If transferable sudoku bragging rights have durability, portability, divisibility, uniformity, and limited supply, then sure I'll call them sound money. No weirder than a yellow, malleable, ductile metal with 79 protons or the calcium carbonate exoskeleton of an invertebrate.https://twitter.com/obadzz/status/1040024130911981573 …
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No weirder maybe.. but that bar is quite low! Seems a bit perverse to call "sound" a currency with no computable fundamental value, whose price fluctuates based on the supply of greater fools..
How do you compute the fundamental value of fiat? Retail price of the paper?
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You study the issuing authority's ability to achieve a price level target (I think your grandfather believed central banks have the required powers for this). Then you need to assess if they *want* to achieve their target. If they do then the fundamental value is the target.
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I get saying that gold money has "fundamental value" because of jewelry/industrial demand. But a central bank price target is achieved by things like "minting/burning money", and "having a mostly fixed supply" - tools equally available to cryptocurrencies.
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The prior owner of "burned" money is made whole thanks to collateral held by central banks. That's the key about "fiat", for every unit of money, there's a unit of anti-money which can be used to extinguish the money. Not so with crypto: it's all liability and no assets..
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Umm...it is just not the case that fiat is fully backed by central bank assets. Also keep in mind that US bank assets are denominated in USD - you can't back money with assets denominated in that money - both go to zero together.
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Base money is backed by central bank assets. Retail bank liabilities are backed by retail bank assets. The existence of the secondary layer isn't so relevant to the story.. The fact that the collateral is denominated in the same currency is an interesting wrinkle... 1/2
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... but if you follow the argument through it turns out not to matter (though that won't fit in a tweet). The best cb assets (and simplest to analyze) are overnight repos (collateralized loans). The collateral to these loans can be anything but in general it's treasuries.
End of conversation
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