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Comment by Geee | Hacker News Reader

I mean specifically the modern inflationist central banking, which started in the 20th century, and more precisely in 1914 when British pound lost its 1:1 backing in gold, ending the era of the gold standard.

You must understand that monetary theft has always happened in many forms, in addition to central banking and fiat currency. For example, even in a gold coin economy, the rulers have always sought to debase the coins with various methods, such as mixing them with less valuable metals. In history, everyone understood that debasing gold coins was theft. Everything worked fine when central banks succeeded in defending the gold standard.

However, things changed and this theft became modern economics, and it's difficult to question, because it's "science".

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I see. The issue with this line of argument is that the gold standard is not good for several of the things we want currencies to do, including the ability to control their supply. It might seem like simply debasing gold coins as you say, but it's not quite. We just went through two very weird years in which the economy went sideways, but we had no massive unemployment, no bread lines and no revolutions. There is a price for it, both in inflation and in unequal access to benefits, with richer people and companies having access to very cheap money. But it's a trade-off either way, not simply theft as you imply.

There's an argument to be made, that the relative stability here is bought from volatility and economic suffering in poorer countries, because the US dollar is the global reserve currency. In addition, there's a few other relatively strong currencies, which are used as reserves for weaker currencies. It seems that globally, the success in these countries is bought from weakening the currencies in poorer countries.

There's also a lot of historical inaccuracies and rewriting of history to defend this system. For example, the great depression is partly blamed on the gold standard, but in reality it happened exactly because the gold standard was already broken (since 1914), which resulted in wildly wrong speculative monetary practices and policies.[0]

As you said there's plausible rational arguments from both sides. But then again, are the central banks even following practices based on economics, or did they become politicized and corrupted, because of their central position in the economy? We see blatant monetary corruption happening in autocracies, but is it happening in western economies too, but it's just less obvious?

I have used years to study these issues and I'm becoming more convinced every day, that it's time for a hard money standard, i.e. Bitcoin. And, I think it's inevitable, because historically, people always vote for harder money in a free market.

[0] From this perspective, the Austrian School of economics has the correct explanation for the Great Depression. https://en.wikipedia.org/wiki/Great_Depression#Austrian_Scho...

> It seems that globally, the success in these countries is bought from weakening the currencies in poorer countries.

Perhaps, but the period since 1914 saw the rise of many peripherical countries, notably China, who also have a tight control over their monetary policy, and use it all the time for their economic plans. For your counterfactual to make sense, you would have to present an example of a country that developed using the gold standard.

> But then again, are the central banks even following practices based on economics, or did they become politicized and corrupted, because of their central position in the economy? We see blatant monetary corruption happening in autocracies, but is it happening in western economies too, but it's just less obvious?

There is corruption and inefficiency at every level, but I fail to see how that would change by going back to the gold standard or cryptocurrencies for that matter.

I am familiar with the Austrian line of argument, and I'm sure in your years of study you have come across many criticisms of it, so I won't bother, but let's just say I don't think this perspective has brought us tangible benefits at all. Meanwhile, the imperfect system we have has shown itself to be at least robust to major hiccups recently.

I'm not saying that economic development isn't possible with fiat currency. What I'm saying is that fiat currency is immoral; it's a form of slavery. It disincentivizes people from saving and taking responsibility, and accelerates consumption and throwaway culture. Because of this, people are overworked and the climate and the planet suffers. Meanwhile, wealth is siphoned to the elite.

If people are denied the use of gold as money, then they can't. There are many regions, where citizens are basically prisoned by their central bank, and can't use gold or US dollars.

Also, Switzerland used gold backed currency until 1999, and they are one of the richest countries per capita. There's no reason to believe that they would have done better with a fiat currency.

> There is corruption and inefficiency at every level, but I fail to see how that would change by going back to the gold standard or cryptocurrencies for that matter.

Self-custodied Bitcoin is impossible to inflate.

> Meanwhile, the imperfect system we have has shown itself to be at least robust to major hiccups recently.

Disagree. We are now entering a long period of depression.

> It disincentivizes people from saving

There is no virtue in saving. Money that is hoarded reduces "consumption" but also reduces "meaningful" investments, no matter your definition of "meaningful" and "wasteful".

> Bitcoin is impossible to inflate, like gold.

