Comment by seanmcdirmid | Hacker News Reader

Comment by seanmcdirmid | Hacker News Reader

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> globally-accepted (at the central bank level) reserve asset that's not subjected to any one nation-state's (or state union's) wims or woes

Gold is hardly that; Chinese reserves of gold right now are unknown, but they are currently the largest miner and buyer of it (the government, consumers also buy). Given that we aren't sure what the real supply is (China's biggest state secret), the price of gold will remain volatile.

> You think the Chinese want USD long-term? Why on earth would they?

They want to continue to sell us stuff without overheating their economy, which is why they are happy to buy treasuries at a loss (the interest is not high enough to cover inflation). No one is really unhappy, even the Chinese, that USD is a reserve currency as long as the American economy is robust enough to be the largest consumer as well as a debtor of last resort (via treasuries). Bitcoin does nothing here: the US is a safe entity to lend to, Bitcoin doesn't magically create a similar entity.

Put it this way: money simply can't be saved without someone else spending that same money at the same time. China couldn't just sit on all of their USD, gold, or bitcoins even if they wanted to. Buying and sitting on gold doesn't magically create or even preserve value that you can call on to use in the future.

The fix for China is simply to promote more domestic consumption so they need to save less, which would also balance out the export/import deficit. Given that consumption can only be increased gradually (too much inequality in China), this isn't going to happen with a switch flip and in the meantime the Chinese would definitely prefer stability.

> Put it this way: money simply can't be saved without someone else spending that same money at the same time.

Saving means keeping something aside that people will want in the future. Which means you can save without someone spending at the same time.

Money can't be saved without someone else borrowing it, even if that someone is just the bank.

Saving is normally transmuted into investment: spending money on machinery/land/buildings/software development etc that will offer a positive return in the future. Investment counts as someone else's income and therefore increases GDP.

Simply putting cash aside is basically hoarding, and normally loses you value over time unless the economy becomes deflationary, which tends to turn into a disinvestment and unemployment disaster.

In order for the economy to be efficient, production must be consumed at about the same time it is produced; otherwise you have to expend resources to store produced goods, which may be perishable or deprecate in other ways (e.g. technology).

Money, gold, or bitcoin doesn't save any value in itself. If everyone on earth was thrifty and living below their means, the extra value they were saving would pretty much evaporate: bread would rot, clothes would pile up and become moldy, iPhones would become outdated before they were even used. Eventually, the will to produce goes away as you can't sell all of what you are producing, and an equilibrium is reached where you live about at your means: if you must save for future expenses, this is only possible if someone is spending more now via a loan.

This is why China being a country of net-savers is bad, and a push for social or mandatory health insurance is a good thing: people don't need to save themselves for medical emergencies, and can instead consume. But until then, the ability for the Chinese government to lend money to someone reliable (the USA), is quite useful as there is a good chance they can effectively draw on their savings later.

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