but all in all I'd rather have a nice home that I've paid down than I'd own a pile of volatile cryptocurrency. YMMV.

That brings up another issue, but what about the original issue that GP brought up? If bitcoin continues to fluctuate wildly in value then it isn’t a great currency.

“Identity thieves drain our accounts”

Isn’t that a US-centric issue? Was it shown that satoshi is from the US?

Isn't it a central bank-centric issue?

It has nothing to do with a central bank and identity theft can be solved easily. The first thing that needs to happen is your credit profile is in a default frozen state. The second is that identity theft is treated properly as bank fraud. Poof, identity theft is nearly eradicated overnight.

In other countries, the government provides a reasonable authenticator for personal identity; the banking system is not so easily fooled.

It's not an essential property of central banking that banks will give you the money in an account, or courts will enforce a debt against someone, simply because you know some basic demographic information about the victim.

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