Author Topic: On the practical defintion of Ideal Money  (Read 438 times)

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J_Smithy

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On the practical defintion of Ideal Money
« on: December 21, 2016, 11:22:37 AM »
I see that all players are locked in their understanding and approach to understanding and optimizing our currency systems and global economies. But I also see with passion and sincerity, and since I have a better understanding of that which I wish to express, we can come together under a shared meaning of what is Ideal Money and what is the significance of it (after all a really really smart man spent 20 years expressing the subject to us through various lectures and writings).

So we can be simple about this, because me and Travis have talked before and exchange some articles and ideas etc....

And because we have a similar understanding of many related subjects...

We understand that gold has a traditional value based on our use of it as an inflation hedge and a good quality money in the sense of not losing its value.

If we can think of this type of value, that golds purchasing power might remain decently steady over time, what are we comparing "steady" too?

Purchasing power yes, but what does it mean for something to be stable in "value"?

What is "value" as a unit and what can it be comparable too?

What is the problem of creating a currency that is stable in value?

Do we have thoughts on these questions?

Travis Patron

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Re: On the practical defintion of Ideal Money
« Reply #1 on: December 22, 2016, 11:30:10 AM »
I think the idea of gold retaining its value describes its usefullness for purchasing general goods and services.

For example, one ounce of gold will buy roughly the same amount of food at the grocery store today. However, we see that the prices (denominated in fiat dollars) have skyrocketed. Fiat certainly cannot buy the same amount of goods and services it once did, but gold stands strong. This is why we say it has remained relatively stable.

As for the challenge of creating stability, it comes down to the way the money supply is regulated. With fiat, the money supply is regulated quite poorly. With bitcoin, the money supply is regulated by an self-adjusting algorihym and supply cap at 21 million.

This is why bitcoin will continue to stabilize and become more stable than all fiat currencies - the method in which the money supply is regulated.

J_Smithy

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Re: On the practical defintion of Ideal Money
« Reply #2 on: December 22, 2016, 01:06:18 PM »
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I think the idea of gold retaining its value describes its usefullness for purchasing general goods and services.
Now this doesn't speak to the reason WHY gold would retain its value tho, but it does suggest that there is a retention of value in relation to a basket of good/commodities etc. 

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This is why bitcoin will continue to stabilize and become more stable than all fiat currencies - the method in which the money supply is regulated.
Now this is where we have to be careful and I think we can introduce words and have caution towards their shared meaning.

bitcoin will "stabilize" means different things if we are thinking of "price" or "value" right?  What does it mean to be stable in price vs stable in value?  What does it mean to be stable in value (ie in relation to what?)?

In regard to fiat, most fiat is targeted at a certain inflation rate, targeting a purchasing power, and allegedly determining its value.

So fiat COULD be used to target stability like bitcoin, in the supply of money sense, so we can think of the relationship between the competition of all of these currencies and their policies (ie if bitcoin gains popularity, central banks might not want to continue to devalue the currencies they are responsible for)

Do we see this could play out, that the quality of fiat might improve?


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Re: On the practical defintion of Ideal Money
« Reply #3 on: December 30, 2016, 10:37:23 PM »
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I think the idea of gold retaining its value describes its usefullness for purchasing general goods and services.
Now this doesn't speak to the reason WHY gold would retain its value tho, but it does suggest that there is a retention of value in relation to a basket of good/commodities etc. 

Gold will retain some semblance of value until there are no people left who perceive it as valuable - much the same can be said of any other form of money. It seems money gets its valuable from the "energy perception" of its users.

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This is why bitcoin will continue to stabilize and become more stable than all fiat currencies - the method in which the money supply is regulated.
Now this is where we have to be careful and I think we can introduce words and have caution towards their shared meaning.

bitcoin will "stabilize" means different things if we are thinking of "price" or "value" right?  What does it mean to be stable in price vs stable in value?  What does it mean to be stable in value (ie in relation to what?)?

In regard to fiat, most fiat is targeted at a certain inflation rate, targeting a purchasing power, and allegedly determining its value.

So fiat COULD be used to target stability like bitcoin, in the supply of money sense, so we can think of the relationship between the competition of all of these currencies and their policies (ie if bitcoin gains popularity, central banks might not want to continue to devalue the currencies they are responsible for)

Do we see this could play out, that the quality of fiat might improve?

On your first point, yes I agree that we must be careful when comparing price vs value. Value is subjective and different for every consumer. Price however, is explicit and determined by the seller.

In terms of fiat improving, we must understand that there are many different streams of fiat money in the world. Some may improve, most I think will not.

It seems in this day and age, with the negative interest rates we are seeing, central banks are losing their ability to manage the money supply in ways they did so previously.

I no longer pay much attention to fiat currenies outside of the effect they will have on bitcoin and other digital currencies.

J_Smithy

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Re: On the practical defintion of Ideal Money
« Reply #4 on: January 05, 2017, 02:58:22 PM »

On your first point, yes I agree that we must be careful when comparing price vs value. Value is subjective and different for every consumer. Price however, is explicit and determined by the seller.
ah here it is.  what I came here to say.  Its not longer subjective, we now have a objective stable value metric-Ideal Money.  It is comparable to an optimally selected basket of commodity prices.

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In terms of fiat improving, we must understand that there are many different streams of fiat money in the world. Some may improve, most I think will not.
Yes I make the point that they CAN adjust. and so there is a survival of the fittest game we will see.  I would suggest, as my opinion, that all fiat will adjust and increase in quality or at least rather I don't believe "hyperbitcoinization" that we will wake up one day and all fiat will cease to be used (perhaps "eventually) but through evolution over time).
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It seems in this day and age, with the negative interest rates we are seeing, central banks are losing their ability to manage the money supply in ways they did so previously.
Yes and i think they could do worse if we didn't have an option, but now with the option I think they will be forced to provide better fiat.  Their new goal will need to be to print money that is stable in relation to what WOULD BE Ideal Money, and to do this they will use the market valuation as their barometer.  Fiats that fail will go down in respective prices.

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I no longer pay much attention to fiat currenies outside of the effect they will have on bitcoin and other digital currencies.
It depends what problem we are trying to solve.  If we want the "best" money and we define the characteristics of it then I can understand, but society is trying to decide the optimal distribution of commodities and for this we would like to have a stable metric for value.  For this money COULD evolve to provide it, but there is nothing to suggest that it can be designed to do so ( I think rather it has been shown through strong argument it cannot).

But if our fiats begin to tend towards strength in the nashian sense (ie against an ideal currency) then I think it could be said that our global currency systems are finally "tuned" to solve this problem of needing a stable metric of value.

creating the best money doesn't solve a useful problem in this sense, rather money could be used to solve a very special problem, scaling and idealizing bitcoin doesn't address this problem.