How will Bitcoin lead to the defunding of the US military? Can I get a specific, plausible answer that isn't some vague utopian libertarian handwave?
I don't think anyone seriously thinks Bitcoin will replace militaries completely.
May Satoshi save us all.
The importance of the role of the dollar as a reserve currency is also just an urban myth:
https://www.ussc.edu.au/analysis/the-reserve-currency-myth-t...
https://en.wikipedia.org/wiki/Petrodollar_recycling#Petrodol...
Most lay-persons don't understand it as a tax and therefore do not complain about it until they cannot afford things (housing, food, etc), and at which point the government distracts by bundling (hiding?) the inflation problem with the stagnant wage / income equality problem.
Eventually (every 2 decades) minimum wage in increased to catch up to inflation. Basically the inflationary tax strategy results in the US budget getting 2 decades of "extra taxes" (burdened by the lower middle class and the working classes[1]), then a reset, and then repeat.
[1] Note inflation as a tax strategy is actually a negative tax on low-interest debt holders like businesses, and home owners. It is also has a net-neutral effect on the investing class, because assets inflate proportionally. Meanwhile, credit card debt and other high-interest loans are not reduced as much (i.e. X% inflation of 19% credit card interest is a lot lower than, X% inflation of 2.5% mortgage interest).
> Say the US government issues a bond, some bank buys it, and eventually they sell it to the Federal Reserve. The US government has the same debt, and it seems to me that the only thing that has changed is that the bank now has cash where before it had a bond.
This is mischaracterizing the situation. It actually is: 1. A bank buys a newly issued bond; 2. The government spends that bond money on the private sector. 3. The Fed buys the bond by changing the values in its database (i.e. "printing money").
The best I can do to explain MMT is this:
1. The government spends as much as it wants and collects as much debt as it wants.
2. The government plays a game of chicken with the private sector (including other countries).
2.1. As long as everyone plays along, its a ponzi scheme that spirals upwards until it hits a ceiling (hyper inflation).
3. Meanwhile, until it hits the ceiling, it creates "manageable inflation" and/or deflates the rest of the world's assets.
3.1. As long as the rest of the world plays along (which it does), the extra cash funds innovation (i.e. the private sector) and improves quality of life world wide (i.e. better pharmaceuticals, cheaper computing, etc).
3.2. Meanwhile, in the US the "manageable inflation" is paid for by the poorest.
My personal thought: the world's interconnected market is so complex, that no one understands cause and effect (including the people making the rules). Currently, there is an emergent property of that complexity that the US, Japan, etc can "print infinite money" and some large group of people somewhere are left holding the bag worse-off for the US' decision, but no one really knows who this group is nor how much those people got fucked. Even the impacted individuals don't realize they are impacted because individually its a small impact, and innovation keeps improving their lives enough to not complain.
Hopefully a denationalized crypto (i.e. no ability for a single nation to print money) will help us simplify all of this to be understandable again.
From what I can read, no one knows how it works, people just know that it works.
Without a simpler design how can I know I’m not being harmed? I think this is one question that will help drive people to adopt a denationalized currency.
FWIW, I do not own any BTC or other crypto coins.
P.S. I highly recommend you research MMT. I think you'll find that no-one (including the most experienced economists) understands the details of how the emergent property works, they only understand that it works.
Because over the last decade the US has been quietly transitioning to the MMT mental model. MMT is how we got out of the 2008 recession and also how we are funding both the pandemic stimulus packages (in 2020 and again in 2021).
The inflation we previously discussed in this thread is, in my understanding, a direct consequence of MMT.
