Bitcoin Forum

Fiat currencies contain a bug.  Specifically, a race condition.  The inflation rate is determined independently of the growth rate of the economy.  These variables should be unified.

Bitcoin eliminates this bug.

Strange, I'd rather say that it is bitcoin which suffers from this bug. Do I miss something?

But this in no case makes bitcoin meet the requirements of the economy (either shrinking or expanding). Its supply is totally inelastic, which is, in my opinion, even worse

This is another question, but this would hinder real economic growth. That is why gold failed (and currencies backed by it)

Gold failed as a currency. As a store of value you can use pretty anything of lasting value (diamonds, whatever). Gold is just more convenient and universal

If you still disagree, please name a few currencies which are either gold (or silver for that matter) or on gold. The countries on precious metals standard HAD to switch to fiat because they dragged through a number of real crises. And real here means REAL when people starved to death

Any quantity of money, within reasonable limits, is optimal. There is no benefit in changing the quantity of money. It just introduces distortions and makes economic calculation more difficult. The move away from the gold standard had nothing to do with people starving to death because of an inelastic money supply. It was the result of the First World War and the resulting huge war debts.

The quantity of money should correspond to the volume of the economy (total goods/services produced)


You made my day, really. What huge debts had USA after the First World War? United States was the biggest creditor to Europe and it had no debts. How comes?

Inelastic money supply (because precious metal content in the currency is fixed) causes production to shrink (unless offset by factors such as technological advances) which in turn causes unemployment which causes consumer expenditures to fall and so we get into vicious circle

So now we are getting into the land of dreams. Nice


This has nothing to do with gold as a currency


There're no such currencies presently, to begin with. The USD status as a world reserve currency is not because of oil (or any other merchandise for this matter) but as a result of USA controlling world trade and trade ways (through exchanges and military)


It has always been so (putting conspiracy theories aside). Nevertheless we are still better off today than we were a hundred years ago

That Libya proposed gold dinar (?) and things suddenly became very complicated for her. The rest is what called "conspiracy theories", I am just not into it, sorry

Are you one of those "gold bugs"?

It has occurred to me that anyone could build an inflationary alt-coin on top of the bitcoin protocol. Let's call it GrowCoin. All we would have to program is an user interface that shows GrowCoin as a multiple (let's call the variable xmultiple) of Bitcoin. The variable xmultiple could be programmed to increase by 1% every month. When you make a purchase using GrowCoin, the interface would just divide by xmultiple to get amount in bitcoin and send them to the new address. Your GrowCoins would increase by 1% every month.

This little mental exercise shows the whole silliness of the idea that we need an inflationary economy. The reason that governments love inflation is that they (and their friends) get the money first. They also get to pay back debts with cheaper money.

Congratulations! You are trying to "invent" money multiplicator


It's called seigniorage

Tell me, what exactly is bad about an "inelastic" currency?

An "inelastic" currency just means one outside of the control of government agencies, i.e, in the control of the free market. Its ridiculous to think that by pumping more currency into existence you're enriching people. That's just dumb. If you want "more" money, represent your money in terms of Satoshis rather than Bitcoins.

In short, deflating currency ("represent your money in terms of Satoshis rather than Bitcoins") would be hindrance to a growing economy. There will be no incentive for producers to expand production (or even keep it at the same level) since there is a time lag between production (including all steps up to an end-product) and actual disposal of goods through stores - you would buy high and sell low

Expanded production makes people richer and comes first, money as such is only a utility, it's secondary to production

This is a completely noob theory for ridiculously obvious reasons.

Consider a scenario in which everybody receives a proportionally equal amount of an inflating money supply. What should be fairly obvious is that this doesn't matter, since you could achieve the same thing by just representing money first in Bitcoins, then in mBTC, then in satoshis, etc...

So, unless you for some reason think the situation above matters, you are proposing a system in which people DON'T receive a proportionally equal share of the "new inflated money." In other words, you seem to be saying that by having a fundamentally unequal system, which is by definition unfair, the economic output would be somehow greater.

An economy doesn't "grow" just because money is being inflated and thus its easy to say "more" money is changing hands and products are worth "more" and our GDP is worth "more." Incentivising expanding production, simply as a store of value, is in fact counterproductive, since it forces people to produce simply to maintain their original wealth-level and thus exceed what would normally be the optimum amount to produce. This means that excess goods are being produced, and in turn that excess real resources are being burned, for no real reason whatsoever.

