Comment by paulpauper | Hacker News Reader

Comment by paulpauper | Hacker News Reader

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Over the past century, the strongest currencies, like the Swiss franc and US dollar, lost over 95% of their value. The average currency lost more than that, like around 98-99%. The worst currencies lost 100% of their value.

This only applies to foreign currencies relative to the US dollar, not the dollar itself given that the dollar is considered the universal, global unit of wealth. It's like saying that a 1kg weights .3k on mars. A kg is a kg anywhere. What she means to say is that "the US dollar has lost its purchasing power due to inflation" which she does later but still misleading. But this still it not quite the same as saying the dollar lost its value. The nice thing about owning dollars is even in spite of loss of purchasing power due to CPI, you have no forex risk. Foreign currencies not only losing purchasing power due to inflation but also due to falling against the US dollar.

And for longer-term savings instruments, here is a chart of the inflation-adjusted forward annualized rate of return of buying 10-year Treasury notes that year and holding them to maturity. You can see the three decades where bondholders got massacred, because the underlying dollars were devalued. During those times, anyone who bought Treasuries and held to maturity received annualized real returns of as low as -4% or -5% during the full duration of the note.

Again, all she did was cherry pick two bad periods. Over the past 100 years, 10-year bonds have tended to produce positive real returns.

Bitcoin and gold are popular but this does not make them good investments or a good hedge against inflation. Beanie babies were popular too. Overall, stocks have proven to be the best hedge against inflation. The S&P 500 has gained more than enough this year to overcome all inflation. Compare the charts of the total S&P 500 , nasdaq, or DJIA with any other asset class and stocks tend to win hands-down with few exceptions between.

,,The U.S. dollar was originally defined under a bimetallic standard of 371.25 grains (24.057 g) fine silver or, from 1837, 23.22 grains (1.505 g) fine gold, or $20.67 per troy ounce''.

The definition of the US dollar changed over time, but according to how it was defined originally, it lost 99% of its value.

The purpose of currency is not to retain long term value. The purpose is to act as a means of exchange so we don't have to barter for transactions.

If you want a long-term hold of value - buy some sort of asset that has utility beyond it's trading value.

This is the key thing 99.9% of the crypto community does not understand.

The winning crypto, one day, will be the one that DOES NOT make you rich.

> The winning crypto, one day, will be the one that DOES NOT make you rich.

Well said! I bailed on Bitcoin in 2017 when I started seeing breathless coverage on CNBC. Once the speculators get out, cryptocurrencies could become very powerful. Unfortunately, I don't see that happening any time soon. Crypto needs to become boring before it can become useful.

Exactly. This is why Eth has a wildly superior value proposition than pretty much any other coin, because it drives a useful blockchain ecosystem and isn’t just another stagnant store of value…

Unfortunately, ETH, while definitely better, still makes the same deflationary mistake. The ETH money supply growth is still effectively a negative interest rate since economies grow much much faster than their ever-shrinking coin generation.

It is the reason gas prices are choking Ethereum economic activity.

The last time the Dutch government issued a few billion in bonds it took the market 10 seconds to buy them all up. If you want safe and boring I wouldn't bet on bitcoin I'd bet on Northern Europe.

And these bonds are denominated in...?

Tulip bulbs. I read they have real growth opportunity.

A kg of gold is a kg of gold anywhere. So yes if you want to know the value of a currency you need to compare it to something else, USD not being an exception.

Central banks never held beanie baby reserves, whereas thousands of tons of gold are held among central bank reserves. Why do you suppose they hold it?

It is the remnant of pre-fiat money era when foreign trade was settled via specie flows. Although it was no longer possible for individuals to show up at the Fed and demand some gold for the dollar, it was still possible for nations to do that under the Bretton Woords system setup by Keynes to manage postwar international trade. When France demanded a large gold shipment from the U.S. to settle accounts, Nixon exited Bretton Woods agreement.

However that lack of convertability still left central banks with lots of Gold reserves that were no longer required to clear trade deficits, so they mostly sat on them. Some central banks decided to sell some of their gold and others bought some, but it is now basically another asset (like Beanie Babies) although gold lasts a lot longer and is more durable, and central banks have spent 100 years collecting it prior to the end of Bretton Woods.

For more info, see https://www.imf.org/external/about/histend.htm

Fun Fact: Many people still think that foreign trade is settled via specie flows, which is why they get all confused about how the US will "pay back" China, when of course China has already been paid (in dollars) and those dollars are not convertible to anything else. If China wants to, for example, use those dollars to retire its own RMB debt, it will need to sell those dollars for something like oil on the international commodity markets, and then sell the oil to its own people for their RMB, and then use those RMB to retire their own bonds. But of course China does not rely on anyone else to supply it with RMB anymore than the US relies on China to supply it with dollars. Once you take settlement of specie flows out of the mix, there is little reason to hold dollars other than sentimentality for the old metallic era.

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