There are people who trade forex the same way they trade crypto. Anyway, Josh's argument wasn't specific to cryptocurrency being used an investment tool. It was that crypto is stupid because there's no way to derive its value from fundamental factors like dividends or interest payments. As far as I can see the same argument says we should be skeptical of the US dollar.
There are people who trade forex the same way they trade crypto. Anyway, Josh's argument wasn't specific to cryptocurrency being used an investment tool. It was that crypto is stupid because there's no way to derive its value from fundamental factors like dividends or interest payments. As far as I can see the same argument says we should be skeptical of the US dollar.
Exchange rates are not arbitrary. They are driven by outcomes and expectations about things like the differences in monetary policy between issuing countries, economic growth, trade balance, etc. The fundamental value of a national currency comes from the fact that you need to pay tax in it, government employee salaries are paid in it, and various other transactions must be conducted in it for either legal or customary reasons. Reserve currencies have additional value because of expectation that the currency will remain widely demanded and inflation in the currency will be low and stable. Other kinds of assets could theoretically play these roles — gold did so before we came up with the superior fiat currency technology — but crypto has no advantages, (including no advantage on price stability; look how wildly the prices move) and many disadvantages.
"AT: In a simple functionalist way, you can define the role of money as consisting in some combination of three things: means of payment, store of value, unit of account. Clearly, in certain circuits folks have begun to price things in cryptocurrencies – NFTs, digital art objects, etc. – so crypto is serving as some kind of unit of account. But crypto is not a particularly useful unit of account because its value in terms of other units of account fluctuates so much, which also means that crypto is a bad store of value (unless you have a high preference for speculative gambles) and is unlikely to become widely accepted as means of payment. (In an upswing, the risk is that, in using it, you undervalue your tokens. In a downswing in crypto prices, only a highly risk-tolerant merchant would accept payment in crypto, unless at a large discount.)
If we depart from such functionalist accounts of money and stress instead the role of money in constituting community, founding polities, etc., then crypto has clearly gained purchase in certain communities and helped to configure and constitute them. The question then is, how stable, robust, and widespread are these social groupings that have organized themselves around this money and/or how powerful are their opponents?"
There are people who trade forex the same way they trade crypto. Anyway, Josh's argument wasn't specific to cryptocurrency being used an investment tool. It was that crypto is stupid because there's no way to derive its value from fundamental factors like dividends or interest payments. As far as I can see the same argument says we should be skeptical of the US dollar.
Exchange rates are not arbitrary. They are driven by outcomes and expectations about things like the differences in monetary policy between issuing countries, economic growth, trade balance, etc. The fundamental value of a national currency comes from the fact that you need to pay tax in it, government employee salaries are paid in it, and various other transactions must be conducted in it for either legal or customary reasons. Reserve currencies have additional value because of expectation that the currency will remain widely demanded and inflation in the currency will be low and stable. Other kinds of assets could theoretically play these roles — gold did so before we came up with the superior fiat currency technology — but crypto has no advantages, (including no advantage on price stability; look how wildly the prices move) and many disadvantages.
I thought Tooze had a good explanation here: https://adamtooze.com/2022/01/22/chartbook-74-crypto-and-the-politics-of-money/
"AT: In a simple functionalist way, you can define the role of money as consisting in some combination of three things: means of payment, store of value, unit of account. Clearly, in certain circuits folks have begun to price things in cryptocurrencies – NFTs, digital art objects, etc. – so crypto is serving as some kind of unit of account. But crypto is not a particularly useful unit of account because its value in terms of other units of account fluctuates so much, which also means that crypto is a bad store of value (unless you have a high preference for speculative gambles) and is unlikely to become widely accepted as means of payment. (In an upswing, the risk is that, in using it, you undervalue your tokens. In a downswing in crypto prices, only a highly risk-tolerant merchant would accept payment in crypto, unless at a large discount.)
If we depart from such functionalist accounts of money and stress instead the role of money in constituting community, founding polities, etc., then crypto has clearly gained purchase in certain communities and helped to configure and constitute them. The question then is, how stable, robust, and widespread are these social groupings that have organized themselves around this money and/or how powerful are their opponents?"