Alternatives to hard money question mark

[Garabaldi]

Personally for each individual hard money is the best and the hardest money we have made is Bitcoin. If you have already saved in Bitcoin, those savings have outperformed every asset class.

 

[Moriarte]

Only bankers specifically want deflation because they are the only capitalists within capitalism who are actually allowed to issue private debt (they have a banking license). Every other capitalist who needs debt (to say expand a company to acquire more market share) hates this.

Bankers might prefer deflation from time to time, but what they really seek is the balance between high and low interest rates. Set interest rates too high (above 5-7%) and suddenly lending activity falls through the floor. Set them too low and margins collapse. Banks make money on the spread between the rate they pay on liabilities and the rate they charge borrowers. If central banks push rates down towards zero - the banker's spread compresses. At the same time, compressed rates are the fuel for speculative bubbles, leading to higher risk of default when conditions change.

As a banker you want:

1. Positive, but not extreme interest rate.
2. Mild inflation, not deflation. (a steady upward drift in prices keeps debtors solvent, reduces defaults, and ensures nominal loan growth.)

 

[Hygro]

Personally for each individual hard money is the best and the hardest money we have made is Bitcoin. If you have already saved in Bitcoin, those savings have outperformed every asset class.

The widespread adoption of bitcoin by various interests has led to its extremely rapid capitalization, rewarding speculators. But this is nowhere has this been a "savings" mechanism in the sense of hard money, and could only become one at its point of maturity, which hasn't been reached.

Perfect hard money's savings' would grow evenly with economic growth, at the extent that money is perfectly economically neutral, and grow and shrink depending on its very own effect.

For example, when money has its hardest: post-Roman, pre-Minting Western Europe, money was largely useless to anyone outside the top political classes. Coin hoards were aggregated to denote proof of deservedness of Roman succession, and only used as payment in ransom to other lords better at capturing your kids than you were at capturing theirs. Virtually all of the gold flowed out of Western Europe for whatever it could buy, and the export of slaves to buy gold was too slow to win back any surplus, and ceased to perform any local duties. It was a time of perfect austerity and even farm yields collapsed to a point that specialization of economies was nearly lost for a long time.

Anyone hoarding silver couldn't sit on it, they had to arm up and put their neighbors on the defense or lose their silver. It was a pure proxy for political power and while carried economic power by virtue of the ability to control the manorial serf economy and what piddling surpluses were produced at a time of such austerity, but it didn't carry market power which is the frame of savings reference by hard money advocates of today.

 

[Lexicus]

For example, when money has its hardest: post-Roman, pre-Minting Western Europe, money was largely useless to anyone outside the top political classes. Coin hoards were aggregated to denote proof of deservedness of Roman succession, and only used as payment in ransom to other lords better at capturing your kids than you were at capturing theirs. Virtually all of the gold flowed out of Western Europe for whatever it could buy, and the export of slaves to buy gold was too slow to win back any surplus, and ceased to perform any local duties. It was a time of perfect austerity and even farm yields collapsed to a point that specialization of economies was nearly lost for a long time.

I want to add to this that, contra the story that gold becomes money because it's a convenient store of value, in pretty much every historical time and place of which I'm aware, gold has stored far too much value to be of use to most people as money.

 

[Garabaldi]

The widespread adoption of bitcoin by various interests has led to its extremely rapid capitalization, rewarding speculators. But this is nowhere has this been a "savings" mechanism in the sense of hard money, and could only become one at its point of maturity, which hasn't been reached.

Perfect hard money's savings' would grow evenly with economic growth, at the extent that money is perfectly economically neutral, and grow and shrink depending on its very own effect.

For example, when money has its hardest: post-Roman, pre-Minting Western Europe, money was largely useless to anyone outside the top political classes. Coin hoards were aggregated to denote proof of deservedness of Roman succession, and only used as payment in ransom to other lords better at capturing your kids than you were at capturing theirs. Virtually all of the gold flowed out of Western Europe for whatever it could buy, and the export of slaves to buy gold was too slow to win back any surplus, and ceased to perform any local duties. It was a time of perfect austerity and even farm yields collapsed to a point that specialization of economies was nearly lost for a long time.

Anyone hoarding silver couldn't sit on it, they had to arm up and put their neighbors on the defense or lose their silver. It was a pure proxy for political power and while carried economic power by virtue of the ability to control the manorial serf economy and what piddling surpluses were produced at a time of such austerity, but it didn't carry market power which is the frame of savings reference by hard money advocates of today.

All in good time, Bitcoin's value will be tied to the global economy once it is the bearer asset everything else is denominated in. We are still early.
It does work as savings now, anyone just holding BTC to buy a house instead of cash has seen house prices go down when priced in BTC instead of up since 2020.

