There seems to be a never-ending debate that goes on between crypto keynesians and the advocates of the Austrian school of economics, and Bitcoin developer and educator Jimmy Song knows very well which side he's on. During his exclusive Crypto Insider interview, the man behind the Programming Blockchain initiative has pledged his allegiance for the choice which makes most sense from an economic point of view: using the credit card for purchases and HODLing your Bitcoin as much as you can.
The rationale behind Jimmy Song's choice is simple and easily comprehensive: credit card companies reward you for purchases and charge lower fees, and you also get to spend the "dumb" money first. Except for fungibility, Bitcoin has all the qualities of sound money and it's actually a better idea to spend your silver while you hold the gold in your vault. Fiat's supply isn't limited, and unlike BTC you can see the government censoring it as a mean of payment or freezing your account. Furthermore, the former will only lose value in time due to inflation, while the latter has really high chances to appreciate in time due to increasing production cost, rising demand, and soaring popularity among people and institutions.
Given these practical and irrefutable differences between Bitcoin and fiat, it seems like it actually makes a lot more sense to use your credit card for purchases – at least until the king of cryptos establishes a solid foundation for price stability and becomes a true medium of exchange thanks to improvements like Lightning, Schnorr signatures (which, in addition to adding more privacy, also reduce the byte size of transactions and consequently make blocks harder to fill, which lowers fees), and even Liquid.
Listen to the interview bit and read the complete transcript below:
Vlad: Now I’m wondering about that tweet which became controversial, about spending with your credit card and paying out in Bitcoin. Can you please explain it? Because I saw that some people really reacted in maybe better ways. Like Jackson Palmer said oh that’s a great way of providing a new form of money and innovation to the world. Where as people like Tone Vays seem to be much more defensive and explain through an article, which I haven’t read yet, that he presented a similar argument four years ago in a debate.
https://twitter.com/jimmysong/status/1049412253227896832?lang=en
- jimmysong
Jimmy Song: Yeah, so my point was that this is the economically rational and more convenient thing to do. I didn’t say this is my recommendation or anything but if you want to do that, this is the economically rational and convenient thing to do. I don’t think there’s any disputing that credit cards are way more convenient, other than darknet markets, international remittances, maybe micro payments. With a few exceptions, credit cards are way more convenient. More merchants take them. It’s a lot easier to use credit cards to buy what you want and my point was if you use a credit card, then it’s economically rational because you get points back, you don’t have to pay the bill for 25 to 55 days after your purchase, you get consumer protections in the form of chargebacks, I mean there’s a lot...there’s a whole host of benefits to using a credit card even though the prices are the same.
So really you’re getting a discount for utilizing a credit card versus using a Bitcoin. Why would you pay more to be able to use bitcoin? Economically that does not make a lot of sense. But, a lot of people took that to mean “oh you’re like pro-Visa” or something like that and that’s not what I’m saying at all. I’m saying it’s the economically rational thing to do, it is the more convenient thing to do, and if you want to use it as a method of payment then just pay off your credit card bill when it comes.
That way you get like 25-55 days of upside which in bitcoin terms can actually mean a significant difference. You can double up on all of the savings, you may be getting 3-4% savings from using the credit card and then in addition to that get like 10 or 20% upside on bitcoin appreciation during the 25-55 days. So economically it makes much more sense to use a credit card and do it that way. That was my argument. It’s economically rational and it’s more convenient. But what people took that to mean is “oh Jimmy is anti-spending” or something like that and I mean, I didn’t really understand their argument because they were sort of saying a shriek and point tactic of a mob that doesn’t like what you say but doesn’t really have an argument against it.
So, you know especially Jackson Palmer or whoever, he’s an admitted socialist. He doesn’t really understand economics whatsoever. So to me, his criticism is a badge of honor, and I really hope that he continues to criticize me. For me, I do not want to be on the same side as him for any economic issue because I don’t think he understands economics, at all! I have an article that explores this significantly further including why they were so angry about it. I mean at one point this was the top 5, 6, 7 posts on r/btc and you have to wonder, why are they so against doing what is individually economically rational? Why are they like that? So you’ll have to wait for my article to come out but yes, it’ll come out next week.
Originally posted on Crypto Insider : https://cryptoinsider.com/jimmy-song-on-why-spend-with-credit-card-instead-of-bitcoin/