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153 sats \ 9 replies \ @Undisciplined OP 24 Sep \ parent \ on: Our Economy Has Never Needed an "Elastic" Currency econ
After reading Mises' argument for why any quantity of a sufficiently divisible currency will be sufficient to facilitate trade, the arguments for why monetary expansion is necessary come off as very convoluted and unconvincing.
It's important to remember that there's no such thing as pure money expansion. It enters the economy somewhere and bids up some prices more than others, making any monetary expansion inherently distortionary.
I think a good way to put it would be to say
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fiat standard gives more flexibility to respond to shocks in the short term, but creates incentive problems that can lead to worse ex ante outcomes
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commodity money has less flexibility to respond to short term shocks, but has a better incentive structure which could lead to better outcomes in the long run
So it can be pitched as a sort of commitment / time consistency problem
Maybe monetary economists already knew this and I'm just regurgitating first year grad school stuff haha
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There might be people who would put it that way. I think the first point needs to be amended with something like "...but no one has sufficient information to respond to shocks in a beneficial way."
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Unless the objective is to pretend you're doing something in response to political pressure, (but what you're really doing is handing out favors to the wealthy), and subsequently to be fellated for your brilliance in the corporate media
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Is that what a benevolent social planner would do, though?
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Indeed, our current benevolent social planners verify their own benevolence by the amount of fellating by Paul Krugman they receive.
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Imagine writing out that objective function
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It would make for an entertaining PhD thesis, at the very least
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The divisibility aspect is also interesting, since one can see how gold coins or even bank notes already in circulation can cause divisibility problems, but bitcoin in circulation suffers from none of those drawbacks
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The main argument I hear is that fiat stimulates innovation, because businesses can borrow it cheaply, and on a Bitcoin standard they wouldn't be able to borrow. They say businesses need to be able to borrow money cheaply and fail.
I don't quite see why for there to be innovation, entrepreneurs who call themselves innovative need the right to 'steal' from other parts of the economy.
It's effectively a call to subsidize some things at the cost of others.
Fiat defenders also bring up historical correlation between increases in gold supply and periods of economic growth. I don't know how to respond to that.
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