Hacker News Reader

Comment by Torwald | Hacker News Reader

> Have any two financial crises happened for the same reasons ?

Yes, all of them for the same reason: FIAT currency instead of real money.

Fiat currency is one of the reasons society has had a lot more stability in the value of money in comparison to any other time in the past. Currencies tied to commodities such as gold, silver, etc have always been more volatile due to supply oscillation, business cycles and periodic bursts of 'pocket' recessions.

The problem with fiat currencies is that there is just a little too much temptation to print a truckload when there are "emergencies". This often causes hyperinflation or massive inequality leading to the rise of populism and democratic backsliding.

Printing a truckload of currency is often a byproduct of populism. Even without fiat currencies, governments would simply use other methods to debase the value of their coins [1]

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

The constant inflation due to fiat currency is worse than the effects you describe, because it has destroyed more wealth.

Yes, that’s were no banking panics before the end of Bretton Woods in 1971

What caused the many many financial panics of the 19th century and the Great Depression?

What’s “real” money? We going back to trading livestock?

You realize even hard specie only has value because of government fiat declaring that it’s appropriate to use for public debts right?

> What’s “real” money?

Money based on value of some kind, as opposed to debt.

Who decides what "value" is or what things should be values at? The whole point of money is to make unspecified commitments for future production. If you want direct exchange of value then you're bartering.

The only reason we ever decided on gold or silver as the store of value was because kings made it so.

> Who decides what "value" is or what things should be values at?

The buyer. By paying the price.

So we're back to barter again, because you're going to need to negotiate value independently for each and every traded good if you don't have an agreed upon unit of accounting (i.e. defined currency).

Real money would be any instrument that's based on work already performed instead of work promised to be performed in the future, i.e. not debt based.

But that's not actually what you want for preserving value: you want to know that a unit now buys you a loaf of bread today or next week or in ten or a hundred years time. Currency is useful because you can use it to buy future work.

Reply on news.ycombinator.com