Inflation-Protected Asset vs. Anti-Inflation Parking

[DavidMc0]

You can’t assume stable demand for the anti-inflation currency

My point isn’t that there will be stable demand for the anti-inflation currency - my assumptions were so that I could address your statement where you said:

For example you issue 1 unit of your anti-inflation currency for 1 USD in 2014. In 2015 you decide CPI is so high 1 unit is 2 USD. The problem comes when people want to redeem (sell) their 1 unit in 2015, which is pegged to 2 USD – Where do you find the 2 USD to pay for it?

My point is that in this scenario, you wouldn’t need to find $2 USD to pay for anything, as naturally the asset will have doubled in value against the dollar given the USD halved in value during the period, assuming all other things being equal for the sake of the analysis.

Whether the peg would be held with another set of conditions is a different debate, but in the scenario you mentioned, there’s no problem maintaining the peg as there’s nothing to stress it.

[mhps]

My point is that in this scenario, you wouldn’t need to find $2 USD to pay for anything, as naturally the asset will have doubled in value against the dollar given the USD halved in value during the period, assuming all other things being equal for the sake of the analysis.

What you are saying is just that “assume there won’t be a problem, we will not face the problem.”

[DavidMc0]

That’s not what I’m saying.

I’m saying that an asset with a stable value that is priced in USD will double in price if the USD halves in value, all other things being equal.

That is just a fact, and if you don’t understand it, that’s ok

[Chronos]

I’m saying that an asset with a stable value that is priced in USD will double in price if the USD halves in value, all other things being equal.

A pegged asset only has value if the peg is secure. If the asset doubles in value, but the backing doesn’t grow, then the peg is twice as weak as before. If you think about value from a perspective of backing, then this becomes clearer.

[Raythma]

I wish the stabilization scheme in this whitepaper is further discussed among the Nu share holders as it is the best future alternative to the current fractional reserve scheme and it can be implemented in the Nubits with the least modifications and infrastructure needed.

[mhps]

I’m saying that an asset with a stable value that is priced in USD will double in price if the USD halves in value, all other things being equal.

I’m less concerned by state than by trend, even less than by stability. Only saying "all other things being equal“ isn’t good enough. If we add “if there is a rigid demand for the asset.*” it would be interesting. For example if the market has an insatiable demand for NuBits to use as a medium of exchange, then you could sell it at whatever price.

If the demand for NuBits as a medium-of-exchange (call it Dx) overwhelms that of a store-of-value (Ds), the requirement for matching reserve can be lowered. It would still be a unstable state but the ratio of the two demands, Dx/Ds, is a measurable health indicator, with which we won’t be totally in the dark in this state. A more strict indicator is Dx/U, where U is the number of unbacked NuBits in circulation. We are above the water if we increase transactional demand of NuBits, and make sure it stays well above the unbacked ones. I don’t know how many NuBits are held in exchanges by the traders. They belong to Dx.

[DavidMc0]

A pegged asset only has value if the peg is secure. If the asset doubles in value, but the backing doesn’t grow, then the peg is twice as weak as before. If you think about value from a perspective of backing, then this becomes clearer.

You are correct that if the value of the asset grows without the backing growing that it would be less stable.

However, in the example I’m commenting on, the value of the asset and the backing remain constant. The price in USD doubles from the first period to the second period only because the USD halves in value. The value of the asset and whatever it’s backed by remain stable In this example

If the asset were dependent on a USD reserve, then we’d have a problem, but NuBits are not backed by USD reserves - just pegged to it by supply & demand control.

[DavidMc0]

Only saying "all other things being equal“ isn’t good enough

This might help you understand why I’m putting the assumption in:

Ceteris Paribus

Ceteris paribus

[mhps]

in the scenario you mentioned, there’s no problem maintaining the peg as there’s nothing to stress it.

Someone bangs on your door and demand $2 for his 1 unit of the anti-inflation currency you have issued, and you don’t have that $2 to pay him. You call it “there’s nothing to stress it” ?

[Sabreiib]

Now, since we are partial reserve and actually have no enough USD/BTC to buy all NBT back @1$ price.

Pegging 1.2$ or 1.0$, the difference is not very big.

However, our NSR cap. is greater than NBT (the actual quantity around 400,000)

NuShares NuShares $ 1,376,121

We can use NSR to back NBT, otherwise it’s wasted.

[mhps]

Technically that would work. However in reality I think you’d ask whether the shareholders to 1) subsidize anti-inflation with their own money (shares). My bet is that since inflation is certain most of the times, shareholders want dividends, not bills. or 2) participate in a hedging scheme to track CPI with their own money as collateral. Most wouldn’t want it because although there will be winners and losers, the net effect is they collectively will lose.

[DavidMc0]

They don’t bang on my door to get their $2 - they go to bter.com or similar & exchange their unit for $2 or equivalent crypto-currency.

Are you familiar with Bitcoin? It has significant value despite zero reserves.

What would happen to the USD price of Bitcoin if the USD halved in value 1 year to the next? (Clue: the price in USD would double).

