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Comment by danuker | Hacker News Reader

Can you come up with a better solution?

Political ones have failed, since with national currencies we end up with inflation and spending the resources of the future (i.e. debt).

The decision to "suspend temporarily the convertibility of the dollar into gold" has lasted indefinitely. This means the government can print its own money with no accountability, until it acquires everything and everyone.

Have you looked into proof of stake? It is a pretty good contender, but is vulnerable to Sybil attacks in case of a network partition. With no objective way to tell legitimacy (like "work" that was wasted in proof-of-work), a network partition can not be resolved.

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> since with national currencies we end up with inflation and spending the resources of the future

One of the important distinctions between Austrians and Keynsians is that the latter have noticed that money isn't a resource. It's a claim on resources.

The resources of the future that we are spending are the real resources: fuel, clean water, energy, crops, minerals, human effort, the natural environment, and the biosphere services themselves.

You can print money, but you can't print oil. If you print money faster than you exploit real resources, then yes you get inflation. However, the converse is not true. The ultimate demand of anti-inflationists is that your salary remain $X - forever, the cost of a car remains $Y - forever, and the cost of a loaf of bread remains $Z - forever. You can't achieve price stability with technological hacks.

The reason why bitcoinism is so offensive to many people is the way it takes real resources - in this case silicon wafers - and turns them into nothing but money. It's a prayer wheel to Mammon, like Arthur C Clarke's Nine Billion Names Of God.

> One of the important distinctions between Austrians and Keynsians is that the latter have noticed that money isn't a resource. It's a claim on resources.

Have you read Mises? Because based on this facepalm comment I can only assume you haven't, and that your "knowledge" of Austrian economics is derived from Paul Krugman screeds.

I apologize for not being so well-read. I have not read books on Austrian or Keynesian economics. But I will tell you what my demands are, and I will appreciate any recommendations.

> The ultimate demand of anti-inflationists is that your salary remain $X - forever, the cost of a car remains $Y - forever, and the cost of a loaf of bread remains $Z - forever.

I don't want prices to stay still; that is unrealistic (and inadvisable) in a dynamic, adaptable system.

I want prices to trend downwards more than salaries. I know this is possible because it happens to computer hardware, adjusting for performance. Why does it not happen to, say, bread? fuel?

Is it not because central banks are targeting inflation? And because currency created by central banks go to private banks and the government first and not wages at large?

I would appreciate a book answering these questions.

> I want prices to trend downwards more than salaries. I know this is possible because it happens to computer hardware, adjusting for performance. Why does it not happen to, say, bread? fuel?

> Is it not because central banks are targeting inflation? And because currency created by central banks go to private banks and the government first and not wages at large?

These are good questions to ask! And the answers are kind of littered around orthodox macro. As well as the real economy. Computer hardware benefits from (astonishingly huge) productivity improvements. Bread does as well, but to a much lesser extent. Fuel, now that goes all over the place, but the increasing capital cost of extracting it as the easier oil has already been extracted plays a part. As does cartelization - OPEC were largely responsible for kicking off US inflation in the 1970s by restricting supply. That's the point at which wages and profits start to diverge on that graph that everyone always circulates.

> I want prices to trend downwards more than salaries.

There have been a lot of policies aimed at keeping wages from rising; both the maintenance of a minimum level of unemployment ("NAIRU" https://www.investopedia.com/terms/n/non-accelerating-rate-u...) and the attack on unions and collective bargaining as means of increasing wages. It's policy to make sure there's always somebody ready to underbid you.

Thank you. I will look for good "orthodox macro" books.

> The decision to "suspend temporarily the convertibility of the dollar into gold" has lasted indefinitely.

Followed by the single most prosperous period in Human history.

> This means the government can print its own money with no accountability, until it acquires everything and everyone.

Ah yes, which is why Venezuela and Zimbabwe rule the world.

Economic progress was actually far better under the gold standard. That was the time of the industrial revolution. That was the first time great masses of humanity were lifted from poverty.

> Economic progress was actually far better under the gold standard.

Would love for you to point me in the direction of the supporting evidence.

