RE: Bitcoin Would Be A New Gold Standard. And Maybe That's A Bad Thing
Well, I agree that at the point Nixon got rid of the Gold Standard, the middle class, certainly relative to the rich, was pretty well off. But the reason for why it changed to today was, in my opinion, not that the moderate inflation caused by long-term money printing hurt the common man so much. Now, runaway inflation definitely also hurts the working man, and that is almost always caused by the government being forced to print money to for example pay off debt. But I think if the government hadn't printed money from thin air, and instead went bankrupt, that wouldn't exactly have helped the working man either
Correct me if I'm wrong, but I think your biggest concern about fiat currencies is inflation and quantitative easing, right? The way I understand it, and I have yet to actually start studying economics but I'm going to start literally next week, inflation barely hurts people who live off of the money they earn, or people who own a house or even a business. It only hurts people who have either deposited hundreds of thousands of dollars in a bank, or who have some other asset giving them a certain amount of dollars.
If you're a worker, at least in a normal economy (say Western economy excluding the oligarchy US for the last 40 years) you're most likely going to get a yearly raise approximately equal to inflation, often higher. So a steady rate of inflation is not really bad for workers, but no inflation at all or even deflation is horrible for the economy because people with a lot of money have an incentive to NOT invest, or even divest by taking money out of investments. If your money increased in value by 5% every year because of deflation, you would be stupid to invest in houses which have a yearly increase in value of maybe 3%. Inflation makes sure that by just hoarding your money you lose some of it, ideally abut 2%, which means you have to take a small risk and invest in something, or slowly lose your money to inflation. If inflation is 10%, then you're forced to take enormous risks which can easily collapse the economy, see the 2008 collapse of risky loans.
And up until the US got rid of the gold standard, about half the time there was deflation, with inflation and deflation averaging out more or less. And how could it be any different, it's not like the amount of gold increased substantially in those years, and if it did, then that's also basically just "money printing", only by gold miners.
That's why I'm against the gold standard. But I think the discussion whether the gold standard is good is a justified one to have, and Bitcoin is, as I pointed out, just a version of that, and we should treat it as such
im no learned scholar in the field of economics but, as i understand it, inflation increases the cost of living for all humans caught under its grip. Coupled with FIAT money that deflates annually. So life gets more expensive and money is worth less every year in the "old" system.
"it's not like the amount of gold increased substantially in those years, and if it did, then that's also basically just "money printing", only by gold miners." - surely piles of gold has more intrinsic value than piles of paper?
You might think that gold has intrinsic value, it sure appears to have because everyone wants it, but what does value really mean? What is gold actually good for, aside from some minor uses in smartphones in the last few years? For most of history it was just shiny and pretty, which always made people want it as decoration. And that in turn made people want it to pay for things, because they knew if all else fails, they can always sell it to some rich guy as jewelry. And so over time gold became directly linked to the idea of "wealth", and soon enough people saw one as the other, so gold barely loses value.
If everyone who owns a sweater suddenly got a second sweater, that would help people in their daily lives. But if everyone who owned gold in a time when you could pay with gold, suddenly found out the amount of gold he owns doubled, would that actually help anyone? I'd argue it just means you have to pay twice as much gold to pay for things then
Most employees renew their wage negotiations every year, and they usually adjust them for inflation and then some. Everyone knows inflation happens, so if you get 10$/hour today but there's 1% inflation, then asking for 10.1$ the next year is basically the starting point of your negotiations.
I agree, in a post apocalyptic world where nothing save food and shelter has any value, gold is about as useful as a hole in your head. On a long enough timeline everything will be zero eventually. Its our job to look at where we are and to do the best we can for the people we love. We all have our own motivations and drivers for doing anything. As a parent I have to always look at the positive in every situation to negate the negative. Personal opinion of course ; )
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Exactly, neither gold nor fiat currencies nor bitcoin have any intrinsic value and we got to do the best with that. Gold is just a currency like any other, but that is usually not printed in high amounts.
Since inflation is necessary for an economy to give rich people a good incentive to invest their money, and it doesn't affect what working people earn, we should have a currency that allows for stable inflation. Maybe some will argue it's not fair when the (democratically elected) government can literally print money, but is it fair when gold miners can?