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Comment by xiphias2 | Hacker News Reader

,,With interest rates at zero, how can a dollar whose supply is rising, in M2 terms, by 24% annually compete with gold, whose supply increases are limited by mining technology, or Bitcoin, with a supply encoded in algorithms?''

It can't. The world doesn't work long term with 25% yearly inflation.

All the reasons written in the article are ,,USD is the biggest currency, so it will remain the biggest forever''.

Historically currencies were swinging between store of value and medium of exchange (gold can't be transferred digitally, USD can). It seems like Bitcoin is a great balance between the two.

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I don’t think increase in money supply is the only factor that contributes to inflation. Its been a while, but I think inflation is caused by a combination of factors, including the availability of a currency, demand for that currency, availability of goods and services that can purchased using that currency, etc.

An increase in supply of the US dollar, may just be due to the increased demand for the currency, as well as increases in the availability/demand for goods and services (e.g., reduction in scarcity).

Increasing M2 doesn’t create inflation without an increase in the velocity of money, which has fallen off a cliff: https://fred.stlouisfed.org/series/M2V

Here’s an article from the fed about inflation and the velocity of money: https://www.stlouisfed.org/on-the-economy/2014/september/wha...

It doesn't create inflation as measured by CPI. It did create inflation in asset prices.

How can anyone be so oblivious to it?

It's important to note that assets are outside the "real economy".

Inflation has been "stubbornly low" for a decade, and yet assets have had quite the bull market.

The rate of inflation seems to have diverged between consumer goods and assets (like stocks and real estate).

M2 doesn't tell the whole story. Inflation of the money supply is being countered by deflation from debts that are likely to default. When a borrower defaults that essentially destroys money. Banks are still not properly marking to market a lot of loans on their balance sheets. This deflation is kind of hidden in official statistics but is priced in by markets.

How can gold and bitcoin keep up with economic growth?

Rewarding hodl is a negative feature for a currency!

It cannot but currently dollar cannot as well.

Right now central banks are printing money and giving it to already insanely rich people, how does that help economic growth and quality of life?

At least bitcoin will be a little more democratic so that it will grow the economy better than current fiat system.

Normally best system would be a nationalised central bank that is actively trying to increase quality of life of citizens but as you can see we are not living in an ideal world.

> Right now central banks are printing money and giving it to already insanely rich people, how does that help economic growth and quality of life?

Because money doesn't get thrown in a vault somewhere; it gets spent on goods and services.

It looks more like they are buying tech companies and IPOs with the money. In self-perpetuating cycle. One wonders how long that can go on...

What happens when the ubiquity of the dollar is combined with a globalized world? It seems like it will take the combination of failure in the dollar + abandonment of globalization by world powers for a shift to deflationary reserves to occur. Regardless, the only loser is the poor and middle class. The wealthy will have enough Bitcoin and gold.

Huh, interesting point there. Do the rich benefit from a deflationary spiral? It seems like either they do or they might perceive themselves as benefiting in the short term. That’s pretty disastrous.

The wealthy always benefit financially, high inflation, low inflation, high interest rates, low interest rates.

If you own a 1% of world, and productivity of the world doubles, the productivity of what you own doubles.

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