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Author Topic: What is the problem with centralized currencies?  (Read 1174 times)
deisik
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June 23, 2017, 05:55:34 PM
 #41

One facet of the centralization versus decentralization debate is: competition.

What would the personal computing CPU market look like if the market were monopolized under intel for the last 20 years under a centralized format? Competition between intel and AMD incentivized CPU advancement, innovation and discovering methods to produce chips at lower cost to consumers.

Under a centralized format all of these free market, competition derived, benefits disappear. This same precedent could apply to currencies.

When they're too centralized in a way which restricts competition and innovation what is left trends towards industry wide stagnation which translates to exorbitantly high prices and corruption rather than progression or cost effectiveness.

This is certainly true in respect to CPU chips

But how well does it translate to currencies? The first thing which comes to mind is that while fiat currencies are certainly centralized, they are no more centralized than the chip makers themselves as economic entities (or any other manufacturer out there). Indeed, if it were only Intel, or IMB in pre-PC era, we would likely not have a personal computer in every home. But is this really different with currencies? After all, there are over 100 fiat currency "producers" out there (but only half a dozen chip manufacturers), so you can't possibly say that there is no competition between currencies (if that was your point)

I'll contend: one of the key reasons behind the recent tech boom is the decentralized format under which capitalist countries operate.

Google & apple began as small businesses run out of someone's garage. A massive amount of innovation and progress defining the tech sector came about as a result of open door policies where anyone who feels they have what it takes to compete is free to try their luck.

Currencies by contrast have centralized, closed door, policies which one might characterize as restricting innovation and progress. Banks have the same. Could centralization, lack of competition and monopolization of currencies be correlated with stagnation, lack of innovation & progress?

I guess you are trying to throw out the child along with the bath here

You are talking about how some entity (like Google or Apple) started, but is it relevant to the point discussed? Even if Apple had started in a garage, this doesn't change the fact that it has always been centralized as an economic entity. In fact, Jobs was famous for his authoritarian style of management and autocratic leadership, while Google is said to be rather flexible and liberal in this regard. I think you can easily draw an analogy here with a fixed exchange rate currency versus a floating exchange rate currency. But this is still irrelevant since what matters here is the competition between currencies in the world currency market which is essentially the same as the competition between companies in their respective markets

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June 23, 2017, 06:37:57 PM
 #42

I'm trying to summarize in as few words as possible, what is the problem with centralized currencies?  Writing an article about why decentralization is important.  I would like a good problem summary to start.

I would say:
 - Someone always has the ability to counterfeit
 - Controlled by centralized authority who can change the rules as they see fit
 - Centralized authority can print more money
 - People can have their bank accounts frozen

Ideally a sentence or two to summarize. Maybe something like "Centralized currencies can always be cheated by someone and manipulated in a manner that most benefits those in control, to the extent of locking you out of your account or taking away your money if you do not behave in the manner those people would like.  When the people control the currency, the people decide the rules that govern it and no one person can touch your money without your permission"?
Centralized currencies are something which one does not own it literally, but is owned and controlled by the governments, we use it and pay charges like taxes, etc for that. The notes or coins which we use are actually like tokens worth that amount. Whereas the decentralized currencies, one owns the amount he earns and is not controlled by someone else.



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June 23, 2017, 07:14:07 PM
 #43

The problems we are having today is because fiat is centralized and because of this there is higher inflation in most of developing countries and even developed countries are also feeling the infect. Corruption and self aggrandizement is prone in centralized currencies. I think the best thing to do is subscribe to this new trend of decentralized Currencies such as bitcoin and others crypto currencies.

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June 23, 2017, 07:16:10 PM
 #44

I'm trying to summarize in as few words as possible, what is the problem with centralized currencies?  Writing an article about why decentralization is important.  I would like a good problem summary to start.

I would say:
 - Someone always has the ability to counterfeit
 - Controlled by centralized authority who can change the rules as they see fit
 - Centralized authority can print more money
 - People can have their bank accounts frozen

Ideally a sentence or two to summarize. Maybe something like "Centralized currencies can always be cheated by someone and manipulated in a manner that most benefits those in control, to the extent of locking you out of your account or taking away your money if you do not behave in the manner those people would like.  When the people control the currency, the people decide the rules that govern it and no one person can touch your money without your permission"?

Anything else I'm missing?

Thank you!

I really dont see any problems with centralized with the exception that if you have a very weak economy, thats going to rise the price of commodities and mostly when your currency falls to the US Dollar, price of thins goes high.



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