You have a collapse in aggregate demand which leads to deflation (that is, to decline in prices). How will this affect enterprise, negatively, positively, or there will be no influence at all (enterprise productivity remains the same)?
Take 1929 for example, the collapsing aggregate demand means most of the people have become poorer, that was a direct result of the earlier inflative monetary expansion: The economy bubble attracted many people to put their money in stocks and assets and greatly increased their spending During the last phase of bubble, banks successfully cashed out and ran away with the money (gold). The banks were reluctant to spend the gold in the following crash, since then their effort of bubble making will be erased, they'd rather sitting on their loot and quietly watching the economy collapse. That is the reason there was heavy deflation  If we have not removed gold standard, same thing would still happen during 2008 crash. But now banks can create money out of nothing, so they have a new way to deal with bubble bursting: They create money to buy everything dirt cheap during a collapse and collect even more loot, so they not only benefit from the bubble making also benefit from the bubble bursting. After each bubble and burst cycle, large amount of wealth moved to banks |
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We would need a ridiculous level of cooperation and synchronization to pull this off OP if im understanding correctly what you mean, I dont see it as very realistic.
You just need to be aware of this, nothing more. For example now some of the IT shops in my city have accepted bitcoin payment, when I purchase IT products, I always buy some bitcoin and spend there. In fact you only need one supermarket and one gas station to accept bitcoin payment, then a large part of your monthly cost can pass through bitcoin Another way to make coins occupied is to buy the coin and hold it for years, which majority of the people are doing right now (That's the reason that most of the bitcoins are not available on market) If the exchange rate does not change, you buy $300 worth of bitcoin each month and hold them for 20 years, after one year you will make 12 bitcoins occupied, the same effect as spending 24 bitcoins every month This chart shows how many coins are hold for a specific length of time:  |
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I wouldn't want to have my savings in something that had its value because 95% of it is not liquid, and the full market is actually carried by the 5% circulating (like maybe right now with BTC !). The moment people decide to put their stash in circulation, the value of it would crash 20-fold !
That's pretty much every asset class out there though. You couldn't liquidate a fraction of the gold or stocks out there in the world without turning the value to dust. That's why BTC will be an interesting case. It could be a hybrid of currency and asset class. I've no idea what that would do to the eventual value. Very true, it is amazing that many people truly believe that they have some wealth stored in their gold/land/bond and then they just sit on big pile of those assets and never cash out them. As we have seen, a slightest cash out of houses will crash the whole economy that is built upon it And you are right that bitcoin is different, since you might never need to cash out it when the time comes, you just need to spend it, thus will not cause its value to fall (FED has proved that printing 5x more money will just make USD stronger) |
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Another way to calculate is use MV=PQ formula, where M is 2100 trillion satoshi, V is 0.05 e.g. money saved for use every 20 years, and Q is world GDP at 72 trillion USD, then you get a P of 1.45 satoshi per USD, more or less in the same magnitude
That's a funny way to look at it. In principle you're right of course, but.... it would mean that the full world GDP would be bought with the very tiny amount of BTC that is NOT in saving funds. After all, you have the difficulty that on one hand, all the BTC would be in funds which are frozen for 20 years, and on the other hand, all transactions happen in BTC (if you want the world GDP to be bought in BTC, in order for your formula to work). I have not thought about it clearly when I quote the formula, maybe the Q in the formula should not be the world GDP, but just a part of it, which consists only consumption by retirees (40% of the GDP?). As a retiree, you will never dump all your retirement funds at once unless in some extreme condition. And a retirement fund can use time lock mechanism to lock the coin until 20 years later. And the exchange rate will not jump to 100 million during one night but gradually over a long period of time In fact, if invest in bitcoin now, you might not need to hold it for 20 years, 10 years are enough. And by then you retire, bitcoin will worth about 100K to 1 million, and you don't want to cash out everything since it still have large appreciation potential, you will only need to cash out enough to live a comfortable life, why cash out if you could not find any investment more valuable than bitcoin long term wise And for people join the investment 10 years later, they will face a much higher exchange rate like Berkshire hathaway's stock, and they will invest in unit of satoshi instead of bitcoin, that appreciation potential still stands but eventually will slow down to the same speed that GDP grows |
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Put some numbers in:
Suppose that 2 million bitcoin users, average monthly spending is $3000, they buy $3000 worth of bitcoin (10 bitcoin at today's price) when they receive their salary, and spend them during a month. But this means that they would have to buy 20 million bitcoins, which is impossible: The coins in circulation is around 1 million maximum. So, bitcoin's price will have to increase at least 20 times to reach $6000 to make that happen
