Comment by jmyeet | Hacker News Reader

Comment by jmyeet | Hacker News Reader

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There is a prevailing myth that crypto is somehow above or immune to governmental actions. Nothing could be further from the truth.

The US government could mostly destroy the crypto market tomorrow with a policy change. That's all it would take. If the US government came out and said to access SWIFT and the US financial system, any financial institution is not allowed to trade fiat currencies to or from crypto currencies then that's it, it's over.

The real problem with crypto is the biggest proponents of it simply do not understand the financial system. In fact they're almost the opposite: they're proud of their ignorance. They wear it like a badge of honor, like it lets them be a better disruptor. Sometimes, that's true. But for those of us with some understanding of the financial system, we just shake our head as the crypto market relearns the lessons already baked into the financial system.

Here's another myth: currencies were never backed by gold (or silver). The US Dollar has never been 100% backed by any metal. What really backs the US dollar is the US military. Yes, we previously had a soverign promise to exchange dollars for gold but that's just a promise. We saw under FDR how that promise can simply be changed when there was a sovereign currency devaluation.

While I mostly agree with you...

>The US Dollar has never been 100% backed by any metal.

This is not accurate but the devil is always in the details. What exactly does "backed by" mean? If we mean pre Bretton Woods (1971), then, for all intents and purposes it WAS backed by Gold, not just a promise. The federal reserve could not conjure up fiat dollars on theirs (or anybody else's) whims and fancies.

Pre-1971 US dollars could be freely traded/swapped for gold at any bank at the then rate of 1oz of Gold = $35. This was written in stone.

Of course, then Nixon did what he did in 1971, and as they say the rest is history.

p.s. The Bretton Woods Agreement/system/whatever you wanna call it, came into being in the aftermath of WWII, in 1944. This was [1] essentially an agreement that those 44 countries will use the US dollar (and by correlation, the USD<->gold peg) as long as the (US) powers that be didn't fuck it up.

p.s.2 - A lot of people don't realize that these accords were what established the IMF, and the beginning the World Bank, BIS etc.

So, what happened in 1971 and what did Nixon do?

"On August 15, 1971, President Richard M. Nixon announced his New Economic Policy, a program “to create a new prosperity without war.” Known colloquially as the “Nixon shock,” the initiative marked the beginning of the end for the Bretton Woods system of fixed exchange rates established at the end of World War II." - per US Office of the Historian.

So, yes, things can change due to government actions, and yes Bitcoin and its peers could be rendered worthless in a heartbeat, if the power that be want it.

>What really backs the US dollar is the US military Agreed. But as always there's a time factor. This was true around that time, but not so much today in 2025. While the European military assets are not worth talking about, China and Russia both have continued developing those assets and do present an equalizer today. Are they equal to/better/worse than the US military is somewhat of a moot point. They exist. That in itself is the point.

[1] - The Bretton Woods system of monetary management established the rules for commercial relations among 44 countries, including the United States, Canada, Western European countries, and Australia,[1] after the 1944 Bretton Woods Agreement until the Jamaica Accords in 1976. - As per Wikipedia.

It was generally understood by 1970 that the US didn't hold enough gold to fulfill the promise. You as a normal person couldn't go to any bank and get 1oz of gold though, only other countries could do that and they didn't in large amounts and so it worked out despite there not being enough gold in the US.

In the 1800s 1oz of gold was tradable for $20. The $35 figure was already accounting for some inflation despite the backing (I don't recall the year it changed, but sometime in the 1930s seems reasonable)

$1 used to be tradable for 1oz of silver. since silver and gold have different supplies though sometimes you could (in the 1800s) make a lot of money from this.

> The $35 figure was already accounting for some inflation despite the backing (I don't recall the year it changed, but sometime in the 1930s seems reasonable)

January 31, 1934. But first the US Treasury took over the US gold supply from the Federal Reserve.

Other than working in the financial industry, is there a way to really understand it? There don't seem to be many credible sources (at a level deeper than the WSJ/Bloomberg).

I don't think you need a deep resume in the financial industry nor a long education to be better off than most of the population. Those things can help for sure.

But financial literacy comes really from media literacy, asking basic questions of who is telling you something, what is their track record, who are they paid by, what are they selling and what other people say about what they say. Too many people simply react to emotions and look for confirmation bias. Also, one needs to distinguish between analysis and justification.

There's opportunities for this every day. It can be as simple as asking what a bank does or how mortgages work. You'll quickly get to a point of asking what fractional reserves are, what the FDIC does and how the government keeps banks solvent.

You then look at what a currency is and how currencies have evolved over time. The early history of currencies can largely be derived from first principles.

Example: in primitive societies, people migrated and followed food. As time went on they'd start to specialize and have excess goods and you'd end up with barter systems, even more so once you had agriculture and you started to see permanent settlements. But bartering is inefficient. You might have the leather that I want but you don't want the cheese that I have. Maybe you'll take it because you can trade it, maybe not.

So people started trading in things that they assigned value to eg silver and, later, gold. It's important to note that this value is "assigned" because, beyond jewelry, gold didn't have a lot of early utility. It has useful properties, like it's inert, fungible, divisible and hard-to-counterfeit (because of it's density).

But dealing in gold itself is awkward so political entities started creating currencies. There were IOUs and contracts but currencies eventually became a promise to exchange it for gold, if requested, by some political entity.

And this really takes us into the 20th century where countries issued currencies and they backed those with gold reserves, literally thousands of tons of gold.

It quickly gets a lot more complex from there as 50+ years ago we ended up with fiat currencies, meaning the value is set by markets instead of an agreed upon exchange rate.

You have people who think abandoning the gold standard was a mistake, often called "goldbugs". Many goldbugs moved to crypto. You can see why: the idea is that the supply of Bitcoin (or whatever) is predetermined. You can't just "print money" (they say). The truth of printing money is more complex. A big problem is the US consistently runs a trade deficit.

I'm not sure how helpful that all is. Just some random thoughts.

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