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Comment by zacharyvoase | Hacker News Reader

Wow.

    Currencies are supposed to be used as a medium of exchange where, they
    facilitate transactions thus the multiplier effect kicks in and increases
    the economies wealth. An example of this, is fiscal stimulus used by the
    Obama Administration with the American Recovery and Reinvestment Act of
    2009[15] however, this is not happening with Bitcoin.

So Bitcoin doesn't have fiscal stimuli like regular currencies, and therefore it will experience depressions and recessions, unlike regular currencies? OH WAIT.

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You're confusing two points just like the author. First you're saying that controlling your currency doesn't help (hurts?). Look at how many recessions the US had when it was pegged to gold vs now, then get back to me on that one.

But, that doesn't really matter because Bitcoin is _not_ a national currency. It really is more like gold in that it's not really a currency in itself, but a way to store/transfer other currencies. No one buys something with gold without first doing the conversion to their local currency and I don't see that ever changing with Bitcoin either. And, it doesn't have to.

I don't see the problem of buying thins with bitcoins directly, as long as the merchants are willing to accept it. And it will happen when/if the market stabilizes. Gold has a lot of disadvantages (fractionating, checking for purity) that bitcoins doesn't.

I don't think that's true, that the economy was less stable a century ago than it is now. People used to give out 50 or even 100 year bonds, and recessions usually were not as bad and didn't last as long.

But even if I'm wrong, the currency not being based on gold is only one of a billion other things that has changed in the economy since then. It's a completely different world.

And while bitcoin is not a national currency it has the potential to become a universal currency online. People could work for bitcoins and use them to buy what they need online from other people that accept bitcoins. The currency could circulate through many hands without ever once being converted to another currency.

And since it's online any conversion could be done quickly and automatically so the effective difference between holding two different currencies wouldn't really matter. The only thing you would have to take into account is how likely they were to increase or decrease in value in the time that you aren't spending them, and bitcoin has a clear advantage in that regard.

Comments like this show a complete lack of understanding about economics and the positive impact government spending and lending can have on the economy. Just because recent monetary policy hasn't improved the economy as much as we would like is no excuse to give up all control over the monetary policy.

> So Bitcoin doesn't have fiscal stimuli like regular currencies, and therefore it will experience depressions and recessions, unlike regular currencies?

You missed the big problem; while one could make an argument that the lack of the capacity for monetary stimulus with Bitcoin is an issue, fiscal stimulus is quite possible with Bitcoin (there isn't any now, because no government uses Bitcoin as the currency in which its budget works), and the multiplier effect resulting from the velocity of money would conceptually work the same way as with any other currency (the inherently deflationary construction of Bitcoin makes the likely velocity lower, which might reduce the effectiveness of fiscal stimulus, but its still possible; and different forms of fiscal stimulus could address the velocity of money.)

Unlike other currencies, Bitcoin is limited in supply and produces a set amount every 10 minutes - as a result there is the potential for a liquidity trap because these new injections into the market may fail to stimulate economic growth. Whereas, fiat currencies are backed by Governments etc (something which Bitcoin isn't) and these currencies can theoretically have an unlimited amount supplied into the economy - and as I highlighted with the American Recovery and Reinvestment Act of 2009[1] government spending and lending can have a positive impact on the economy in particular through kick-starting the multiplier effect.

[1] http://en.wikipedia.org/wiki/American_Recovery_and_Reinvestm...

But my point is that the possibility of fiscal stimulus is not critical for a functioning economy, and in many cases simply does not work. I disagree with the monetarist principle that economic growth is stimulated by money injections—it's just people getting up and going to work in the morning, and inventing new things and discovering new processes. All this money mechanics stuff is distracting fluff.

ha ha. Yes. It's good that the USD was backend by the government. Who can bail out the bad credits? You can just print more Bitcoins?

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