The philosophy of Bitcoin and the question of money | Hacker News Reader

The philosophy of Bitcoin and the question of money

journals.sagepub.com

19 pointsMo36 comments

Abstract

> Money has been a polarising and unresolved socio-economic issue for more than 300 years. In this article, we explore how the state became increasingly involved in money and, through the words of prominent monetary theorists, identify the problem of the state in money. We analyse Bitcoin to see if it is a solution to this problem but move on to contend that the political dimension needs to be the focus of theory in the 21st century and that control of the supply of money, and the power that it gives, is the root of contention.

Debasing currency is profitable, profit gives you power, very little states in history resisted this 'free' extra power because it's costs can be paid in the future and by other people. Bitcoin way to fix this problem of money is to try and make it impossible to make more of it, which will perhaps work, but perhaps not, and if it does comes with a set of its own problems.

I think we have to understand money as a technology and the specific problems it solved when we invented it and how they transformed, and think representative currencies are the best solution to the essential problem of money - debt. Commodity money as it was belongs to history, but crypto can invent a better form of it.

Debasing currency “just a bit” is arguably a positive thing. A steady trickle of predictable low inflation encourages the use cash and taking on debt for investment in future growth.

A little deflation is fun for those who hold cash, but it discourages taking on debt to invest in growth and at higher levels, it discourages spending cash at all (ex. the yearly mockery of the guy who used Bitcoin to buy that pizza back in the day). You end up with a deflationary spiral where money is too valuable to ever spend, causing the economy to grind to a halt.

You can use money or housing as a fun collectible or you can use them for their intended purpose, exchanging goods and shelter. As far as I can tell we prioritize the former well above the latter. The concerns of the collectors override the basic needs of the poor.

When you consider that money is representing a claim to someone else's time then treating that person's time as a collectible forces helplessness onto that person. You run into the paradox that a person that is capable of helping themselves is banned from doing so, yet is simultaneously reprimanded for their forced upon helplessness by the very people that forced this helplessness upon them.

A little deflation discourages spending, a little inflation encourages it. A lot of either is ruinous. Your example is one with deflation at an average of 120% for a decade straight. How well would an economy with inflation of 120% work out? Just ask Argentina.

Maybe a little inflation is good for us, the problem is how often it becomes a lot. Since 1920, at least 55 hyperinflation events have taken place, destroying savings and creating economic hardship [1]. Such events generally result from the mismanagement of financial systems and the economy by central governments.

Bitcoin offers an alternative in which sound money exists outside the control of governments and central banks. Who knows where it'll go, but it's an interesting experiment.

[1] https://assets.website-files.com/614e11526f6630959fc98679/61...

You can't debase fiat, there is nothing to debase, fiat currencies change this basic problem into inflation and monetary policy issues. If for commodity money the problem of debasment gradually reduces the quality of each individual money in supply, for fiat this happens for the all of the money of this type. So the problem of money 'breaking' because of debasement becomes the problem of systemic risk where the whole economy/country collapses. This is a complete politicization of money, which you can of course argue for or against.

The argument that deflation discourages spending etc. is really besides the point as money's primary function doesn't cover 'encouragement' or 'dicouragement', these are possible only when talking about fiat money specifically.

Reply on news.ycombinator.com