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> The biggest difference with bitcoins is that nobody can create them out of thin air due to whim like they can with USD. I've never really understood the obje
by pyrois 12y ago
> The biggest difference with bitcoins is that nobody can create them out of thin air due to whim like they can with USD.
I've never really understood the objection that people have with regards to the Fed printing USD (for instance). It's actually a pretty powerful regulatory tool, isn't it? A small amount of inflation is fine (I think the Fed targets about 2%), but high inflation or deflation is a problem for people who have savings in USD. One way to manage inflation is to control the amount of dollars in circulation, which can be controlled by printing or not printing new dollars (and removing old ones from circulation). There are other ways, but the Fed is fairly limited in terms of techniques it can apply. Can someone explain why bitcoin advocates so often object to that control?
- jordigh 12y agoPrinting money is but one way to create and it's not how most USD is created. Most USD is created by banks, and not the federal bank, whenever they give out loans. This is the basis of fractional reserve banking.
- akgerber 12y ago'Printing money' is, in the context of the Fed, a metaphor for incrementing numbers on bank computers.
- jordigh 12y agoBut the fed isn't the only one who can increase the supply, is my point. Any bank can do this.
- praxulus 12y agoThere's a pretty big difference between increasing the money supply by loaning money, borrowing from the fed at the discount window, and creating money out of thin air to use however you'd like.
- depoll 12y agoWhile that's true, isn't the exact same true of any currency (including BTC)? In principle, a bank could loan BTC with a fractional reserve and produce the same outcome, could it not?
- jordigh 12y agoI suppose banks could create some sort of financial instrument that says "IOU 2.5 BTC" or whatever, but this thing they create couldn't pass off completely as bitcoins, since you couldn't spend this thing on the blockchain like you can with ordinary bitcoins. Maybe this will happen. Who knows.