This purchase happens during the beginning of the month, and later the price will fall back due to more and more coins flowing back to market. Average holding time for these coins can be regarded as 15 days, if they don't all buy at the same time, it will cut the coin demand by half, so a price of $3000 is more likely
If the user base increase to 2 billion, then price will be at 3 million per coin. Notice that no matter how high the coin price is, most of the coins would still be held as long term storage, the coins in circulation will never be above 2 million
And this is all very rational calculation, in reality the market can be more crazy than people can imagine when the shortage of coins are overwhelm, I'm not surprised to see a price of 1 million with much smaller amount of users
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The idea of money being an illusion used to be a major economic concept until the 1970s when it was replaced after criticism from Milton Friedman. He argued that you can fool people once, but not all the time. He argued that people would catch on to the government’s scheme. So if inflation was 5% they would demand a wage rise of 5%. This would nullify any government action.
That is the theory, in reality, if workers demand a 5% wage rise, they will be fired. They would still be fired if they do not accept a wage cut  It depends. Sometimes 5% of wage is less than cost of coaching for an inexperienced laborer. The wage do not rise because there are so many skilled workers out there The dilemma is: If a worker is outstandingly smart and creative, then he would be creating his own business and not working for anyone else. But if a worker is just like many others and do the routine work, then he will replaced by machines and robots This is a little bit off-topic, this thread is about money's slavery effect. Of course automation and AI is a even more severe problem, it is not about slavery, but annihilation of work. You still got some money under money's slavery, but with the arriving of AI you might not get slavery even if you asked for it, you are totally out |
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The colors in this chart are outrageously misleading. For example, you easily confuse Japan with U.S. Social Security Trust Fund, Belgium with U.S. Federal Reserve, China with U.S. Military Retirement Fund, and so on. I'm curious, is this done intentionally? Even if you have difficulty in separating those colors, there is a reading order called clockwise Your impression of China holding large amount of US debt is based on some statistics that showing all the foreign owners share, and that share is about one third of the total US debt |
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Printed USD can be sent out to pump up the petroleum price, Euro can not, it will just keep driving up the price of government and corporate bonds and other assets, assets bubble does not create more jobs and income, since in Europe about half of the people live in rented house, it will just raise the rent and reduce many people's spendable income
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Technically it is not possible to regulate, and in fact banks are dodging government regulations regularly using different tricks. So I don't think bitcoin business will be any different, they will always find a way to get around regulation, because the governments are technically incompetent to regulate either banks or bitcoin
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Yes, it is possible.
Bitcoin should become mainstream.
It means that we need much more users and many more merchants accepting BTC.
But, there is no easy way to achieve millions of dollars and it's not realistic in short period of time.
Possible but seriously unlikely, even if it goes mainstream that does not give us a million dollar tag does it, at the moment there is no need for bitcoin if there is finally a need for it then we will reach thousands i am sure but million lol This is the confusing part: Q: Why should I use bitcoin? A: Because it can make you some money Q: How come? A: 2 steps 1. Buy some bitcoin and store them 2. Let all your monthly consumption go through bitcoin (purchase bitcoin and spend them), then your stored coins will become more valuable and you will get good profit when you sell them And I don't think it is a pyramid or Ponzi scheme, since the process does not involve anyone else, only your own action: You first invest in some bitcoins and then let your consumption pass through bitcoin to reduce the amount of coins on market. The second action will give the coin value a permanent lift so that when you sell your invested bitcoins, you will always get a good return If only one people do this, the result might be neglectable, but if every one is doing this, the result will be significant Of course you can only do this once, when you already have all your consumptions pass through bitcoin, unless you further increase your spending, there is no more support that you can give it. In fact, when your coins worth more, you might have some more spending directly from your stored coins, that might reduce the value of bitcoin |
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that is why the infrastructure is important. To encourage spending, there must be stores accepting it. Most of the time, when I purchase 1 bitcoin, I will end up hoarding it for some time until I find places or merchants that accept bitcoin. I'm not saying the theory is not workable, in fact it is what happening right now, but instead of spending and the whole process reduces supply in the market, we ended up holding it longer, so the spending cycle is not working.
