Comment by jasode | Hacker News Reader

Comment by jasode | Hacker News Reader

>Ideally the initial coins would be evenly distributed to US citizens and taxpayers— [...] The government can likely create a lot of de novo wealth for its citizens in the process.

This USDC proposal seems to reiterate the same themes as a previous blog post "American Equity".[1]

>, 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).

I doubt the USA government or any other modern government with fiat money would agree to this. Inflating currency is a hidden way to spend money it doesn't have. E.g. since Social Security payments are denominated in US Dollars, the govt can _nominally_ keep its payment promises by printing more USD.

Sure, the buying power of each USD for each SS recipient is severely reduced in that scenario but most citizens don't understand nominal dollars vs real buying power and therefore, it's a win-win for the govt.

A cryptocurrency that doesn't allow government flexibility to spend money that it doesn't have will have monumental political hurdles.

[1] http://blog.samaltman.com/american-equity

> Inflating currency is a hidden way to spend money it doesn't have.

This seems to be a recurring area of confusion in every thread about cryptocurrencies, so let's clear it up now:

* The amount of money in circulation is manipulated by the Federal Reserve. When the Fed increases the money supply ("printing money"), it does so through banks, by creating money and letting them lend it. The recipient of the "printed money" is someone taking out a loan.

* Deficits are when the government spends more money than it takes in in revenue. It borrows money (by issuing Treasury notes and bonds) and spends it on food stamps or bombers or whatever. The amount of money in circulation does not change and there's no direct effect on inflation.

These are two separate things. The government can run a deficit without the Federal Reserve printing money. The Fed can print money without the government borrowing anything. Inflation is emphatically not something the government does so it will have more money to spend.

When inflation is too low, we print money. When we want to spend more than we take in, we borrow. Two related but separate things.

> When inflation is too low, we print money.

This is really not how it works. Many economists think this is how it works but actual real world events have made it very clear that governments cannot simply manufacture inflation [1]. Governments like Japan wish they could produce inflation.

Inflation is much, much, much more complicated than merely "too much money." It's much more about real economic quantities affecting the price level [2]. This is usually driven by demand for something an economy cannot manufacture itself, not government spending. See oil shocks [3] for real inflation.

That said, it's always funny to see paranoid Americans go on about the government stealing money via inflation. What do you think money is? Talk about missing the forest for the trees.

[1] https://www.bloomberg.com/news/articles/2018-03-22/the-great...

[2] http://bilbo.economicoutlook.net/blog/?p=10554

[3] https://www.investopedia.com/ask/answers/06/oilpricesinflati...

But why do we "print more money" when inflation is too low?

A main reason is so that government debt can grow perpetually/exponentially. Hence a hidden tax taken from wages.

Opinions are my own not my employers.

you can build in inflation into any crypto if you want. It is just the parameters you set when you create it. Bitcoin has fixed supply, but there are plenty of other altcoins that have inflationary aspects to the coin. Until recently, I thought inflation was bad, but it can have positive aspects to re-distribute currency to spenders and non-hodlers. Its a way for people to get access to new money that otherwise is held by a few.

Social Security in the U.S. is inflation-adjusted.

The government also controls the COLA Cost of Living Adjustment. Ask retirees if they feel the modest COLA increases have kept up with real expenses.

against a benchmark formula derived by the same US govt that can print more money. There has also long been discussion that the existing inflation measures are inaccurate [0].

https://www.bloomberg.com/news/articles/2018-05-02/the-consu...

The big thing is the ability to pay bond repayments with inflated currency. The vast majority of government debt is fixed rate

Reply on news.ycombinator.com