Love the irony of this coming from a manager of a fiat currency bank: “My very humble assessment is that it is worth nothing, it is based on nothing, there is no underlying asset to act as an anchor of safety,” she said.
In a "prepper" type disaster scenario things like farm land, ammunition, antibiotics, or specialized survival skills would be worth far more than gold.
Next, people started increasingly accepting gold in trade, just by their individual decision. Because of this, it made sense to try to obtain it yourself to take part in the economy. When the demand grows for gold as a monetary good, it becomes even more valuable, and therefore even more rational to save and use in trade, and at the same time demand for other types of money diminishes. At this point, the network effect is so strong that it becomes obvious to everyone that gold is money, i.e. it is the most wanted good in the market. That's also why money tends to converge into one, when there are no regional regulations or controls around money.
Historically, gold has become money independently in many parts of the world. It has been money for thousands of years, and in many forms. King Croesus was probably the first who minted standard-weight gold coins, to make it easier to transact with.
Is it supposed to convince people to adopt it or else they are hypocrites? When has that ever worked?
But it does reveal to people that "value" is a human construct. A central bank can create infinite money out of thin air, but we never stop to think about that.
But central bankers think about it on a daily basis. Christine Lagarde has certainly paid a lot of attention to whether the amount of money the system demands is about right or whether an interest rate rise is needed to stop the economy overheating, whether there's enough liquidity and financial control the commercial banking system the central bank feeds into, what the change in the shape of a bond yield curve says about investors longer term expectations of for money, and what the side effects of all this money coming in is on the rest of the economy, and whether a particular downturn is better ameliorated by fiscal policy. Thinking about this is literally why her job exists.
People LOLing at "fiat" currency coming from nothing whilst rushing to buy the newest token invented from nothing (as a wealth generation exercise for its creators) that isn't supported by monetary policy (or redeemable as legal tender), not so much.
Yes, and it is them we have to thank for the massive inflation too. So either they want the highest inflation in 40 years, or they are inept.
(And yes, they absolutely do prefer the high inflation outcome from a fuel supply shock following a COVID shock to the raise interest rates and crash the global economy like 2008 outcome. That much is a policy choice)
Why do you think people don't know about it or haven't thought about it? Is there some predicted outcome in the world—that is absent—that suggests that people don't know that "value" is a human construct?
Most people are living their lives day to day, and never stop to think about what money is. We just use it, and never stop to think about why paper bills are worth anything (or that our entire networths are basically digits in a MySQL database these days).
I supposed I could be wrong and that my taxi driver is indeed well informed about the nuances of monetary policy and monetary history.
Why are you strawmanning my argument? I didn't ask if you believe your average person knows "the nuances of monetary policy", I asked why you believe people haven't thought about "value" being a human construct.
Everyone I've talked to about the subject acknowledges that they've thought about it before. Some go as far as to roll their eyes, like "oh great, this conversation again" because it's so played out. So I think you're seriously underestimating who hasn't heard of these ideas.
Go ahead, ask your next uber driver why money has value, and see if the response isn't something along the lines of "because people believe it has value." It's not a difficult concept only understood by experts.
This is not where money comes from.
A central bank is a financial institution given privileged control over the production and distribution of money and credit for a nation or a group of nations. In modern economies, the central bank is usually responsible for the formulation of monetary policy and the regulation of member banks.
Money isn't pushed into the economy. Money is pulled when loans are taken out, from retail institutions. These loans are constantly repaid meaning that the money supply is controlled by the quantity of origination of loans and the rate of repayment of existing loans. The Fed controls the circulating supply by adjusting the demand for new debt, by setting interest rates.
Generally even QE, the Fed creates reserves and swaps them for liquid assets like treasuries. These reserves then collateralize additional lending. [1]
[1] https://www.forbes.com/advisor/investing/quantitative-easing...
Just because you haven't lived long enough to see a major empire fall doesn't mean it won't happen eventually.
