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Comment by gwbas1c | Hacker News Reader

> the actual reason so many governments are speeding the push against crypto might be related to a future of high inflation and high gov debt

The reason why we have inflation and debt is to keep the value of our currencies stable. IE, if people want to use dollars, the US government can print more dollars to satisfy the demand. (And thus keep the value stable.)

Cryptocurrency's volatile value is a result of its inability to "print money" when more people want to use it.

Remember: Currency is not an investment. A good currency has a stable value over time; otherwise it's very difficult to conduct commerce.

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> The reason why we have inflation and debt is to keep the value of our currencies stable.

I'm not following. By definition, inflation is what happens when the price of a currency is not stable.

> Remember: Currency is not an investment. A good currency has a stable value over time; otherwise it's very difficult to conduct commerce

Agreed. But in countries with high inflation, such as mine, you will lose money if all your wealth is stored as fiat.

Stability operates on short and long time scales. 2% annual inflation means a currency is worth 99.994% as much tomorrow as it was today which in practice is generally fine.

Even fairly high inflation levels of say 7% annually can still be quite stable on a daily or monthly basis which is all you really need. As most people spend most of their paycheck every month and savings aren’t limited to the currency in question.

By comparison crypto coins tend to have much higher daily and monthly variations which isn’t a big deal for savings, but in practice it discourages their use for day to day expenses.

You should look more into the real causes of inflation in your country, because they are probably not what you think

Even without knowing what country you are from, I would bet that inflation is because imports and exports imbalances and nothing to do with "printing too much money".

And anyway, if the problem is storing value, why you don't buy gold or dollars, yens or something like that?

"And anyway, if the problem is storing value, why you don't buy gold or dollars, yens or something like that?"

Those are the traditional means and are usually banned or strongly regulated, if the states money is at stake.

Where are you from? What were your options before crypto?

There is a huge difference between moderate inflation and ruinous hyperinflation. For example, before last year Australia had gone almost 30 years without a recession [0], in large part because their central bank's inflation target is a few points higher than the US's hard 2% ceiling. This gives their bank more flexibility in controlling the money supply.

That kind of stability is more beneficial to the middle class than any negatives that may come with that level of inflation.

[0] https://www.nytimes.com/2020/09/02/business/australia-recess...

Not sure why you're so downvoted.

"Please don't comment about the voting on comments. It never does any good, and it makes boring reading."[1]

And if you're going to break the guidelines and comment on voting anyway, the very least that you could do is also add some value to the discussion, e.g. add some thoughts/elaboration/support for the points made.

[1]https://news.ycombinator.com/newsguidelines.html

> For example, before last year Australia had gone almost 30 years without a recession [0], in large part because their central bank's inflation target is a few points higher than the US's hard 2% ceiling.

Australia has gone 30 years without recession because we're supplying commodities like iron into the most miraculously productive miracle in all of recorded history, aka mainland China. And because we've got one of the highest rates of net migration in the developed world.

On a per capita basis Australia has had recessions, and it is a stretch to say that our inflation target did anything relative to all the other countries that have inflation targets.

And that's fine. If you need stuff now, spend; if you don't, invest, at whatever risk level you're comfortable with. Just hanging onto purchasing power while doing neither is bad for the economy if too many people try it.

I will concede that switching out of a high-inflation currency to a stable one is a good idea, and that for many people using cryptocurrency is the only way of circumventing their country's laws on the subject.

However, bitcoin experiences 10-20% drops against the USD on a regular basis. It looks like this announcement has triggered another one. It's not stable, it's just (a) appreciated over time a lot and (b) is doing better against the USD than, say, the Argentine peso.

> By definition, inflation is what happens when the price of a currency is not stable

Inflation is what happens when the price of goods and services in a currency is not stable. It can be triggered without a change in the money supply by underlying shocks to the real economy (e.g. 70s oil shocks)

Bitcoin claims to guarantee money supply stability, but it cannot guarantee price stability.

> But in countries with high inflation, such as mine, you will lose money if all your wealth is stored as fiat

That's also the case in countries with low inflation. That's why, in the US, wealthy people don't stuff cash in mattresses, or keep most of their wealth in general bank accounts. They buy stocks, bonds, real estate, ect. This is also why, in the US, investment vehicles like 401ks and IRAs are highly encouraged.

> Remember: Currency is not an investment. A good currency has a stable value over time; otherwise it's very difficult to conduct commerce.

Perhaps that is why countries like Japan are changing the definition of crypto and calling it "virtual assets" instead of "virtual currency".

> The reason why we have inflation and debt is to keep the value of our currencies stable

A stable currency would have an inflation rate of 0%. Inflation does not cause currency stability, it decreases the value of the currency.

By definition, its value is changing.

Not true, if money supply does not grow with population or economic growth it will be deflationary aka not stable. If deflation continues then people will hold onto money rather than buy things with it since things become relatively cheaper every day, which leads to economic downturn.

Is that a bad thing? Items would become more durable, planned obsolescence for products would all but disappear. Things would need to last a long time otherwise people won't spend on it. It would be good for landfills, fewer electronics and plastic garbage. I think it's sad that people in 2020s aftaid to hold savings because they know if they don't spend it, their buying power is reduced tomorrow.

Exactly! Sad to see this kind of financial illiteracy on HN in the GP

> A stable currency would have an inflation rate of 0%

Sure, and if the government had centralized control of all prices, it could mandate that. Since it doesn't (even those that assert that power don't have it in practice), what it seeks to do, as far as stability, is try to acheive low short-term price volatility, and as it turns out, experience shows that low-to-moderate inflation helps with that.

The M1 [0] tracks physical currency in the economy. It would appear there is a rather large amount of literal money printing afoot. So while a sharp turn to dictatorship could stabilise the currency, there are probably less extreme measures the US government could take to keep inflation at 0%. 75% of (physical, not the important ones in bank accounts) dollars literally appeared after 2016.

The M1 isn't the measure that matters - but it is a fact that large amounts of money are appearing from somewhere and that is probably the most significant factor in the currency losing value. Price controls are an overreaction, there are easier ways to make the currency more stable.

[0] https://tradingeconomics.com/united-states/money-supply-m1

> The M1 [0] tracks physical currency in the economy.

No it doesn't. M1 also includes demand deposit accounts (checking and savings accounts), among other things that aren't physical currency.

https://www.investopedia.com/terms/m/m1.asp

A stable currency would have a stable Velocity. This is something both USD(which is inflationary) and BTC(which is deflationary) get wrong. We need a flationary currency.

The USD historically has an inflation rate of 4% a year; or prices double every 17 years.

The USD is one of the most stable currencies in the world.

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