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Comment by DennisP | Hacker News Reader

Hayek points out that you wouldn't choose an inflationary currency. He relies on that to limit overall inflation. But you also don't have the deflationary problems of the gold standard, since it's possible to make more money at will if you need it.

Regarding payments: suppose we were starting from scratch, with two proposed systems: (1) user signs transactions that authorize transfers with specific recipients and amounts, or (2) user gives multiple parties enough information to withdraw unlimited amounts, hoping unauthorized parties don't get hold of it, and we make up for the inevitable thefts with statistical antifraud protection, manual intervention, and banks just eating the losses.

I can't imagine anyone choosing the second option.

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>suppose we were starting from scratch

"What-ifs" are always an interesting game but practically we're veeeery far from starting from scratch with the economy. But okay, I'll play.

>user signs transactions that authorize transfers with specific recipients and amounts

Great, but you've only secured one tiny part of the "earn money/spend money" loop. What if the service/goods you buy turns out to be a scam or something defective? What if my company stops paying me? What if the government starts unfairly taxing me and threatens to throw me in jail if I don't comply?

Our current economy is a lot more than just adding a value on one counter while decrementing an other. It's a complex web of laws, regulations and arbitrations that mean that I can buy something on Amazon without having to cross my fingers that I'll get what I paid for.

That's where this whole libertarian wet dream collapses for me. The whole argument behind bitcoin seems to be "what if your government turns into a fascist state, do you really want them to control your money?"

And clearly the answer is no, but if we end up in this situation my savings account might not be the first of my worries. Nor would having my money in bitcoins prevent me from being thrown in jail if I refuse to yield my secret keys to the neo-gestapo.

On the other hand if the government is benevolent and works for the good of the people then I really want it to be able to control the currency, be able to cease the money generated by illegal activities and tax legitimate income fairly in order to build roads, hospitals, schools, the police and firestations (amongst other things).

I don't want to live in a society where I can't trust my democratically elected government. So maybe we should work on fixing that rather than coming up with incomplete workarounds. "Hey, my sister got detained for thought crime yesterday, but at least I can send her Bitcoins to prison unhindered! Take that Ür-Hitler!"

> What if the service/goods you buy turns out to be a scam or something defective?

Reputation systems reportedly have worked well on darknet markets, but it's also simple to do third-party arbitration; when the two parties agree, the arbitrator doesn't even have to be aware of the transaction (or get paid).

> What if my company stops paying me?

You sue or quit, just like now. Fiat has no particular protection here. I'm arguing for a payment system, not a new judicial system.

> What if the government starts unfairly taxing me and threatens to throw me in jail if I don't comply?

I don't advocate cryptocurrency as a way to avoid taxes. However, if they did make our existing taxes hard to collect, various other taxes could be used instead. E.g. I'm a fan of carbon taxes at major point sources; just count tons of coal coming out of the mine.

The remaining paragraphs argue with points I didn't make. However, I'll mention that capital controls and confiscation are not that uncommon in emerging markets, and while your money might not be your biggest problem in that scenario, it can sometimes help solve your other problems.

> you wouldn't choose an inflationary currency.

Inflation only hurts people that hold non-trivial amounts of that asset. Most people benefit from inflation as it makes their debts easier to pay.

However, it's foolish to assume most people make make such choices rationally. People would choose currencies based on popularity and/or whatever they heard on TV.

> I can't imagine anyone choosing the second option.

"Signing transactions and having to authorize every transfer sounds like a lot of work. Bank $FOO will handle all that for me, for 'free' if I open a new account before $DATE."

edit:

Sure, the ability to use proper user-controlled, signed/authenticated transactions would be wonderful, regardless of the currency.

You're proposing a false dichotomy regarding payments... As if the cryptocurrency way has no flaws and the other is chalk full of them.

If life has taught us anything it is that; Given things of value, people will find a way to defraud, game or otherwise manipulate said items of value.

I am positive that people will abuse or are abusing the cryptosystems to the same extent people abuse fiat given more time.

I'm not saying that at all, and fiat payment security is improving. But the very fact that it's able to improve implies that some systems are more secure than others.

"Hayek points out that you wouldn't choose an inflationary currency. He relies on that to limit overall inflation. But you also don't have the deflationary problems of the gold standard, since it's possible to make more money at will if you need it."

Ideally, you'd want your currency to expand (or contract, heaven forbid) at the same rate as the economy. But that's a little hard to do. A deflationary currency is way bad. (By definition, you're economically irrational if you spend it.) On the other hand, uncontrolled inflation is way bad, too. "Controlled" (in some, hopefully meaningful, sense of the word) inflationary currency is probably the best of the options.

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