> "Congress has been showing us — in practice if not in its rhetoric – exactly how M.M.T. works: It committed trillions of dollars this spring that in the conventional economic sense it did not ‘have.’ It didn’t raise taxes or borrow from China to come up with dollars to support our ailing economy. Instead, lawmakers simply voted to pass spending bills, which effectively ordered up trillions of dollars from the government’s bank, the Federal Reserve. In reality, that’s how all government spending is paid for." [0]
> When President Trump signed the $2 trillion CARES Act into law, the federal government sold bonds to fund the new spending, expanding the government debt. However, the largest purchaser of those bonds was the Fed. ... As a currency issuer, the federal government can create more money to buy Treasuries and pay off its debts, making an involuntary default impossible. Under the Fed’s jurisdiction, it could purchase all U.S. Treasuries tomorrow and retire the entire U.S. federal debt, something Japan has already done with nearly half of its debt. ... Is the Fed’s financing of the debt created by the CARES Act fueling inflation? Not quite. The annual U.S. inflation rate currently stands at around one percent, half of the Fed’s two percent target. In fact, over the past decade, the Fed has struggled to increase the U.S. inflation rate. There actually is not enough spending (aggregate demand) in the U.S. economy to hit the Fed’s inflation goal. [2]
> Modern Monetary Theory (MMT) is alive and well in the United States. While MMT is derided by mainstream economists, the federal government is practicing MMT. From running massive federal government deficits, to the operations of the Federal Open Market Committee (FOMC) by the Federal Reserve Bank, the United States is practicing a policy of MMT that is currently underpinning the economy of the United States. ... The U.S. Federal Reserve (Fed) began its own form of quantitative easing (QE1) on November 25, 2008 by purchasing $600 billion in agency mortgage-backed securities (MBS) and agency debt. [3]
> While MMT may seem like a purely theoretical construct, it should be recognized that many governments, including the U.S. government, are effectively already putting MMT into practice. [4]
If you're still not convinced that the US is actively applying MMT in practice thats ok, lets wait and find out more. Meanwhile, thanks for catalyzing my motivation to research all of this! :)
[0] https://www.nytimes.com/2020/06/09/opinion/us-deficit-corona...
[1] https://www.cnbc.com/2020/04/29/op-ed-pandemic-moves-modern-...
[2] https://policy-perspectives.org/2020/10/23/modern-monetary-t...
[3] https://intpolicydigest.org/the-u-s-has-embraced-modern-mone...
[4] https://www.fa-mag.com/news/america-is-on-the-road-to-mmt-58...
However, the continued liberal application of QE 1. Could hit a hyper inflation ceiling (hurting the poorest). 2. Weakens USD compared to other currencies (as we have seen through 2020. Hurting every entity that holds cash i.e. typically the poorest). 3. Reduces the ability for the US to apply QE in the future. Hurting our ability to tackle the next crisis, which will predominantly hurt the poorest.
All of this to say, a portion of the lost trust in the USD is being put into crypto to hedge for the medium term, and (for better or worse) to create a long term denationalized currency where no handful of politicians can choose to use QE rather than making good fiscal policy decisions quickly.
I'm not making a judgement about its merits, it might end up horrible.
All I'm saying is, there is a trend towards denationalized currency as a hedge against bad monetary policy. Based on this trend something like BTC will likely become the new gold standard used for slow transactions (i.e. reconciliation) between governments and large corporations.
Will it be BTC? I don't know. Will it be a good thing? I don't know.
I do know, the trend suggests a particular future, and trying to root out the motivations suggest the trend will continue.
But, if you are willing to acknowledge both Square and Tesla are run by very intelligent people, these are quotes about their motivations:
> However, when fiat currency has negative real interest, only a fool wouldn’t look elsewhere. [0]
> Square believes that cryptocurrency ... provides a way for the world to participate in a global monetary system, which aligns with the company’s purpose. [1]
Based on my research into the motivations for BTC (or any crypto), these quotes are not unique. The majority of the root motivations seem to be 1. "to hedge against bad monetary policy" and 2. "to create a global monetary system" i.e. create a single global monetary policy.
Meanwhile, if enough S&P companies follow Square and Tesla the US government will find BTC is "too big to fail" and adopt it wholly. But I'm not convinced other S&P companies will follow. Lets see.
[0] https://twitter.com/elonmusk/status/1362600676174557186
[1] https://www.cnbc.com/2020/10/08/square-buys-50-million-in-bi...