What a time to be alive. No wonder the M2 money supply is at an all time high. No one has any idea of what the intrinsic value is of anything.
I don't have strong opinions on fiat vs crypto, primarily because it seems like a boring question. Whatever currency is the future, currency isn't the present or the future of investments, productive assets are.
Scare quotes used because a ton of the price of those assets now reflects a monetary premium. I.e. a portion of the price of a house is its value for living or renting out in a given area, but a lot of it is its value as a scarce asset that is somewhat resistant to inflation.
Needless to say, this is not a great allocation of resources and is an incredibly inefficient way for saving to work.
So you’re suggesting this is a bad thing? And the alternative of hoarding unproductive assets is preferable?
> houses...a lot of it is its value as a scarce asset that is somewhat resistant to inflation.
The reason houses are expensive has nothing to do with being resistant to inflation. They get expensive when the supply of the land they sit on gets used up relative to the number of people who want to live in a given area.
Houses in rural Kentucky aren’t expensive at all, because nobody wants to live there. That’s the main factor driving prices, not some inflation hedge. If the only reason people bought houses was to hedge inflation, they’d be better off buying stocks which are even more productive and produce returns above inflation.
> this is not a great allocation of resources and is an incredibly inefficient way for saving to work.
After reading this, I could not be more confused.
So you’re saying that, the inflation mechanics of fiat is bad because it encourages people to invest in productive businesses and build useful real estate? And it’d be more efficient for society if everybody kept a useless stash of gold bars in their basement and took no risk?
How would this make less people want to live in SF and houses suddenly cheaper?
Could it be that all this worry about printing money really doesn't matter?
Read as: as long as others want access and are not fully satiated to you, your affiliates, or what you both possess
We are in an era where saving does not exist, where interest rates are negative.
The end result is an enormous asset bubble as their only solution is to print money to prevent any actual deflation from happening as that would implode the financial system.
Pretty clever trick but it’s only a random accident of the financialized systems that make modern life possible. It’s like how all the pandemic chaos only increased corporate profits and government power.
It’s just endless consistent accidents that never benefit 95% of people.
The value of US currency is backed, whether you like it or not, by US's military might. Very much not nothing
You have it backwards. The military is an instrument in protecting the US dollar's dominance, control and influence as a reserve currency.
So I don't think that it's a good argument for the USD being backed by value.
I'm pro crypto, but this is ridiculous.
No intrinsic value? I can spend my dollars anywhere in the world with no input or reliance on any other entity. They might be the most valuable asset on the planet.
However once you have them, you get rid of them. Good assets don't lose value over time. https://www.statista.com/statistics/1032048/value-us-dollar-...
https://en.m.wikipedia.org/wiki/Civil_forfeiture_in_the_Unit...
https://en.m.wikipedia.org/wiki/Executive_Order_6102
https://en.m.wikipedia.org/wiki/Greek_austerity_packages
A 51% attack doesn’t let the bad actor steal someone else’s coins. It lets them reverse and double spend their own spending. They can’t directly steal coins. The flexibility of open source software gives opportunities to mitigate such an event, should it happen.
USD in paper form can also be burned for warmth, or used to write on. In coin form, it has the same intrinsic value as the metal.
Besides, everything you said, including tax payment and keeping out of jail, also applies to the Venezuelan bolivar and quite a few other fiat currencies that completely crashed in value due to hyper-inflation.
So I don't think those are good arguments for the USD being valuable or having substantial intrinsic value.
Yes, I agree.
> Besides, everything you said, including tax payment and keeping out of jail, also applies to the Venezuelan bolivar and quite a few other fiat currencies that completely crashed in value due to hyper-inflation.
USD will always be valuable as long as the US government exists and taxes its citizens in USD. This means that there will always be demand for USD (again, as long as the US government exists).
I don't think it's wrong to say that the US government is more stable than the other governments that print currencies that are less stable.
For the USD to have value, you need technological innovation and productivity. You need to export more value than you import.
Simply existing and taxing your population does not give your currency value.
However the flammability is a good example of intrinsic value
There are also many, many situations where I’d rather have dollars than bread.
Although I think we should mention that one can write a sentence for bread that is very similar to the one you gave for dollars. Bread only has value if you are hungry and don't have other more preferable food sources.
I don't understand what specifically makes some kind of value "intrinsic" under your model.
"In philosophy and ethics, an end, or telos, is the ultimate goal in a series of steps. For example, according to Aristotle the end of everything we do is happiness. It is contrasted to a means, which is something that helps you achieve that goal. For example, money or power may be said to be a means to the end of happiness."
https://en.wikipedia.org/wiki/Intrinsic_value_%28ethics%29
Fiat currency and bitcoin, and to some extent gold, are not an end-in-themselves but just a means to acquire something which is actually useful to you. They are not in and of themselves useful to anybody.
If those goals were satisfied through other means, whether by using bio-engineering to modify my physiology or through some other process, would bread no longer have intrinsic value?
What are some examples beyond bread that meet your criteria of intrinsically valuable?
How do you determine if something is an “end-in-itself”? I find it difficult to definitively attribute that label to anything.
- Medium of exchange
- Store of value
Fiat currency has utility for both. If crypto was more widely accepted by merchants (thereby satisfying bullet point #1) then this certainly changes the game. But it's not.
Comparing both in their current capacities is disingenuous.
It is at the whims of whoever decides the interest rate.
Which is precisely what makes it a fiat currency - its value is determined by a government entity.
> A US Government 10 yr bond currently yields 0.91%, and has been falling consecutively since its peak in 1981.
You know there are other fiat currencies right?
> not sure how you determined there is much utility in using it for saving.
"store of value" doesn't mean simply saving, it means the asset doesn't depreciate. The alternative to a fiat currency is to hold your goods as is and barter them, which relative to a fiat currency is a bad idea. Your cow eventually dies, your milk eventually soils, your tree eventually dies, etc. etc. In other words those assets all eventually depreciate to zero.