You need to go back and read Keynes -- in a multi-asset world cryptocurrencies will absolutely weaken the ability of Central Banks to stimulate the economy through monetary policy. But the presence of highly-liquid and mildly-deflationary alternatives to cash will also reduce the need for market intervention at all since the people trading INTO crypto will by definition be trading OUT of fiat. And with fewer people holding cash off-market as a long-term investment we will have effectively eliminated the source of liquidity traps, which is the entire justification for monetary policy in the first place.

I blame the lack of enthusiasm for crypto among orthodox macroeconomists on the fact that economic history is out-of-vogue and no-one bothers to read the major thinkers anymore. But it's also ironic on the other end -- since for all of the fuss goldbugs make about Keynes, he would absolutely love bitcoin (read his war diaries!). Sure, it is important prices, wages and taxes continue to be denominated in and settleable in a national currency. But as long as that happens cryptocurrencies will be a boon not a curse, although they are also likely to bring about short-term inflation as the purchasing power of digital assets rises relative to those of traditional currencies.

I understand the argument: however, it pivots on the availability of assets, not currencies. If ’cryptocurrencies’ were termed and marketed as ’cryptoassets’, and folk were under no illusion that this stuff is money with which you can directly buy your food and pay your rent but rather something you can exchange for money to indirectly affect your wealth depending on whether it’s value appreciates or depreciates, I’d be much more content with the rhetoric.

There's no reason that people can't transact in cryptocurrencies directly, qubex. Remember that the economic problems caused by the Gold Standard did not result from people transacting in gold -- they came about because there was a fall in aggregate demand. Governments embraced hoarding/austerity in response to their own budget problems and that starved the global economy of general liquidity.

As long as all crypto purchases require an exchange of fiat for crypto the total amount of fiat in circulation never falls. It doesn't hurt if people transact in non-fiat assets (that may be preferable in many cases given the efficiency gains involved). Sure, the growth of alternatives to fiat may lead monetary authorities to reduce the amount of fiat in circulation, but all that is really necessary to prevent deflation is that prices continue to be denominated in fiat and that fiat continues to be acceptable as legal tender.

”Transacting in non-fiat”, beyond the crypto-jargon, has a name: barter. You can’t keep your accounts in barter units (particularly volatile ones), and more pertinently you cannot settle your tax liabilities in altcoins.

I'm going to end the discussion here because I don't want to personalize it, but all you are doing is contradicting yourself and you don't even seem to be reading what I have written. So what is the point?

Yesterday you were complaining that that if everyone transacted in crypto the money supply would be deflationary; today you are insisting no-one will want to hold crypto assets because of volatility. Yesterday you were comparing crypto to the gold standard; today you are suggesting that all economic activity prior to Bretton Woods was "barter" (as if that is an argument!). And then it is clear you haven't even read my previous comment, which explicitly states that cryptocurrency is non-problematic so long as prices continue to be denominated in a non-deflationary asset -- so of course taxes need to continue to be paid in fiat.

So I'll stick to my earlier observation: if you want to understand how crypto will intersect with the fiat economy you need to go back and read Keynes on the causes of liquidity traps, and then work forward from first principles. You don't see it now because -- like Krugman -- you think you are arguing against the Gold Standard. But the Gold Standard is irrelevant: in practice the only question that matters from a macro perspective is to what extent fiat-denominated activity will shrink as crypto-adoption spreads, and whether the manner in which crypto is adopted translates into wage and price rigidity across the economy as a whole. If your generation of macroeconomists do not or cannot understand this, the next ones will.

Pity you choose to end the discussion here because I was enjoying it and you have made some points that I am forced to concede, and that lead me to revise some of my statements.

Firstly, you are absolutely right that by calling all transactions that are denominated in non-fiat assets ”barter” I have inadvertently and inconsistently folded-in all transactions that occurred in official currencies that occurred prior to the abandonment of the gold standard, and that was not my intention. As such, I wish to amend my statement so that it is understood to apply now, far after the abandonment of the gold standard, and relates mainly to the fact that all official currencies that I can think of are fiat in nature, so that transacting in official currency and in non-fiat are understood to be mutually exclusive options (at this moment in time).

Secondly, I do not wish to give the impression that the inherent volatility of cryptocurrencies makes them unsuitable as investment vehicles: given their (naive) return/volatility profiles, they definitely have a role to play in an investment portfolio. What I am trying to say is that they are suitable for investment and speculation, not as a measure of value and as a unit of account (traditional roles of currencies) because they’re too damned unpredictable.

Hopefully you read this and given those two provisos you are willing to resume the (very engaging) conversation.

Who are these people trading with? People trading OUT of cryptos INTO fiat. How does the asset distribution change, net, in that exchange?

The distribution of assets changes and also the relative purchasing power of each, but the total volume of fiat in circulation does not change -- you get it, yes!

(Ceteris Paribus the velocity of the relevant monetary stock measure drops proportionately, which is in and of itself neither a good nor a bad thing.)