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Comment by s_q_b | Hacker News Reader

>The article is pointing out that governments like to increase the money supply every year and Bitcoin doesn't allow that.

But that's nonsense. If anything a sovereign digital currency would give governments even more fine-grained control over the money supply.

Of course governments shouldn't use Bitcoin, but a sovereign altcoin is a very interesting idea.

Sure, they couldn't use Bitcoin itself, but in a hypothetical world of government-backed cryptocurrencies Bitcoin would be more of a reserve commodity, like gold, than a circulating fiat currency.

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Much of the appeal of Bitcoin is the limited supply. But from a Keynesian government point of view, that's a flaw.

A sovereign cryptocurrency without that limitation might be an interesting alternative to cash, but the bulk of our money couldn't be in a "hard" cryptocurrency unless we also eliminated fractional reserve banking.

(Why? In short, with fractional reserve banking, the total value of everyones checking and savings accounts is far greater than the supply of currency, whether paper or crypto.)

Do you need fractional reserve banking with cryptocurrency? The physical object limitation of hard currency simply doesn't exist.

But the real hallmark of FRB is that banks only need hold in reserve a fraction of their depositors' account balances. I don't see how CC would change that requirement. As scary as FRB is, without it lending would be a much, much more limited activity.

Money is funny - it's just an IOU. An IOU blown up to massive scale, obviously, but since a business sets the price of something and the market determines if it fits well in to a tradable value comparison, then I don't see how a digital IOU is any worse than a paper one, considering how little that paper is worth when everyone decides it has no value.

And let's be honest. If the value of paper can crash when people agree it has no value, it's just as easy for everyone to agree gold isn't worth a lick either. So in the end, we're just choosing a representation of an IOU we all agree upon, and if that's paper, rock, or digital (or 4 ton coins [0]) what does it matter, in the end?

(This all presumes some degree of safety in CC - with the recent value of Bitcoin thefts, people would ditch it really quickly on a national scale.)

/rambling

[0] http://en.m.wikipedia.org/wiki/Rai_stones

I didn't mean to start a discussion of FRB, simply consider that it's what we have, and abandoning it is an even more radical step than replacing cash with a cryptocurrency.

> But the real hallmark of FRB is that banks only need hold in reserve a fraction of their depositors' account balances. I don't see how CC would change that requirement.

My question is, what will a CC replace? If the answer is all cash and electronic transactions, will there be enough CC, with FRB? If the answer is simply cash transactions (already limited), what's the point?

I understand the money supply and the multiplier effect of fractional reserve banking, but with an appropriately designed cryptocurrency you don't need it. You can literally just create more currency out of thin air and pump it into the economy like an instant perfectly efficient printing press.

In fact, you could probably utilize the increase in the money supply in much more productive ways than the current system, which primarily benefits banking institutions.

hmmm... seems to me your reasoning rests on the reasoning of Keynes?

what if Keynes is wrong?

If he isn't, btc is doomed in its current form. Wouldn't a better solution be on where his rightness or wrongness isn't an issue?

Then the Great Depression becomes a lot more difficult to explain.

perhaps this is what they are actually talking about -- creating their own cryptocurrency. how would they prevent people from across the world from creating Greek Bitcoin? perhaps this would crete (I almost corrected that typo, but I'll leave it there haha) a strange secondary market whereby people not in greece mine bitcoin, and then sell it to ordinary Greeks for some fractional rate?

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