True wealth is the value of natural resources, and the value of human labour. When you artificially drive up the future value of these resources, you force continued consumption of such resources now, rather than later, when you'll have to pay more for it. This artificial skew causes market inefficiencies that should be fairly obvious. It makes employers not want us to wait and get educated, but work now. It makes consumers not want to save, but spend now. It makes producers not make what the market actually demands, but constantly over-produce, destroying real natural resources, in the hope that people in the FUTURE will hopefully want his product, when he can charge more for it. Human nature already drives us to want things now, there needs to be no further economic incentive to highlight such wasteful tendencies in humanity. If anything, the opposite needs to be encouraged.

I didn't understand what you had meant to say by this snippet (haven't yet read further). What do you mean by "What should be fairly obvious is that this doesn't matter" - what doesn't matter and why should we consider this scenario if you say it (?) doesn't matter? What same thing could we achieve? I don't get your point

Please explain, then we proceed

He means that, in that case, the distinction between inflation or stable money supply doesn't matter.  You aren't, in fact, arguing for inflation.  You are arguing for centralized inflation.  You've attempted to justify inflation.  But how do you justify centralization?

What is centralized inflation and centralization here?

It seems I got his point if your guess is correct indeed. If we raise the face value of EACH unit we actually don't change anything and the effects are negligible. It is called redenomination, i.e. changing the face value of a money token, it's done for conveniance primarily. We just write off (or add up) some zeroes, that's all

Creating new units (money supply) has nothing to do with redenomination, you just cannot directly compare these notions. Asking such questions is like asking about the difference/similarity between meters and grams

What depends? Please be more specific

Thanks for clarification, now I got your idea. Even if we take money with "intrinsic" underlying value (say gold backed dollar) redenomination and creation are surely not the same thing. In the case of redenomination there is no redistribution of wealth - every man will still have the same share of total gold reserve backing up the dollar (despite the number of zeroes added or subtracted from a money token). So redenomination doesn't change anything even in this case (in fact it just doesn't make sense either)

Regarding creation (printing) of new gold backed dollars, the answer is obvious too - people become less wealthy (in gold), their gold share is decreased per holder (and this is one of the faults of hard asset backed currencies, which fiats are free from)

Not quite so. If money supply corresponds with the supply of a backing asset, this unit value stays the same. And this is where, in my opinion, fiat currencies are far superior or even fairer beside hard currencies

Well no, it certainly *does* matter.

1. If the currency inflates by 10% yearly, you will be 10% poorer in a year's time by keeping it in your mattress.

2. If the currency DEflates by 10% yearly, you will be 10% richer in a year's time by keeping it in your mattress.

See the difference?
Spoiler:  (1) motivates you to invest your money, while (2) motivates you to keep it in your mattress.

*Bitcoin is currently an inflationary currency -- it inflates by the number of coins "mined" by the "miners."
Understanding the basics is important.

If a currency is backed by economy (widgets), printing more moneyz as the economy grows (more widgets are made) keeps the currency value exactly the same (more moneys = more widgets to buy with it) :)

That is why fiat currencies have superiority against hard currencies. They are backed by the whole economy, total national wealth, and if the economy grows, so does money supply. There is no need even to print new money by the central bank. Money is created/destroyed automatically inside the system as required. In relative terms everyone's share of national wealth becomes less as the economy and money supply grows but in absolute terms it stays the same. I think this is a fair state of things from public welfare's point of view

Once again you fail to see the whole picture (first of all regarding interest rates and making everyone happy). There is no singular creator being a malevolent entity taking away wealth. The money printed by CB makes only a small fraction of all the money in the economy

It's both theory and practice -- the standard of living throughout the world is better today than it was when currencies were backed by shiny metals.  Let's at least keep our facts straight.
And sure, there are plenty of ways to run economy into the ground -- both with inflationary and deflationary currencies, both with fiat and specie-backed money.

The point is Invisible Hand is always at work.  Even when it creates crippling regulations -- that's Invisible Hand too :)

And so what? Are they saboteurs, I don't get?

Look, say that instead of halving the block reward, Satoshi kept the block reward the same but doubled the amount of BTC in existence. in other words, everybody who used to have 1 BTC now would have 2, and everybody who used to have 4 now has 8, and so on.

This would be functionally equivalent to the system we have right now. There is literally no difference, because it would still be "fair", if a bit more confusing. Sure, its an increase in money supply, so the price will naturally halve. Except its a predictable increase, and a fair increase. Gox & other exchanges would likely just halve the price of Bitcoins on that day as well, because the system is fair, and open: Everybody knows.

Knowledge is one of the requirements for effective capitalism. What you're arguing for, is a system that is fundamentally unfair because it is unpredictable. You're saying that simply due to the lack of information people have about WHEN the money supply is increasing - not to mention who is getting the new money supply and what they intend to do with it - the system somehow becomes more efficient, when in reality it just adds uncertainty.

