http://bytemaster.bitshares.org/article/2014/12/31/Stable-Crypto-Currencies-are-Impossible/
Okay, so...
It is also widely accepted among many crypto-currency fans that the FED has failed at their mandate because of persistent rise in prices resulting in the dollar losing 99% of its purchasing power since the FED was founded in 1913
Okay fine, create a currency pegged to the consumer price index.
The goal of price stability at its heart is the same as Price Fixing and this is a well known economic fallacy that crypto-currencies should avoid.
The reason why price fixing is an economic fallacy is that in the real world you do not have a magic lever to increase the supply or demand for a product. If the natural market rent is $4000 and you set a legal rent ceiling at $2500, then due to decreasing supply and increasing demand you will have a shortage of rent, and there's nothing you can do to force extra supply to emerge at that price. However, this argument specifically does not apply for currencies. With currencies, you control the supply. Hence, assuming a simplified formula price ~= supply/demand, if you fix the price then all you need to do is constantly adjust supply to equal demand. Robert Sams' seignorage shares shows how to do this just fine.
Governments around the world are constantly changing how they calculate the basket and what items are included. They will do things like exclude food and energy along with stocks and real estate. John Williams maintains a website called “Shadow Government Statistics”
Ahh, shadowstats. I think it gets pretty nicely debunked here:
http://azizonomics.com/2013/06/01/the-trouble-with-shadowstats/The idea that any currency could exist and maintain stable purchasing power through a nuclear war is insane.
Agree. But I don't see why such a high threshold needs to be a requirement.
From the perspective of someone holding a coin, positive and negative interest rate changes are identical to price volatility.
The key difference is that positive and negative interest in SchellingDollar exists in small quantities and only for as long as needed until traders reallocate their holdings to make profit via arbitrage. One can literally set a maximum and minimum interest rate of +/-10% annually, and the scheme would still work fine. The reason why this is possible is that the stable coin is a zero-total-supply asset, and so any level of cash holding preferences is compatible with any price level; in a finite supply asset, on the other hand, price is proportional to cash holding preferences.
Any approach that provides unlimited liquidity at a fixed price is vulnerable to market manipulation attacks.
Sure, so if those kinds of attacks prove to be a problem, then provide liquidity on an increasing fee schedule. No big deal. Or we could just go back to Robert Sams' auctioning approach.
Predictable vs Stable... It seems to me that what people really want from a “stable” crypto-currency is reduced volatility.
Well yes, that's exactly what I mean by "stable" and why I think stability is useful to people. What else did you think I meant?
If we think about the “ideal money” it would be widely accepted with 0% growth in supply.
I think you'll find most economists would disagree on you on that point. Particularly
non-Austrian economistsIn my opinion, gold and silver, should be physical money and a crypto-currency should attempt to peg to gold and silver. In this way we can free all of society from the centralized control of fiat currency issuers and keep inflation limited to what gold and silver miners can produce.
Please dear god no, gold is an
environmental tragedy that uses proof-of-waste for its supply expansion algorithm. I would rather have BTS be the universal money than subsidize gold's price a single dollar more.
Also, as a final comment, all of the attacks against the US government in that post are irrelevant. Neither bitassets nor schellingdollar nor any other proposed mechanism is (1) controlled by any kind of Fed, (2) necessarily needs to be imbued with the explicit goal of 2-4% inflation, as opposed to a non-inflationary strategy like CPI pegging or heck even shadowstats pegging, and (3) has profits somehow leaking into a shadowy financial elite - everyone can own shares/volcoins and take part in any profits that the scheme may end up generating. It is wrong to extend criticism of existing centralized monetary policy into criticism of the very concept of monetary policy at all.