For a regular "currency", when the market is getting hot, the central bank usually reduce the amount of money supply, and increase it when market is on a downward trend. It looks like, as a reserved currency for Defi, we are doing the exactly the opposite. Can someone explain this?
Disclaimer: Not sure I am entirely accurate here. Thinking out aloud.
In a downturn, increasing money supply enables the state to sustain demand (through stimulus) and maintain price stability. Most times this prevents the structural issues (in the economy) from self-correcting, and inflates and delays the issues for the next cycle.
But what it also achieves is prevention of panic.
As a central bank of the new world order, we shouldn't have a role in manipulating demand (through stimulus). Instead we can just focus on being the safe haven asset.
When panic happens, Ohm will just absorb it and the economic premium increases. Which can then in due course oscillate back into the ecohnomy, as the panic subsides.
Inverse bonds seem genius.
Also,
Cons of the Proposal
- Encourage arbitrage activities.
Doesn't seem like a con. Arbitrages will ensure things stay efficient.