Talk:Stable coin governance

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Craig Calcaterra (talk) 04:26, 27 March 2023 (CDT)

Resources

• Understanding monetary policy
  • federal funds rate

https://www.investopedia.com/terms/f/federalfundsrate.asp

Craig Calcaterra (talk) 11:36, 3 April 2023 (CDT)

Interest rates & Inflation & Spoilage

Interest rates and inflation are crucial concepts for governing a stable coin. The peg of a stable coin has to be decided in terms of a CPI and a target for inflation.

I think of them as friction in the economy—corruption, what is lost due to spoilage.

So the interest rates should go down in stable times when the world is correctly producing for the demand. Interest rates should be low when the economy is efficient.

However, interest rates are not just a matter of how well industry gets our products to us. It is also a matter of how well governance is working. So if we are wasting our productive capacity on war, then the absolute meaning of money should be somewhat diminished as spoilage is greater.

Spoilage includes all the non-productive aspects of the economy, including overhead such as policing, legislation, & judicial activity; news media reporting, entertainment, & education. Baldly saying, “education is spoilage” tends to be provocative and offensive in the wrong atmosphere. But from an abstract point of view, here is what I mean: When someone dies, their education is spoiled. Their life’s work in educating themselves is lost. Then society needs to re-educate a new person—a child—to replace the dead person. This is wasted effort compared with the case if people were immortal, which is one of the advantages of AI over humans. I put education in the economic category of spoilage with respect to the gross domestic product.

Interest rates are closely correlated with inflation. From a course perspective, I believe inflation is the same thing as the interest rate, though inflation is more fundamental. Neither the true value of inflation nor the true interest rate are observable, neither is spoilage. They all converge in the right equilibrium.
Craig Calcaterra (talk) 11:53, 3 April 2023 (CDT)