Inflation is just a symptom not the cause of an economic collapse.
If inflation is also something that is everyone's problem then my thesis is that it is nobody's problem.
They become worth nothing because people realize the central bank will inflate away the future value of any RMB, and thus holding RMB or any asset that derives value from future RMB (including stocks in businesses whose revenue or dividends are in RMB) become worth nothing.
Good money is supposed to be a good store of value as well. If RMB cannot store value, people will not use it. If people do not use it, it becomes worthless.
So even if you don't want RMB if the government pays you with RMB then you take it. That means that banks, contractors, employees etc all get RMB.
Government can also force trade parties to trade with its own currency, like Russia does today.
Venezuela was stripped of its manufacturing capabilities with the exit of foreign investment due to sanctions. Their former petroeconomy now is worth nothing.
The intrinsic value of their currency is lost, as the Venezuelan gdp in absolute terms disappeared.
Currency exchange rates is the least of their problems.
They are out of value. Not out of valuable cash.
Example: We imposed strict sanctions to Russia that almost cut any trade with them. Is the Russian currency valued at 0? Of course not. Because Europeans, Indians, Chinese are buying Russian currency to pay for Russian natural gas / oil.
https://www.npr.org/sections/money/2022/04/05/1090920442/how...
If you got rid of the government, the value of the currency might still go to zero, while the intrinsic value of the resources could still be worth something paid in another currency.
If there was no Russian government and army then you would just go in and take whatever resources you like at the cost of maybe a couple of bullets.
Transaction costs are not a factor in the worth of the asset.
[edit] I'm sure they're just waiting for their fiat shill check form Soros.
[edit] Just a quick side-note: you do know that "fiat banks" (a hilarious term btw) don't care what you keep in them right? BNY Mellon and Fidelity are more than happy to custody your future of finance for you so it doesn't get lost in a boating accident. These people are far less zealous than you seem to imply. How about we avoid ad hominems?
If the linked article contained anything other than a brief offhand remark by Lagarde (as quoted by the OP), it would be reasonable to address her argument in greater depth.
As it is, the sole reason this is even being discussed is due to the authority she wields. It is therefore reasonable to address that authority instead.
The OP posits that a person whose authority is potentially threatened by a technology might not necessarily be an impartial judge of said technology. You might agree or disagree, but you’re not really responding to the argument. And you’re the only one bringing up conspiracy theories.
Is it irony right? Because your second edit seems more serious and end with 'How about we avoid ad hominems?'
Irony is hard on the internet.
Generally this belies a serious lack of understanding of where money comes from and where it derives its value.
If I go to the bank, and borrow money for a house in the form of a mortgage, then new money is created. An obligation to repay that money is also created. That obligation to repay is collateralized by my house. In this case, the new money that was created was in fact backed by hard assets.
More generally the value of money is derived from an obligation to repay the debt that created it, and the legal system and framework which enforces it.
If you have a stack of 100 dollar bills, where do you take them? What debt are you repaying or what can you exchange them for?
I think you are diverting from having such a hyperbolic reaction to someone else's comment. They pointed something out and you launched into some sort of conspiracy nonsense that they didn't say.
Also do you realize you are accusing people of "bad faith" when you replied to someone and said "I'm sure they're just waiting for their fiat shill check form Soros.".
[edit] Note also that the US bailouts weren't monetary policy, but fiscal policy. They were administered by Treasury, not by the Federal Reserve.
Now do the Wormhole bailout by Jump lol.
All I think it demonstrates is how little these advocates seem to understand economics and banking.
"whatabout" traditional banking?
But it doesn't, it just requires acknowledging that crypto is burning more energy than most countries for a comparatively tiny number of people to gamble a comparatively tiny amount of wealth, and that the actual incentive structure of PoW (probability of block rewards based on consuming more energy than rivals) is the most wantonly environmentally destructive technology invented in a history which also includes leaded petrol and CFCs.