from Hacker News

Ask HN: Do you care about sound money?

by Capira on 1/11/22, 8:40 PM with 29 comments

Bitcoiners care a lot about "sound money" (or "hard money"). They believe for a society to be sustainable, it is fundamental that its money is hard to debase. Furthermore, they believe that only if a society uses hard money the prices in the market can accurately reflect the cost of production. Otherwise, the market will always end up with inefficiencies and worse quality.

Apart from all criticism with regards to bitcoin's energy consumption - do you care about sound money in that regard?

  • by starwind on 1/11/22, 10:31 PM

    No, I don't—I care about central bank independence.

    I’ll answer this in the context of the gold standard—the ultimate hard currency/sound money. That history is very different than the one its proponents portray. Governments routinely had more currency in the circulation than they cover with their reserves, the money supply was effectively ceded to technological developments in mining, and we saw a period of social unrest in the back half of the 1800s as farmers got screwed by deflation. (See William Jennings Bryant’s ‘You shall not crucify mankind upon a cross of gold.’)

    The money supply matters. Historically, the gold standard exacerbated swings in the business cycle. Economies would grow by exporting good and gold would flow in, people had more money so they spent more growing the economy more. But, if the economy was bad and there wasn’t gold down in the basement, the government and central banks were unable to issue the currency necessary to stimulate business activity to help end the problem. Milton Friedman made his name by looking at the money supply as the root cause for why the Great Depression was so bad.

    Could the Federal Reserve do better? Absolutely. But if you compare the last 10-15 years to any other period in the last 150, things are as good as they’ve even been on the monetary front.

  • by jstx1 on 1/11/22, 9:31 PM

    No, it's not just the energy consumption, the economic model isn't sound either. The upper ceiling on the supply isn't a feature, it's one of the reasons why you can't run an economy on Bitcoin.

    Money so sound that it lost 30% of its value since November? I know that it's massively up long term but it's still a volatile asset measured against actual currencies; it doesn't function as money.

    If it has a chance of succeeding in any way, it's to be an asset that people are convinced enough that it's a reliable investment similar to gold (gold's actual usefulness is a small fraction of the value so the comparison is close enough). So maybe people will keep buying Bitcoin for it's own sake and making dollars with it, who knows. But the "sound money" argument is bullshit.

    > Bitcoiners care a lot about "sound money"

    I doubt that most of them care. It's just that when you have a strong financial interest in something like Bitcoin going up in price, it's very easy to start inventing and believing all kinds of arguments that don't make sense.

  • by AnimalMuppet on 1/11/22, 9:13 PM

    I care about the value of the dollar (since I'm in the US) being stable. I do not care about how many dollars exist, whether that number is going up or down, or whether the number going up constitutes "debasement".

    Also, the prices in the market reflect the cost of production (the cost curve) and the demand curve. I'm not sure that looking only at the production side tells you anything meaningful.

  • by Bostonian on 1/11/22, 8:46 PM

    If one believes that, why not own gold and other precious metals? It's true that the dollar is not backed by anything except the government's decree that it is legal tender, but cryptocurrencies have not even that.

  • by atmosx on 1/11/22, 9:37 PM

    Money serves a specific purpose, it's an exchange medium. BTC is a digital asset, as an exchange medium _has already failed_.

    Additionally, having the FED controlling rates is a democratic, reasoned approach. BTC is not handled by a known, government controlled authority. I know that many BTC proponents don't like governments for $reasons but BTC _liberal_ alternative is more akin to a jungle than a civilised society :-)

  • by diogenesjunior on 1/11/22, 9:01 PM

    If we all suddenly woke up and started saying "US tender is worthless" and chose another item, the dollar would only be worth it to those who still care about green pieces of paper.

  • by gostsamo on 1/11/22, 8:53 PM

    Economy is fiction based on the trust of everyone participating either genuine or faked. Once the trust is gone, it does not matter how you cound your riches.

  • by dexwiz on 1/11/22, 8:43 PM

    Is there any truly hard money other than precious metals? If the internet goes down or partitions, then what happens to all those coins?

  • by dragonwriter on 1/11/22, 10:28 PM

    > do you care about sound money

    No, I care about stable money, not “sound” money.