Central banks aren't privately owned, though this isn't relevant to my point -- merits of inflationary & deflationary currencies.
If you'd like to branch off & talk about inflation not matching economic growth, fine.  As i said, it's possible to run economy into the ground no matter what money is used.

Ability to increase the money supply is simply another tool available to Keynesians -- a tool simply absent from the Austrian toolbox.  Inflation is also not intrinsic to fiat currencies, and runaway inflation is simply an example of economy done wrong.

Done right, it encourages investment & discourages hoarding.
Hoarding is a bad thing, a sign that you got more than you need, that you forgot to share -- even kindergarten kids know that.

And so what? They are leeches. They suck up the lifeblood of the economy (real, resources) by printing money in return for public debt,  in return for just getting the right to use currency. Then, they take that interest (or the collateral they get in case of a default) and use it to take our real resources, not printed resources, away from real people, and place them into the hands of the elite.

It's a partnership between bank and state, just as corrupt as the partnership between church and state used to be. The state gets to steal the wealth of the people in the form of inflation, while the banks get to steal the wealth of the people in the form of eternal interest.

Central banks are not "privately owned," you obviously know this [see red text].  
No, there is nothing fair about the banking system, just like there is absolutely nothing fair about money itself, or about nature (why is one baby born rich, while another starves?)

To see the million ways that bitcoin economy *could* go wrong, please visit the lending section of this forum, where thieves are pitted against misers charging usurious rates, or the securities subforum where scammers continuously  fleece gullible noobs.

Sharing isn't sharing when it is forced. Moreover, sharing paper money that can be printed whenever, isn't sharing at all either, since it's worthless. You seem to be forgetting the whole entire point of currency, to represent a share of resources. When you inflate currency, you incentivise consumption of such resources faster than a free market would have you consume them. That's why its ridiculous that the same government imposing all these regulations to supposedly protect the environmental resources is systematically rewarding over-consumption - i.e, wasting - of such resources.

True prosperity isn't how much fake money you have, or even how fast such fake money is changing hands. Its about how many real resources are being produced. Everything else is just a mirage. Money is supposed to be a model for that, but when you intentionally distort your model to reflect "growth", even when no such growth exists, then you have to scrap that model, and restore a real model, else you're effectively just ignoring the truth.

Sharing is sharing if it's forced, e.g. "Johnny, share your cookies with Jane or get my boot up your ass."
Regarding worthlessness of paper money, please send me all of your fiat if you actually believe what you say.


You seem to be making up rules as you go along.  The point of currency is whatever it is.  You're thinking of IOUs.


You do no such thing.  If i give you more money & forbid you to buy candy, will you inevitably try to buy moar candyz, or might you buy a car instead?  Spending != wasting resources.  It could mean starting a company which invents new, treehugging fuels.


Stop postulating what money is supposed to be.  That's what *you* want money to be.  The guy without money may want an entirely different thing, see?

Sharing is voluntary. Theft is forced.

Sex is voluntary. Rape is forced.

I'm not very familiar (mildly speaking) with BTC interiors but I think I got your idea. I just can't agree with your assumption that price would halve. We don't know how many BTCs are actually traded and how many are kept secretly in wallets, so it is a mute point. Surely, it is not total BTC supply that determines the price of coins

And I still don't see what are your arguments against my initial post you branded as "a completely noob theory for ridiculously obvious reasons". What are those obvious reasons really?


These are no more but vague phrases. First of all, I didn't say the words you are attributing to me. Secondly, why something which is unpredictable is so inevitably unfair? Why do you think that the predictable money supply would in the long run make the economy any good, which has an inherent and significant uncertainty in it?

In short, you have to say something more substantial to sound convincing

Omg, you're objectively trolling.

IOUs are meant to represent the worth of someone's credit. The point of currency is to represent value. Value is real resources. Thus, currency is meant to represent a share of real resources. I don't even know what your're on about. Seriously, I don't even know what you're talking about any more. If you can't agree that money is supposed to represent value I don't even see the point of posting here.

You are confusing cause and effect. Interest rates reflect growth rate, not the other way round. Otherwise they make no sense, you can't take 5% if economy can only give 4%. Yes, central banks can use them to regulate the economy but this doesn't change the whole thing

I give you an example of forced sharing, and you nonsensically repeat yourself.

Not sure what sex or rape have to do with money, unless you're talking about hookers.

False. The Central Banks set interest rates, because with infinite money you can screw over the free money. And sure you can take 5%  if the economy can only give 4%: You take not just from the growth of the economy, but from whats already there.

Money is supposed to represent value.  This value does not have to remain constant over time.

