Why the government will not attack bitcoins. | Hacker News Reader

Why the government will not attack bitcoins.

4 pointsAndrew_Quentin7 comments

Hayeks - a prominent economist who won a Nobel Prize for his theory of how best to allocate resources in an economy states that deflation is better than inflation:

"It is, however, rather doubtful whether, from a long-term point of view, deflation is really more harmful than inflation"

His argument is quite long of course, but basically there is the argument about taking money from savers. The argument that inflation means miss allocation of resources as higher inflation creates artificial and temporary higher employment, artificially keeps businesses afloat, etc. So when the correction comes its worse than it needs be.

Then there is Keynes. He argues that inflation is better because it encourages investment and makes debt easier to discharge.

So Keynes is the left - i.e Democrats - because higher inflation means the government has more power which means the government is a bigger government.

Hayek is the right. Thatcher said: "This'is what we believe', and banged Hayek's [book The Constitution of Liberty] down on the table." Her idea of unregulating banks was based on Hayek's idea of having a decentralised currency without the issuance of money by the government - so bitcoins really. Though he would have preferred there to be many currencies each competing and each valued by the free market.

So, whether bitcoin should or should not exist is an ideological divide between the right and the left.The right wants it to exist based on the conservative principles of Hayek which aims for a small government and rewarding savers. The left does not want it to exist based on the Keynsian ideas which aim for a big government and rewarding borrowers.

Therefore, in my opinion, bitcoins has a strong backing, and thus a strong voice, in the Conservative/Republican's. That - I think - is a mighty ally to have which in my opinion guarantees the existence of bitcoins as far as the government is concerned.

There are two problems in your argument.

1. Mainstream US economics and politics is dominated by varying degrees of Keynesianism or Neo-Keynesiansm. Even the Republican mainstream (not talking about Ron Paul / libertarians, I'm talking about Mitt Romney).

2. Republicans are very supportive of measures that increase national security. If Bitcoin ever becomes widely used by terrorist organizations to shuttle money or other criminal organizations (as it appears to be used on a smaller scale already), then some Republicans would turn against it.

Combine this with the fact that the White House and Senate are controlled by Democrats, and you could very well see government action against Bitcoin.

I don't think mainstream US and UK economics is dominated by Keynesianism. A good example is the current debate about cutting spending. The Uk has conservatives in power and they are cutting spending which is deflationary. The US has democrats in power and they aren't cutting spending but maybe even increasing it which is inflationary. Keynes would definitely recommend to increase spending or at least not cut it while Hayek the opposite.

I said nothing about UK politics, merely US politics.

Since there is a limited number of bitcoins, once all the bitcoins get mined, won't that lead to deflationary pressures on bitcoin?

Prices would go down to compensate for the higher value of money therefore stabilise any deflationary pressure.

But yes, the difference between gold and fiat is that the general tendency in a hard currency economy is slightly deflationary while in an fiat currency it is slightly inflationary. Hayeks seems to believe that slight deflation is better than slight inflation, while Keynes the opposite.

So basically which is better depends on your values. Since conservatives want a small government and to reward savers, slight deflation is better - hence the reason for cutting spending in the UK. While democrats prefer big government and to rewards borrowers so for them slight inflation is better - hence no spending cuts in the US yet.

You keep throwing these terms left/right conservative/liberal around. Have you read Hayek?

http://www.cato.org/sites/cato.org/files/articles/hayek-why-...

there's a false equivalancy in your arguments. inflation and big government don't necessarily go hand in hand.

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