 

[Cutlass]

We managed without one between Jackson and Wilson. The government didn't own the means of production and distribution, and we had elections (including a third party that ultimately displaced the Whigs).

And we repressed the growth of the economy by tons.

 

[Cutlass]

Every communist country has had a central bank. That's how they steal the assets, they print money to pay goons to take the Kuluk's land.

So you want to pay goons to steal assets by other means. Got it.

 

[Cutlass]

Personally for each individual hard money is the best and the hardest money we have made is Bitcoin. If you have already saved in Bitcoin, those savings have outperformed every asset class.

And if you tried to run an economy on that, most of them would be homeless now.

 

[Hygro]

All in good time, Bitcoin's value will be tied to the global economy once it is the bearer asset everything else is denominated in. We are still early.
It does work as savings now, anyone just holding BTC to buy a house instead of cash has seen house prices go down when priced in BTC instead of up since 2020.

But that’s not “savings” in the same sense as your “don’t debase my savings”. That’s like, a successful financial speculation to buy with your “savings” ie surplus money. Which like yeah, that’s savings in the normal sense, but the normal sense doesn’t support your hard money view. If you say your position is more complex/diverse than the originally espoused hard money view I guess we don’t have to get stuck on it.

 

[Harv]

I will have to read your OP several times to understand your thought. What makes you believe it is the monetary system that failed? I remember some of us mixing it up with you about the monetary theory you were presenting, where the government prints an obligation, but I forget what you call it. (MMT? Modern Monetary Theory?)

Are you sure it is the monetary system that is failed? I thought it was the political system that failed. Have you ever had a bad dream where you fell asleep for a bunch of years and woke up in a dystopia?

 

[Hygro]

I will have to read your OP several times to understand your thought. What makes you believe it is the monetary system that failed? I remember some of us mixing it up with you about the monetary theory you were presenting, where the government prints an obligation, but I forget what you call it. (MMT? Modern Monetary Theory?)

Are you sure it is the monetary system that is failed? I thought it was the political system that failed. Have you ever had a bad dream where you fell asleep for a bunch of years and woke up in a dystopia?

Yes the political system failed. The issue is what monetary system should we have in the wake of such political realities — is it inherent that intentional year over year deficit spending will be captured by harmful interests, or is that just a thing that can happen and did?

 

[innonimatu]

Yes the political system failed. The issue is what monetary system should we have in the wake of such political realities — is it inherent that intentional year over year deficit spending will be captured by harmful interests, or is that just a thing that can happen and did?

It is a thing that can happen and did. The British Empire ran through its whole history with a strong pound, and was dismantled when the rival power, the US, intentionally insisted on repayment of war debts and refused to support the pound throgh Keyne's proposed scheme at Bretton Woods. The british state deficit could not be papered over somehow to keep paying for the military and administrative expenses. So the military and administrative machines of the Empire had to be quickly dismantled.
The british ruling class could have attempted to print pounds and force its colonies and vassals to take them and thus subsidize the expenses of running the Empire. India and the arabs would be enough. The UK's government didn't dare go down that path because its army was near mutiny in India and they weren't sure they could avoid a revolutionary situation in the UK. So the US sucessfully stole the british sphere of influence from it.

Nixon, in a similar situation of imperial overextension and excessive expenses, could risk forcing the vassals to pay because because he wasn't afraid of revolution at home. Those vassals couldn't agree to set up an alternative financial system and exclude the US, to a large degree because the UK and Germany kept refusing France's schemes. The UK with a strategy of using teh americans to keep a shadown of their fforme influence, germany because they were under military occuparion and really wanted to try again for hegemony in Europe some day rather than follow under the french. The US getting away to print dollars for 50 years was contingent of the specific conditons outside the US. While it lasted.

The US devalued its currency as a way to extend its period of hegemony past expiry date in the 1970s. So long as the negative trade balance could be covered with forced investment from the vassals, the eurodollar and petrodollar, inflation in the US would not be severe enough to cause unrest. Even Japan was forced to subsidize the US buying treasuries as a condition for access to its market. Towards the end of the 1970s the US government got, perhaps more accidentally than intentionally, another sucessful scheme going: attrach foreign capital willingly by offering greater returns, even if it looked like a ponzi scheme. That started with Volckner and the high interest rate. It worked because "sillicon valley" then happened, the US managed to have a new successful industry to attrack investment with. The capital balance was balanced with an inflow of dollars as investment covering the outflow caused by the trade deficit. There's a brazilian economist who in the late 1980s wrote a pretty insighful book forecasting exactly that turn of events but I can't recall the name.
For a time, until the early 2000s, there were actual returns justifying those capital flows into the US. Things got wobbly after the dot-com bust, it looked like the euro might be a threat to dollar stability and US hegemony, but the eurocracts managed to self-sabotage into the great financial crisis: undestricted, unregulated capital flows and apetite for earnings from investments in US securities had weakened the the european banks and made them dependent on liquidity from the Federal Reserve. The euro weakened, US treasuries remained the safe heaven for international finance. The US could keep printing and having foreigners pay for its bloated military and imperial government.