Bitcoin's worth has more than doubled over the past month.  It represents *more than twice the value* it represented a month ago.
By your logic, bitcoin isn't money.
Nice going :)

You seem to be missing the whole thing. It is in the best state and bank interests that people would get richer, so they get their share of wealth. If your words were true, economies would have long collapsed. I don't say that this system is perfect but you can't deny that it works

If it were so, it wouldn't take long for the economy to go into the ground. Central banks set interest rates but they don't do it without reason. Production lives on credit, if they can't pay the debt (read get more income that interest rate) the economy would collapse

The bankers never want to kill their milking cows if they could milk them.  The happier & healthier these milkers, the more & better the milk.  Symbiosis. :)  Without healthy cattle, the bankers would surely starve or start milking each other, which is ... eww.

What debt are you talking about?

Wrong, the Federal Reserve would just issue them more debt and list their debt as an "asset."

Lol, two mutually contradictory posts ^^ above ^^

Let'em fight!

As an adult, i feel somehow responsible...
 :D

Hey, I'm still waiting for your "obvious reasons" why deflation is good for the economy

I said that inflation is BAD for the economy, because it forces over-consumption. And since you call everthing that isn't inflation, deflation (somehow), then sure, its good.

So, as I get it, you can't really substantiate your position, ok. Add to this that you attribute to your opponent what was not said by him (and I didn't say a word about inflation, lol)... Well done, what else can I say?

Sure.  You say there's nothing to pay off the debt with, and the guy below you sez the FED "would just issue them more debt and list their debt as an "asset.""  Not enough monyz to pay the interest?  We'll add extra naughts to the plates & print moar!

See how well things work out?

Protip:  Stop watching "Money as Debt" vids & read an economy textbook (make sure it was printed in the last 80 years -- some new shit happened) :D

I try to keep things sporting, even -- who knows? -- let you think that your obsolete Scrooge economics have a chance :)

http://www.wupr.org/wp-content/uploads/2013/01/scrooge1.jpg

I have no idea what you're on about.

The US Government needs money in the system, so it goes to the Fed, borrows money, then spends it by giving it to workers who work. Now it needs to pay back that money plus interest. So it taxes back some of that money (either in the form of inflation or actual tax) to pay it back. If it pays back money in the form of tax, then the bankers obviously get the "free money" in the form of interest, which they then use to buy up REAL RESOURCES. Or, they don't tax the people, and are forced to borrow more from the Federal Reserve, in which case the Federal Reserve will get much of the newly borrowed money back immediately in the form of interest on the old debt, which they get "right of first spend", dodging the inflation they themselves are causing and once again buying up REAL RESOURCES. Or, people default, as the state effectively shifts the burden of debt from the state to specific individuals, and the banks get REAL RESOURCES as their collateral.

In either case, the people who actually work are paid with inflationary, taxable, paper money, while the bankers get real resources, either obtained through "right of first spend", or through the obtaining of resources used as collateral, which can actually result in tax benefits.

Beggars in NYC have begun dying from starvation?! Did I miss some breaking news???

I wonder if there's anyone out there who could at last plug this fountain of garbage?

I have suggested reading an economics textbook because you do not understand what the Federal Reserve is, or what it does.  It is not a private institution you think it to be, and "the government" doesn't "go to it to borrow money."  That's just stale, nonsensical pablum YouTube vids have fed you.  It's embarrassingly stupid.  Spit it out right nao or no desert 4 U!

Taxes are not spent on making "the bankers" rich.  Taxes are needed to build and maintain the infrastructure -- roads so you can get from point A to point B, Cops so that the lazy poor don't pwn your ass, armies so that my statist buddies, the *other* nations, don't waltz over and put a "For Sale" sign on your lawn & tell you to GTFO nao!  All of this stuff costs money, and your taxes pay for it.

And yes, "the bankers" get some too -- contrary to popular belief, The Invisible Hand doesn't work for free.  See New PseudoLiber Paradise -- Somalia.
On a happier note, these "bankers" charge U much less than 90% of bitcoin securities, which turn out to be either gross incompetence or outright scams.

The people who work do better in an inflationary economy -- they have no money to hoard, and their pay goes up with inflation.
That's why we haven't all starved to death after 1913.
The idle rich, who have money to stuff in the mattress, don't fare as well, but i'm not particularly worried about them.  
The enterprising rich, OTOH, who put their money to work, fare well under any economy -- that's how they got rich in the first place.
Then, of course, there are the idle rich wannabees, who complain about economic injustice while hoping to become the new moneyed elite. :)

Are you kidding? The state (in fact any state for that matter by definition) already has all the land which is comprised within its borders

It was a question...
And now you ask me the same question that you were asked not so long ago (in other words indeed)?