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Comment by fauigerzigerk | Hacker News Reader

That's a very weak argument. We just had the biggest financial crisis since the 1930s and not a single saver in the U.S lost their funds in a regular bank account.

Here's the secret: Deposit insurance.

Bitcoin related organizations are well advised to start copying some of the good parts of the traditional financial system instead of just pointing at its weaknesses. Some have already started: http://www.bbc.com/news/technology-25680016

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That's not strictly true, people lose money above the insurance limit all the time. The reports here frequently discuss it:

http://www.fdic.gov/bank/individual/failed/banklist.html

If you go here, you see depositors not being made whole:

http://www2.fdic.gov/divweb/index.asp#bottom

But $250,000 of insurance for each account is much better than none.

Neither of those two citations actually list or enumerate people losing any value of their deposits. They just describe the process by which it would happen.

(That's a lot of banks! The US system seems quite fragmented?)

If you select "All Banks" in the drop down at the bottom and run a report, you see a bunch of "Final" dividends where the percent paid is less than 100%. I'm pretty sure that's people losing value of their deposits.

(remember, those are 'dividends to claimants' and the claimant listed is almost always 'depositors')

If you have more than $250,000 and didn't use one of these services[1] then you were really negligent with your money.

[1]http://www.bankrate.com/finance/savings/6-ways-to-insure-exc...

Basically there are banks that will divide your money amongst a bunch of independent banks, and let you access the money as if it were all in one bank.

So you're proposing to add more of the things that make our current financial system have the costs it does? Given the large amounts that have been stolen recently, I think deposit insurance would cost a fortune for BTC.

Bitcoin deposit insurance could be much cheaper than deposit insurance for traditional banks as they are not lenders and hence there is no credit default risk.

All they have to do is up their QA game and organize some external audit and certification system for all participants in the insurance scheme.

No one loosed UDS in the crisis but the value of the USD is decreasing every year. Since the 2008 crisis the amound of usd M2 has increased by roughly 50%. http://research.stlouisfed.org/fred2/series/M2 That means Your Money have lost 30% of its value in 5 years. The official inflation numbers excludes some items and incorperate others and was different 20 years ago then now.

>the official inflation numbers excludes some items and incorperate others and was different 20 years ago then now.

Yes. It no longer includes weaving looms, and now includes consumer electronics. You have an issue with that?

We don't spend our money on the same basket of goods as we did 50, 25, or even 10 years ago. The CPI should be and is fluid. You should look into how it's actually calculated, rather than going by your favourite conspiracy site's reports.

>That means Your Money have lost 30% of its value

That's completely false. You are ignoring the velocity the of money: http://en.wikipedia.org/wiki/Velocity_of_money

And contrary to a savings account your bitcoin wallet doesn't even pay interest.

Well, that's only nominally true. Every single holder of USD lost around 1-2% a year to inflation, which is essentially a backdoor tax.

If you were in Cypress, or had a less trustworth (irony?) government that went out of business, you probably didn't do well either.

Allow me to offer a new TINSTAAFL: There Is No Such Thing As A Non-Productive Perfect Store Of Value.

The world don't work that way. Cash inflates. Houses decay. Land uses shift. Tastes in art change. Uranium decays. Even our gold supply increases at a rate of 1-2%.

It's the Red Queen's Race. You've got to run as fast as you can just to stay in one place. The only way to maintain value is to invest in productive activities.

It's Cyprus and the "levy" there was only for deposits over 100,000 Euro which weren't insured anyway...

http://en.wikipedia.org/wiki/2012%E2%80%9313_Cypriot_financi...

So the only people who suffered were those who were daft enough to deposit amounts large enough to be uninsured in a badly run bank - can't say I have much sympathy.

Cyprus. I don't have a great deal of sympathy for people with large deposits in Cypriot banks, given how many of them were only there for the tax evasion in the first place, thereby promoting a less trustworthy government.

I should probably write up a good explanation of why asking for zero inflation == asking for price controls, and is not a good idea either.

> Every single holder of USD lost around 1-2% a year to inflation, which is essentially a backdoor tax.

That's only true of cash, and money in checkings accounts. Money deposited in savings accounts yields interest, which (on average) more than compensates for inflation.

What banks have savings accounts that yield that much interest? The average yield on a savings account that I've seen is 0.01%. I've seen some "high yield" accounts that can get you 0.03%.

If you're talking about money market accounts (where I believe you need to park a substantial amount and can't touch the money in the account for something like 10 years, but correct me if I'm wrong), you can get up to 3% yield (just beating the stated inflation of 2%).

Am I missing something?

http://www.money-rates.com/research-center/best-savings-acco...

Interest rates are very low right now, but you appear to be off by a order of magnitude.

You're right. I was just pulling numbers from memory. Still, even those examples are an order of magnitude off from keeping up with 1% to 2% inflation.

Yeah - "on average". The last couple of years have been an exceptional situation, since the federal funds rate is almost 0%.

Bitcoin holdings don't pay interest either and its purchasing power swings wildly. If you want to guard against inflation in the long run you have to own productive assets or lend your money to someone who uses it productively.

Well, in theory, Bitcoin is deflationary: By holding it it goes up in value, not down, over time. This has its own problems, and it yet remains to be seen if those problems are insurmountable. We shall see. But insofar as Bitcoin is what it is, this means that it doesn't suffer from this specific problem, in theory.

That theory relies entirely on the supply side. But what about the demand side? Without accounting for both you know nothing about the price of something traded on a market.

What if next year some other cool new "currency" comes along and no one wants your stinkin' bitcoins any longer? Does it matter that supply has a cap? No. It matters as little as the limited supply of paintings created by some forever unknown artist.

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