What are the main benefits of fiat that Bitcoin doesn’t have?
Doesn’t fiat allow governments to raise money more easily, by increasing the money supply and possibly easier taxation, to pay for important programs, including health care, education, research (and other public goods) and for emergencies (like COVID)?
Hi Michael, thanks for your comment. I am the original author of this post.
Yes I agree, you can argue that fiat allows governments to monetize their debt much more easily and spend more freely. I have two responses to that:
As Alex Gladstein (CSO of the human rights foundation) argues in this essay, fiat currencies have also allowed governments to finance wars in a much more opaque way. In other words, fiat currencies remove the checks and balances on government spending. This was, in fact, the main reason we removed the gold standard to finance the first world war and even though we re-pegged, we again had to depeg in 1971 in large part due to excessive spending during Vietnam war.
Increasing the money supply can be thought of as a regressive tax, because it ultimately leads to inflation which hurts the poor more than the rich. I’m not advocating for anarchism, and agree that healthcare education research are all important, but if we want to finance those things, we should do it via progressive taxation.
I think the government would still be able to tax bitcoin, via corporate income taxes, VAT etc, but their spending would be much more limited to what the people democratically approve of—think of how unpopular war bonds used to be and how we have replaced them entirely with “credit card wars”.
What are the main benefits of fiat that Bitcoin doesn’t have?
Doesn’t fiat allow governments to raise money more easily, by increasing the money supply and possibly easier taxation, to pay for important programs, including health care, education, research (and other public goods) and for emergencies (like COVID)?
Hi Michael, thanks for your comment. I am the original author of this post.
Yes I agree, you can argue that fiat allows governments to monetize their debt much more easily and spend more freely. I have two responses to that:
As Alex Gladstein (CSO of the human rights foundation) argues in this essay, fiat currencies have also allowed governments to finance wars in a much more opaque way. In other words, fiat currencies remove the checks and balances on government spending. This was, in fact, the main reason we removed the gold standard to finance the first world war and even though we re-pegged, we again had to depeg in 1971 in large part due to excessive spending during Vietnam war.
Increasing the money supply can be thought of as a regressive tax, because it ultimately leads to inflation which hurts the poor more than the rich. I’m not advocating for anarchism, and agree that healthcare education research are all important, but if we want to finance those things, we should do it via progressive taxation.
I think the government would still be able to tax bitcoin, via corporate income taxes, VAT etc, but their spending would be much more limited to what the people democratically approve of—think of how unpopular war bonds used to be and how we have replaced them entirely with “credit card wars”.