Millions were lifted out of poverty in the 19th century, whereas billions have been lifted out in the 20th and 21st centuries on the back of enormous credit expansion.

I'm not arguing the fiat currency and credit cannot be incredibly dangerous...they can be. But it's absurd to think that money supply should be fixed to the arbitrary quantity of a random element that we can dig out of the ground.

Should it be fixed to an arbitrary quantity of random numbers we burn electricity to find, either?

"Absurd" is the new normal in post-modern society.

If I had to pick which better exemplified post modern society and absurdity, I'd pick unlimited government money printing by the Fed, over bitcoin.

Weimar Germany pretty much defined what it means to be "post-modern," and they printed themselves into extinction (admittedly, that's not the whole story).

> Would love for you to point me in the direction of the supporting evidence.

There is scholarly work arguing for this. George Selgin comes to mind as someone who I believe has written about this. There's probably also scholarly work arguing the other side. I can't take the time to dig this up for you right now.

> But it's absurd to think that money supply should be fixed to the arbitrary quantity of a random element that we can dig out of the ground.

It certainly isn't absurd. There are lots of people who think this is a good idea, with good reason. Plus, it is historically precedented, and for good reason.

Good god did someone drink the kool-aid... please explain succinctly what "problem" is being solved by a handful of wealthy individuals using all of the world's GPU power to mine numbers for mostly unusable currency...

The "vanity receipts for badly drawn apes problem"

> mostly unusable currency

I suppose that's why it has grown in price in spite of its supply slowly increasing. Because it's unusable! (sarcasm)

> "problem" being solved

In essence, it takes scarcity to make scarcity. So, to get digital scarcity, you have to fork over scarce resources.

But I agree with you that the computing cost is excessive, and the reward function was not well calibrated.

On the other hand, the rate of the explosion in price could not have been foreseen.

>I suppose that's why it has grown in price in spite of its supply slowly increasing. Because it's unusable!

The fact that the price is consistently increasing is what makes it an unusable currency. A deflationary currency is a useless medium of exchange as any rational actor will not spend it due to the potential future increase in price. I hold multiple crypto assets but I think you have to be kidding yourself if you think that Bitcoin and the like are usable currencies.

Computer hardware has gotten exponentially cheaper in the past half-century. But people keep buying it.

I am looking to buy a flat, so I will spend some of my Bitcoin.

All of the same problems that the "Internet" as we agree upon it, via protocols, is solving today,

just slightly worse (because its brand new and you keep speaking against it instead of improving it, for some reason)

and also with better security, and portability.

Rhetorical, almost flabbergasted questions for you to consider:

What problems does "money I can store on a Ti-83" solve?!

What problems does the Ethereum Virtual Machine solve, as far as turning decentralized network code into a server/computer?

> and also with better security, and portability.

What security?

> What problems does the Ethereum Virtual Machine solve, as far as turning decentralized network code into a server/computer?

Given that the eth VM uses a fraction of a single percentage of its processing power to run smart contracts (like, 0.00000001%), and the rest in redundantly verifying those transactions, it's not solving any problem of decentralised processing in a useful way.

This article is about making custom purpose silicon only usable for sha256 based proof of work mining, and has nothing to do with GPUs. GPUs have not been profitable to use in bitcoin mining for many years now.

> Can you come up with a better solution?

Yes!!!! It's called central banks and monetary policies. Seriously. We need to get back our democratic control over it, and make it work for us again. We have to stop wanting to fix our societal issues with technology: we can't fix our money with crypto-currency any more than we can't fix mass surveillance with encryption.

If anything, crypto currencies are a concentration of what is worse with our existing financial system: even less democratic control, no regulations and therefore all sorts of scams, and we can't tune it to make our economy work.

In a world ruled by crypto, our governments would have the perfect alibi for failing: it's not their fault, their hands are tied, they can't get the money for the projects that are needed. This has happened plenty of times in the past when we were using gold and such. And that's just the credit crunch problem, there are many more.

>Political ones have failed, since with national currencies we end up with inflation and spending the resources of the future (i.e. debt).

