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Comment by gahahaha | Hacker News Reader

Currencies are stable (and losing 2% value per year) because governments actively manage the supply of money to keep it stable in the face of very volatile demand (caused by what Keynes called "animal spirits". Since demand will fluctuate Bitcoin will fluctuate wildly for the foreseeable future like the value of gold has done and is doing. Bitcoin will never be a stable, safe place to store wealth for that reason. It might be useful as a payment system where you quicly buy Bitcoin and give it to somebody for a product (who then quickly sells it again), but it will be to volatile for much else except speculation..

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The government could keep currency stable by simply not permitting more to be created. Done. That's not the intention. The intention is to make sure the banks can loan out as much as they want when they want and then get bailed out when crashes occur.

Not true. If the amount of money in circulation was fixed, the fluctuating demand for it would cause its value (i.e. what goods/services it will purchase) will fluctuate with it.

It does that anyway. The currency itself would be stable and there would be no guessing games about what was going on with monetary policy since there would be no policy to discuss.

> The government could keep currency stable by simply not permitting more to be created.

That would keep one measure of money supply stable. It wouldn't keep the value of the dollar stable, though.

  ...fluctuate wildly for the foreseeable future like the
  value of gold has done and is doing.

The value of gold as measured how? Do you mean the price of gold in USD? Isn't that more indicative of the price of USD, and/or the price of cash vs. commodities?

No, since gold has varied far more in value than any inflationary/deflationary measure of USD.

How are you measuring gold's value?

Inflation adjusted dollars.

Inflation isn't the only thing that affects the value of USD. UDS's perceived value fluctuates with regard to investors' value perceptions of other currencies, commodities, etc.

Edit: If you think that USD has a fixed value, you are mistaken. You may use it as your reference point, but that just makes you blind to the fact that the perceived values of all currencies and assets are fluctuating all the time. There are some which are more closely tied together, and some which are less.

I still stand by the statment that gold is more volatile than the USD.

[edit] I have not done the analysis, but would wager that gold measured against a basket of goods or currencies is more volatile than USD similarly measured.

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