Hacker News Reader

Comment by forty | Hacker News Reader

My understanding is that real money (let's say USD) have value because, thanks to loans/mortgages that are done in USD, you have a garantee that some people will always be really motivated to get some USD, to pay their loan/mortgage. Since those tends to last 20-30 years, that's good because in 20-30 years you know that your USD will have value to someone (to many people even)

On the other hand, no one really need to get bitcoins. It would not be surprising than in 20-30 years, no one cares about it (and it is actually the most likely scenario IMO).

View on HN

The real base reason fiat currency has value is because the government requires taxes to be paid in it, and they can use force to imprison you if don't pay your taxes. Everything else is a follow-on effect from that.

I don't really buy that argument. Yes, taxes force some level of demand, but that doesn't ensure any particular value of a dollar. The value of a dollar could shrink to arbitrarily low values, taxes only prop up the value of the entire monetary base. The value of the dollar is a follow on effect of what amounts to basically brand recognition from the days when the dollar actually had a commodity backing.

Fiat money, by definition, has value because the government says so. It's backed by police military. Government can run the money printing machine whenever they please. You can work hard all your life placing your savings in a bank account but the purchasing power will be a lot less in the future because of inflation. Bitcoin is fixed supply and Ethereum could even be deflationary in the future.

An actual monetarily deflationary currency would be just as bad as a monetarily inflating currency because it would distort the market just as much.

Government legal and enforcement efforts to promote a currency are neither sufficient or necessary for a currency to have value.

The value of a currency comes from its usefulness for transactions. Many ingredients come into play there, but the big one is wide acceptance.

Government efforts are a (for good or ill) common coercive and often successful tactic to create the conditions of wide acceptance.

But such efforts can fail and any other conditions that create wide acceptance are just as valid.

Reply on news.ycombinator.com