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Comment by suraci | Hacker News Reader

i suggest everyone who want to know the nature of crypto coin to read Das Kapital

The modern sovereign credit monetary system and the rise of financial innovation products have led most people into the illusion that "commodities are money." However, the truth is quite the opposite.

A very simple perspective: Bitcoin prices are highly correlated with the stock market.

However, this does not mean that cryptos are not worth investing in. It just means they are not inherently more magical than other virtual financial products—at least for now.

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Stocks and crypto are fundamentally different.

Stocks give you a legal right to the assets and future profits of a company - a legal right enforced by the government (i.e. men with guns).

Crypto gives you no such right. In crypto you just hope someone else will pay more for it later. In that sense crypto is similar to baseball cards, and slightly similar to gold (gold has some industrial “actual” uses, but its high price is really driven by cultural perception of value.)

> Stocks give you a legal right to the assets and future profits of a company - a legal right enforced by the government (i.e. men with guns).

Financial derivatives such as options would be a better analogy, although I don't think anyone is currently buying stocks for the reason you mentioned.

Additionally, BTC and gold have fundamental differences, i talked abt it here and in other comments

Financial derivatives like a call option have a value derived from a stock (which is a real thing that gives real world legal claims on actual assets/profits). So it’s still not like a crypto coin.

People are most definitely buying stocks for the reason I mentioned. There’s a reason why the pension fund of the teachers of California, the pension fund of the teachers of Texas, and your 401k holds stocks. It’s not because they are collectibles with a lot of hype. It’s because they get a claim on future profits at (expected to be, on average, over the long run) a discount. Of course there are people who have no clue what they’re buying or why it works and just buy something… but that doesn’t mean the thing they’re buying doesn’t have a fundamental value connected to reality.

Your argument for "crypto" applies to money. Money will lose 90% of its value over a century or so. In this case I don't have to "just hope someone else will pay more for it later" I know that money will be practically worthless if held.

I kind of agree. Money (e.g. the dollar) only has value because (1) we implicitly agreed as a society to have faith that it can be accepted by others for goods and services (2) the government requires us to pay a material part of our earnings as taxes which can only be paid using money.

If people lost faith, it would lose value.

Mild inflation (say 2-3pct a year) is considered generally good by economists. It’s an incentive to go and invest the money productively or spend that money on goods and services (which is good for growing the economy). Deflation in contrast would create an incentive to hoard money (just keep little papers with no productive value).

> an incentive to hoard money

That’s a funny phrase and one that I think deserves ridicule.

Society should value savings, in fact historically prosperity is the result of savings and every fall from prosperity is accompanied by artificially low interest rates and low saving rates.

I don’t see how people would differentiate savings from hoarding when infinite compound debasement is supposedly the “smart” policy.

To be clear, I think people that say "hoarding" is bad, really mean to say that they think "saving" is bad and that they should identify as champions of consumerism.

You don’t have to spend your savings on trinkets.

If a company wants to expand and build a new factory (say to provide more, cheaper pharmaceuticals to more people), it needs capital. If you have cash but there’s deflation, you might just keep your cash under your pillow because it’s worth more every year. If instead we have an inflation, and so you have a disincentive to leave the cash under your pillow, you invest it (give to that company to fund its factory). That’s good for society.

> If instead we have an inflation, and so you have a disincentive to leave the cash under your pillow, you invest it (give to that company to fund its factory). That’s good for society.

There's a lot of "ifs" here with little evidence they're true or necessary.

Without examining all of the "ifs" let me just characterize the argument as fundamentally pro-corporation. I think it's better for society that corporations justify the money invested in them rather than artificially structuring the money such that people are forced to hand their money over to corporations as a form of wealth preservation because Paul Krugman said we'd have a Great Depression otherwise.

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