26 lines
1.8 KiB
Markdown
26 lines
1.8 KiB
Markdown
|
- Discuss the following quote from the Fiat Standard
|
||
|
|
|
||
|
|
> While many
|
||
|
|
people would be tempted to exit fiat debt entirely and shift to holding hard
|
||
|
|
bitcoin savings, the continued existence and wide availability of fiat debt
|
||
|
|
will offer a strong incentive to borrow fiat and use it to accumulate bitcoin.
|
||
|
|
One of the smartest and most far-seeing analysts of bitcoin, Pierre
|
||
|
|
Rochard, had identified this phenomenon as early as 2013, outlining how
|
||
|
|
bitcoin allows investors worldwide to carry out a speculative attack on all
|
||
|
|
national currencies similar to what George Soros and beneficiaries of low
|
||
|
|
interest rate lending have been doing to weak national currencies for
|
||
|
|
decades, with spectacular success. The speculative attack strategy is to
|
||
|
|
borrow the weak currency, and use the proceeds to buy the stronger
|
||
|
|
currency. As the borrowing of the weak currency causes an increase in its
|
||
|
|
supply, selling it to buy the strong currency causes a decrease in demand
|
||
|
|
for it, and results in the decline of its value next to the stronger currency.
|
||
|
|
This reduces the value of the loan the attacker owes, and increases the
|
||
|
|
value of the currency he holds, a highly lucrative combination. With bitcoin
|
||
|
|
a harder currency than all national currencies, it could serve as the perfect
|
||
|
|
launchpad for attacks against national currencies. It is a natural evolution
|
||
|
|
of the interaction between the two forms of money: hard bitcoin is
|
||
|
|
optimized for appreciating as it is held, while fiat is optimized for devaluing
|
||
|
|
as it is inflated and lent. The likelihood of speculative attacks casts doubt
|
||
|
|
on the monetary upgrade scenario discussed above. How long can fiat
|
||
|
|
survive if people can keep inflating its supply by borrowing it to buy harder
|
||
|
|
bitcoin? We have never seen a similar situation and it is hard to estimate how this will unfold.
|