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Comment by bjarneh | Hacker News Reader

> Fiat currencies are not “backed by nothing”. They are backed by the labor and assets of all the humans who have obligations to pay in fiat

So when we "print" more money, we print more labour?

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When (commercial or central) banks "print" money, they extend a loan which the debtor is obliged to repay in future, meaning they will have to sell labour (or earn returns on others' sold labour) to do so.

When cryptoenthusiasts "print" money, they burn electricity in exchange for digital tokens which they hope more people will want in future, but nobody is under any obligation to need any of the newly minted tokens at any point in future. (there probably is a niche cryptocurrency out there which only issues coins as repayable debt, and there definitely should be, but it's not the prevailing economic model)

No, but if there is an increase in productivity and you don’t print money there will be deflation.

Is deflation an awful situation ?

It is believed to be the primary reason for the great depression.

https://en.wikipedia.org/wiki/Causes_of_the_Great_Depression

Deflation or Hyperinflation on the other side is nothing compared to the crises we have today.

They are both a path for disaster, this is the primary fear of economists.

Good explanation: https://www.quora.com/Why-is-2-the-ideal-inflation-rate

"Our main finding is that the only episode in which we find evidence of a link between deflation and depression is the Great Depression (1929—34). We find virtually no evidence of such a link in any other period."

-- Federal Reserve Bank of Minneapolis (Research Department)

https://www.minneapolisfed.org/research/sr/sr331.pdf

I hoped for a logic rationale, not an interpretation of an historic fact :(

Let's suppose that today, a dollar will buy you a loaf of bread. Tommorrow, though, you have a very strong expectation that a dollar will buy you two loaves of bread, and it seems likely that next week a dollar will buy you a Lamborghini Countach.

What do you do?

1) Spend the least amount of money today that you can to continue living and put the rest under your mattress?

2) Anything else.

Being rational, you choose one. Now magnify this by every other rational actor in the area affected by deflation.

You can no longer buy bread because the grocer decided not to spend his money on new stocks. You no longer have a job because your employer would rather have your wages than your work. The widget factory expansion gets canceled because no one will loan the company money to pay for it.

Ask Japan.

And how do I verify that the money printed is not more than the increase in productivity ? Effectively stealing from my productivity through price inflation ?

First, that already occurs to the tune of of about 2% annually. The Fed aims for about 1-2% inflation annually to encourage investment.

But to answer your other question, in order to verify this you would need a complete-ish picture of the entire economic output of the country: how much it grew (Growth Rate), and how much currency was destroyed (Destruction Rate). With those metrics you can determine how much currency you need to print.

Nope, you mostly devalue existing claims which is - depending on your perspective - either a nice feature or a glaring bug.

When you create more money, which banks do every time they issue a loan, you are accommodating more saving in that currency.

If you're saving, you're not spending and if you're not spending you are denying other people an income.

The alternative is to confiscate savings, or ban them.

The bit the mainstream metallists miss is that deposits are a result of loans, not the other way around.

and most loans depend on some collateral as a deposit, some income producing property possibly with a personal guarantee.

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