Hacker News Reader

Comment by moduspol | Hacker News Reader

Well, whether or not it's a problem depends on who you're asking, but:

Remember in the first Captain America movie when his first role in the military was on a tour raising money for the war? That was actually a thing at that point in time. You had to actually convince people to invest or give money to fund a war. The USD was tied to gold in the real world and they couldn't just create more.

Nowadays, we don't have that. A President might have to ask Congress for funding, possibly. And even then, that money might simply be borrowed (adding systemic risk) or printed (devaluing the rest of our money). As a result, the amount of public support required for waging a war (or any huge expenditure) is much lower.

That's a good thing if the people in power are correct despite popular opinion. That's not always the case, though.

View on HN

Seems like a horribly inefficient national defense strategy. A country is on the brink of having a war levied against them by a belligerent, and plead for funds... some are scared for their life and donate their entire savings, others give nothing because they think/know their neighbors will.

Anyway, this is not a primary reason for having fiat money, but it is a reason.

Yep. I certainly wouldn't want to go to war asking for donations if the other side can use a pen to put half the value of his country's money toward fighting me.

It's definitely a benefit--it just also has the potential to be abused.

And yet somehow America didn't lose WWII. This type of rhetoric (that we need big government to make decisions for us) scares me a little.

Also, people don't need to be altruistic saviors, they can buy bonds.

Nobody donated money (well, ok, maybe....), people bought treasury bonds of varying flavors, and intentionally devaluing your currency by "printing money" to pay for war expenses is essentially always the last thing you do before your government goes down in flames, one way or another---either you just lost the military war, or you destroyed your economy.

The president can’t spend money without authorization from congress (see Authorization for Use of Military Force congress keeps renewing) It doesn’t matter where the money comes from. Congress doesn’t just control how tax receipts can be spent, they also control how much can be borrowed and when, and directs the president in how to use it. And neither the president nor congress control monetary policy.

The US currency was effectively not tied to gold by the time of the second world war:

https://www.federalreservehistory.org/essays/roosevelts_gold...

You only need to take a look at the many other highly intrusive powers the federal government was able to exercise at the time (everything from directing economic production, resource and price control, conscripting large chunks of the population into the war effort to internment of some of its own citizens) to recognize the idea a cryptocurrency would somehow act as a check is far fetched to put it very mildly.

But they had to exercise those powers, which themselves had significant political costs since they were explicitly seen and felt by the population.

Now compare that to the wars in Iraq and Afghanistan, or Syria. The difference is clear.

Besides, cryptocurrencies have a property gold doesn't: They take up no physical space and even huge quantities can be hidden easily and/or lost forever. If your government became oppressive, you couldn't take your life's savings in gold and leave the country. They could feasibly confiscate your gold [1] in a way they can't with crypto.

They can still point guns at you, conscript you, or imprison you, but their options are lot more limited with crypto.

[1] https://en.wikipedia.org/wiki/Executive_Order_6102

I don't see the difference or understand what the difference is supposed to be or the rest of your argument at all, really. First you said something inaccurate about the gold standard on the basis of a comic book movie. Now you're saying what exactly?

"And even then, that money might simply be borrowed (adding systemic risk)..."

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

Cap, in the movie, was selling war bonds; i.e. getting people to loan money to the government. Nobody donated money to pay for WWII. (Donating metals, though, was a thing.)

In fact, my personal feeling is that retail war bonds were more a war propaganda/patriotism thing and the majority of the funding was through the normal commercial bond market.

I suspect your idea of the power of the executive branch is significantly and unrealistically inflated.

Cryptocurrencies would indeed preclude printing money.

>that money might simply be borrowed

...but I don't think any cryptocurrency would have any effect on any government's hability to borrow money. What would stop a lender from trading 1 BTC from a note saying "I.O.U. 1 BTC"?

They could still borrow, just not indefinitely the way they do now.

How come? Now, they just sell more I.O.U.s to pay the ones that reach the due date. They could do exactly the same in BTC, gold, tulips, or whatever.

To whom do they sell the IOUs?

There's a limited number of Bitcoin in existence, and with each one you buy (issuing an IOU in return), the price goes up and people doubt your ability to pay back more and more.

This is almost exactly what's happening with Puerto Rico's debt crisis [1]. They've sold a bunch of bonds, were downgraded to "junk status" in 2014, and then defaulted on a bunch of them in 2015. Eventually you have to face the music and cannot borrow any more.

[1] https://en.wikipedia.org/wiki/Puerto_Rican_government-debt_c...

No one distinguishes between "original" USDs and accounting IOUs in a bank. In Bitcoin, people can and do distinguish between a real Bitcoin and IOUs for one.

People can and do distinguish between dollars and IOUs, the IOUs are called US Treasury Bonds.

Sure, they're traded at very close to face value, but that's because traders trust the US government to pay. That's different for governments considered at risk of default. That could also become different for the US government, if the economy really goes south or if enough people start talking about defaults.

I don't see how criptocurrencies would change any of that. For how much less than 1 BTC would people trade a 1 BTC IOU backed by the US government?

I’m not talking about bonds, but fractional reserve banking, where a bank will credit two accounts with $1 when it has only $1 in cash.

Edit: As it stands now, there is a "lender of last resort" that can create new money as needed to fill in the gaps if those two account holders want to get their money out, so there's no need to distinguish the original vs bank-created money. But you can't create new Bitcoins, so there is a reason to distinguish Bitcoins on the blockchain vs those IOUs.

But you are asking a sovereign authority, with few restrictions in terms of monetary policy, to voluntarily restrict itself for no benefit.

The benefit is a more free society and less systemic risk.

It doesn't benefit the sovereign authority directly, but neither does freedom of speech, religion, etc.

The gold standard, in the same way, formerly removed much of the ability to conduct monetary policy, and it was supplanted because it turned out that counter-cyclical policy was very useful.

Cryptocurrency is similar except that it wastes a lot more energy to accomplish the same thing.

The government, of course, retains unlimited power to tax, so the ability to fund whatever it wants is retained in all cases.

"Cryptocurrency is similar except that it wastes a lot more energy to accomplish the same thing."

Out of curiosity, what's the carbon footprint of bitcoin mining as compared to gold mining (and then parking the gold in a depository vault)?

Gold mining is ecologically destructive, but varies based on the form. When gold becomes absurdly expensive, as would happen under a renewed gold standard, it would be very likely that the proposals to mine the sea floor would be pursued, and could have major ecological damage. As for carbon footprint, specifically, I don't know.

Thankfully, USD is not based on gold at all.

Reply on news.ycombinator.com