I never touched crypto so I am I wrong that it's value is even more unpredictable then putting money in the bank? Like I can buy something now and tomorrow some news about a hack or some internet drama and I just lost everything. As a dude that is not into economy theory my conclusion is that crypto would have negligible value if it wasn't used to speculate it will grow or used in illegal stuff, I won't be surprised if behind all of it is a group of obscenely rich and greedy individuals

Bitcoin is like owning some cool trading cards, they are valuable now, they might be more valuable tomorrow and some internet drama about the show/authors will make it's value negative day after tomorrow.

>Have you looked into proof of stake

PoS is like fusion power in that it will be here soon but unlike fusion power those working PoS don't actually want it to be used it seems to me.

> Political ones have failed

In what sense has the current monetary system failed in your opinion? The gold standard certainly failed, that's why it was abandoned by every single country in the world, but the current monetary system seems to be doing just fine.

Just fine?

To be able to save for retirement, you have to assume a lot of risk (stocks) or accept a negative real (inflation-adjusted) return (bonds). This is because inflation acts as a tax on top of income tax and social security etc.

The gold standard failed and inflation is higher because governments like to spend more than they earned. This is unsustainable - any asset holding its value will be preferable to funding a government that is constantly losing money (i.e. bonds).

The economy of the future doesn't owe you anything, that's not how it works.

Yes it does. I work for money, and I expect to get something in return when I spend that money.

And what I get in return should not be exponentially robbed by tyrants to pay for bread and circus.

Well, it doesn't work like this. Producers of goods and services have no obligation to sell a fixed amount of goods and services for a certain price in the future. You have a choice to consume now or to save and consume later, and there's an inherent risk to saving because the future is uncertain. And this is true regardless of the currency that you use, or the inflation rate. A crypto-currency is not going to make the future any less uncertain, sorry. You have been sold a lie. In fact, if you put your savings in a crypto-currency, saving is going to get a lot more risky for you personally, not less.

I'm not sure you realize how bad deflation is.

The IT hardware industry has been deflating for, what, half a century now (Moore's law).? Yet nothing bad happened.

That is inflation. Transistors have gotten less valuable.

It is transistor-inflation, where we print up tons of transistors. It is the opposite of currency-inflation, where we print up tons of currency, driving prices UP.

This has nothing to do with inflation or deflation, which are very specific concepts.

I'm not sure you realize how leaky the abstraction of "deflation" is, or for that matter all of the abstractions thrown about in the laughably oversimplified version of economics that has made it into the lexicon of pundits and bureaucrats.

Inflation is not necessarily a bug or something you “need to solve”.

Inflation is a feature, not a bug. It discourages hoarding of money -- and encourages putting it to use, as opposed to letting is slowly lose its value. Too much inflation, of course, is bad, but a small amount offers the right incentives with very few downsides.

Putting it to use where? Stocks are at ridiculous valuations, and bonds have negative real yield. That's not really encouraging investment.

Not even classical one-sided economic schools like "Keynesian" are as absolute as you pose it here.

Inflation, nor deflation are bad. Too much of any is. The common consensus is that the scales, on average, should lean a little towards inflation. But only a little. And not always.

>Inflation, nor deflation are bad. Too much of any is. The common consensus is that the scales, on average, should lean a little towards inflation. But only a little. And not always.

I think the common consensus is that any deflation is too much. What's contentious is just how much inflation is acceptable and how much is counterproductive to economic growth.

> I think the common consensus is that any deflation is too much.

This depends on how broad you define it. We've seen deflation for the past decade now. In the sense that the buying power of your savings on a traditional savings account have shrunk, while official inflation was below zero at points. We've now bounced back to "high" inflation.

None of this is bad, as we can see clearly by how well tech has benefitted from this (cheap loans, beneficial DCF). This is even policy.

>None of this is bad, as we can see clearly by how well tech has benefitted from this (cheap loans, beneficial DCF). This is even policy.

This led to a lot of economic problems with zombie businesses that were able to continue to trade only due to cheap loans and continued asset price growth sans proportionate economic growth. Any this was before we saw any significant periods of real deflation.

Inflation encourages consumption, in the same way that returns on capital encourage investment. We need both, and sometimes we need more of one or the other. Anyone who thinks moderate inflation is bad does not understand deflation.

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