Or Litecoin. Or Bitcoin Cash, or BSV. Individually, they are all "fixed supply", but as whole, any crypto currency that enters the market and gets traded should be counted as part of the asset reserves.

Unless, of course, we get some central entity to force everyone else to adopt the Highlander approach and claim "there can be only one"...

Oopsies.

That stock market and real estate bubble is meaningful? It's better for the economy to let people save, instead of forcing them to invest just to escape inflation.

No, money has strong network effects an tends to one.

> That stock That stock market and real estate bubble is meaningful? and real estate bubble is meaningful?

Correlation is not causation. Japan has fiat currency and has not had significant inflation for decades. Housing is affordable. It's not just because most countries have "bad" monetary policy involving fiat currency that makes it impossible to have "good" monetary policy.

> money has strong network effects

In relation to currencies controlled by central banks? When used by governments as single legal tender? Perhaps.

But just look at any chart and see how BTC market cap relative to the rest of the crypto keeps going down. The number of Ethereum wallets is already larger than BTC. BTC is not the dominant chain anymore. Whatever advantage it had in terms of "network effects", it is evaporated.

BTC is a failed experiment. It failed as a currency and it never was a "store of value". And let's not even get on the topic of how BTC price is so heavily manipulated by Tether, to the point that exchanges should only display BTC/USDT if they honestly wanted to reflect their dependence on Tether's "fractional reserve".

We will wait until they crash to see how the maxis will be crying that Tether is too big to fail or something like it.

Bitcoin doesn't have competition. Ethereum isn't money, and doesn't try to be money.

Why would Bitcoin be the most affected by Tether? USDT is used on all markets. It seems that Ethereum, DeFi, NFTs etc. have way more of shady stuff going on.

I didn't say anything about "trying to be money", and for the purposes of the debate it doesn't matter. BTC already failed at what it tries to be, anyway, there is no point in arguing semantics.

Re: Tether. They were constantly touting that their reserves were in BTC. When it depegs, BTC is the first that is going to crater.

Bitcoin is money, it doesn't try to be anything. It has succeeded far beoynd any expectations.

Not true. Tether should have USD equivalent reserves, but I don't care about them. I don't care if they go bust.

How can you say that it works as money, if (e.g) when Tesla announced they were accepting BTC for payments, but they would not return the same amount of BTC if a return request was made and the price of BTC changed since the payment?

> Tether should have USD equivalent reserves

Should, but they don't. At least since 2019 they already dropped all pretenses of having USD to back all USDT they minted. With the bull run started in 2020, they've used it as justification for all their wild minting with the price of the BTC. Whenever the price of BTC started to go down, they would "miraculously" mint a bunch of USDT and use to buy more BTC - in a clear attempt of market manipulation.

You are saying you don't care if they go bust, but you should at least be honest with yourself and be open to the possibility that all the market for crypto is built on a lie. The upcoming crash will be entirely on them.

Yes, I know it's volatile and has practical issues. It gets better every day, because it's just a matter of maturing in the market. The primary purpose of money is to be a store of value, which it has done very well, from 2009 to this day.

USDT minting means that someone buys USDT with USD. There's nothing funny going on. Most of the USD in this market is invisible, because it's on exchanges, not in stablecoins. There's also USDC and BUSD, which are combined as big as USDT. I hope Tether falls, if that means cheaper Bitcoin.

> USDT minting means that someone buys USDT with USD.

No, it does not. Even themselves admitted it. They have minted before just based on the "value of their reserves", which no one can really verify.

If you continue with arguments that are provably false and blatant circular logic, I think I am done here.

> Everything worked fine when central banks succeeded in defending the gold standard.

No, this is revisionism.

By the way, you could totally use a gold standard nowadays in a centralized communist country, but if you believe in debt, risk and all that liberalist stuff, better not go back to that.

In modern economies, as production and population increase, you need more money in the system. If money is not available (because backed by gold), you'll need to augment your fractional banking ratios. One minor banking crisis and it's 1797/1893 all over again.

Bitcoin doesn't need banks, because it can be practically self-custodied, and therefore the economy runs mostly on full reserve. Fractional banking is still possible, but the risks are contained within private banks and their private IOUs.

You don't need more money, because Bitcoin is infinitely divisible. It just means that the value of Bitcoin increases, when demand grows or productivity increases.

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