An anti inflation NuBit wouldn’t need subsidising. It would work exactly like standard NuBit, except the rate of increase in the money supply (new NuBits minted & distributed to custodians) would be lower than for standard NuBits that track the USD.

Full / large reserves of crypto-currency or fiat would definitely increase confidence in any peg, and confidence in the peg is the most important factor in determining its success.

[Sabreiib]

mhps, I think we should clarify some concepts at first.

NBT is our product, and its quality is actually money’s quality.

Why is BTC a bad money? It can be used as “store of value” and “medium of exchange”, however, the “unit of account” demand STABLE value of a currency while BTC very volatile.

The more stable, the higher quality of a currency. USD is quite stable but not the most stable because of its inflation for 2-4% annually.

An anti-inflation currency has better quality than those strictly pegged to 1USD. We will sell more product if we provide anti-inflation feature,

Will most shareholders object to provide better quality of product which means greater sale?

Another question is to pledge NSR to protocol. You can withdraw your pledged NSR once you pay back those NBT. Since you will not lose your NSR unless Nu wallet hacked/stolen by hackers, why would you worry about it?

[mhps]

You don’t appear to understand how NuBits works. NuBits being a $1 coin, unlike bitcoin, gets its price from the bots which NuNet installed at BTER etc. All Nubits in circulation are supposed to be sold by the bots. Anyone can sell his Nbits to the bot at $1/Nubits. In my example someone in 2015 will demand the bot to pay $2 for the 1 unit currency he bought from the bot in 2014, which the bot won’t have.

[mhps]

We will sell more product if we provide anti-inflation feature,

There is no shortage of example that a new feature is so good it breaks the company.

[Sabreiib]

We may issue a new anti-inflation Unit. If both NBT and it are well pegged, the free market will judge which is more welcomed.

[Sabreiib]

mhps, I just read this one-month old thread on percointalk.

BitcoinMagazine failed to mention NuBits!

these 2 comments are interesting:

"

To all supporters of BitUSD, Nubit, and similar USD (or any fiat) linked volatility “solutions” (while admiring their enthusiam): Think again!

Fiat paper money which governments can print and devalue at will is just what we do not want. These “solutions” endorse them, their centralistic hubris. Their monetary policy with artificially low interest rates to fund the expanding government debt bubble which makes a mess of the economy, makes houses unaffordable and destroys peoples’ savings through negative real interest, until the inevitable crash, unemployment and poverty. Think.

Backing a cryptocurrency with fiat or pegging its value to a fiat is like building a house on quicksand. Bitcoin can do better, and will do better.
"

“It looks like NuBits are pegged to the dollar. That’s not a stable currency. I’m looking for a currency designed such that prices of goods and services will not go up/down at all over time, except with natural market forces.”

---

This is quite some crypto fans’ view, they address the hardcore issue, shall we become followers of corrupted central bank and betray satoshi’s dream?

The answer is no, we just need to peg 1.02USD in 2015, and they’ve got to shut up. Furthermore, they will love Nubits because we are actually the implement of Hayek’s theory which is probably their spiritual pillar.

I come from a so called socialism country–Red China. When i was in middle school, the economics books read “The evil capitalism society suffers a lot from economic circle” which is called by my teachers as “Great Menses”. LOL

"When time to economic valley, people are lack of foods/service while those evil capitalists dumping their milk to keep price high and profit.

I think the scene described is sth like 1929-1933.

Although the living standard in western countries are far better than 1929, but the economic circle is still there, lots people lose their job when the recently 2008 crisis coming which makes Sotoshi to invent bitcoin.

[Sabreiib]

Eventually China discard the marxism trash theory and hug western mainstream economics which is being taught in Chinese university. But the latter is not perfect due to monopoly monetary police by corrupted central bank.

The politicians who trying to be elects every 4 or 5 years are very keen to use inflation to incentive economics and as a result many bad projects becomes success due to inflation help on their finacial balance. This is drug, even mild inflation is also drug. In a long run, economics is harmed, crisis is inevitable just like 2008.

As Hayek said, it is monopoly monetary not capitalism should responsible for economics crisis. This monopoly opposite to hardcore spiritual of capitalism: free competition.

I 100% support NBT added anti-inflation feature, 2015 or 2016 is suitable IMO.

[DavidMc0]

The anti-inflation currency would not use the same bot specification as NuBit.

Its bot would need to constantly update the buy & sell walls to keep up with inflation.

It wouldn’t jump from $1 to $2 overnight, but slowly throughout the period, so it would sell & buy at a slowly increasing price.

If USD inflation was ridiculously high like in your scenario, the bot would not hold big quantities USD, but a more stable asset & minimise USD holdings.

[Sabreiib]

NSR price can be ridiculous high if we manage to peg 2$ when USD inflation so high, never underestimate the belief of people. What’s the price of OS? Microsoft windows is several hundreds bucks, pirate version only 90 cents, Linux is free, the price range of software is HUGE.

For thousands of years, for the first time, there is a magical software(Nunet) can provide good money (neither Inflation nor deflation), any price of NSR is possible. Since our software can satisfy people long time desire. And that precious NSR can be used to back NBT pegging.