In the meanwhile inside the US the moneyed class, the ruling class, also acquired treasuries as wealth instead of paying taxes. Foreigners didn't have to straight out buy US treasures. They could invest in US companies and thoe companies could convert their profits into interest-paying US treasuries. Or the stockholders would convert the dividents paid into treasuries. The state had to spend into deficit to produce all the debt securities, that would be acquired by the wealtyhy as assets. tIf the state didn't run a deficit the wealthy couldn't keep getting wealthier because the "liquid" assets they accumulated were not federal reserve notes but debt: US treasuries. Also private and corporate debt. The more indebted the state and the population and the companies, the more assets the wealthy could claim to own: in terms of accounting they must balance. A person's debt is another person's asset.
The walthy, and pension funds ("popular capitalism" as much as it can happen, a forced one) are financing the costs of empire, directly and indirectly. Pension funds in particular were such a bright idea, far better than pushing war bonds. All this debt capacity and recyclying of expenses through speculative reinvestment made it increasingly unnecessary to tax the wealthy in order to maintain the state apparatus that protects their social position. Issuing debt to be acquired by the wealthy, or taxing the wealthy are the two ways the government can finance itself. The first allows the wealtly to make a public claim to power over the conduct of the state because "they're creditors" and goves them an enforment mechanism in not biung into new issues of treasuries. The second doesn't. So they prefer the first methor od state financing. That @Hygro is a permanent feature of capitalism.
Under this cheme the wealthy get protection, they get politicla power, they don't have to pay for it (be taxed), and they kept geting notionally wealthie - what was there not to like in a policy of running budget deficits, for a capitalist ruling class? Once this was discovered, I guess it was inevitable it would go on until it can't. They may pretend they don't like deficits but they really want those to keep growing, except when and where in risks impairing payments (defaults).

Throughout all this the US does have a problem as hegemon: a trade deficit remains since Nixon's days. When the recycling of dollars sent out ceases to work then the US government has either to tax its own wealthy class to cover that gap (who else is there to tax in a society where productive assers have been so concentrated?), or cut its expenses radically. Trump, or indeed any of the two parties of the oligarchs, won't ever choose to tax their own. Trump's bright idea to tax consumption cannot close the gap in the budget and will probably cause worse inflattion and economic problems. It also does nothing to close the trade deficit because there's no working indutrial policy behind it. His other idea has been to extract tribute from the vassals. Thing is: vassals can and do rebell. And the US military is a paper tiger now, can't be used to force them to pay. I don't think Trump understands that.

The devaluation of the dollar Nixon started it is peanuts compared to what will happen when the recycling of dollars send abroad back into the US ceases. That happens when enough vassals rebell and cease "investing" into the US because they see the writing on tha wall for its economy and the weakness of its coercive weapons. Visible weakness of the hegemon is self-reinforcing. And it has started already. First the arabs, done. Then the asians, happening now. Finally the idiots, I mean the western europeans.
Then, finally, only then, the wealthy in the US will be on the menu for the members of the state apparatus there. Those members won't shut themselves down and fire themselves, especially not the ones who how handle the actuall coercice power of the state. Whan happens then is anyone's gess, I won't offer mine. Musk, the exemplary oligarch, has already been on the job of dismantling the state and got kicked out. The coercive portion of it wansn't even pinched. And it's a bloody expensive one.
I'm not trying to gess how that conflich will go, but I am guessing is is very near now.

Also, I don't think any of this was inevitable. The experience of the US in getting away with printing money, for a while, can perhaps be compared to the assignats at the end of the ancient regime in France. Sometimes it happens. But it's not comparable to anything that happened to the british in their hegemon days. Sometimes it doesn't. That printing dollars worked for so long for the US also owes much to an abnormal absence of rival powers that would offer an alternative to using dollars as a trade and reserve currency. They sould that thanked Gobachev instead of putting him doing pizza commercials.

 

[soundjata]

I want to add to this that, contra the story that gold becomes money because it's a convenient store of value, in pretty much every historical time and place of which I'm aware, gold has stored far too much value to be of use to most people as money.

Except maybe in pre-Columbian era?