The problem with spending bitcoin is it feels to valuable to the average joe. A person buys 1 bitcoin, and this person treats it like an ounce of gold, not like some coins you use to buy groceries. So people tend to hold, or dump if they dont have patience and are scared. The people dumping btc instantly for fiat are the big ass whales like overstock (whales in the sense of people running millionaire business). Also mining whales that need to pay expenses. Suppose that Bob bought 10 bitcoins, then he hold them for 20 years as a store of value, that is the investment you described, perfectly fine. Beyond that, when Bob goes to buy some TV, he first exchange his dollar to bitcoin and then use bitcoin to pay overstock to get the TV delivered. Or, when he is buying a car, he first buy some bitcoins and use those bitcoins to pay the car dealer. These actions does not touch his original 10 bitcoins, but they reduce the amount of coins on exchanges and will raise the value of bitcoins, thus indirectly raise the value of his 10 coins |
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Communication protocol seldom have competitors, unless hindered by tradition, the most widely accepted protocol have the tendency to expand and dominate, since that will reduce the friction for any party involved
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In Wall Street's eyes, bitcoin is just another asset that they can make bubbles upon and earn lots of fiat
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Your theory could work only to some point.
For example:
-Current Bitcoin market cap is about 4 billion dollars.
-Assume that all bitcoins are in circulation(I know it is not true, but my point is different).
-Your theory needs that every 3 hours there should be at least 4 billion dollars txs.
-And lets say there is an average 8 billions USD txs.
-So what will happen ? At first , your theory can work and BTC price doubled or tripled. But at this point total bitcoins used in txs will be decreased due to increased BTC price.
-Total real world market txs wont change too much. Every 3 hours there will be consumed nearly same amount gasoline or bread or other things. So at first you moved 14 million BTC from the market but when price tripled the needed BTC will be 1/3 or 1/2 of total amount. So , when price increases , the needed amount of Bitcoin will be decreased.
In long term , market cap of bitcoin in real world applications will increase. Most of mall or shopping centres will accept Bitcoin and need for Bitcoin will increase. But this will take time. And also I believe Bitcoin price will be around 1 Million dollars. But not in a near future and not in your way (or at your speed).
Nice point! What you said is true, and you looked deeper than I into the sequence Still, I don't think the effect will be totally nullified. Let's imagine, at first you have no consumption pass through bitcoin at all, and then you let all your monthly consumption of $3000 pass through bitcoin, that requires 10 bitcoins. Suppose that make the bitcoin price reach $600, that will reduce the amount of bitcoins you need to do transaction, so later you need only 5 bitcoins to do your transaction, and the other 5 returned to market to increase its supply, so the price drops back to $450, that will increase the amount that you need to do transaction , and you have to buy 1.67 more to do transaction ..... So after many forth and back feedback it will be somewhere around $470, not exactly doubled, but still much better than before And you are right that the total real world consumption does not change at all, you still consume what you used to consume. So the added value of bitcoin is purely caused by transaction demand, nothing else. But this is also the theory that decide fiat money's value |
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Well, I think this is where services like BitPay is not helping at the moment. {Converting BTC directly to fiat}
The merchant that accepted BTC should not be able to convert ALL the BTC it received, INSTANTLY back to fiat. {I know they do offer the merchant the option to choose, what percentage they want to instantly convert to fiat}
Let's say BitPay or any other payment processor agree with merchants, that it would hodl the coins, until a 1% to 3% increase in the value occur and then sell it, then we would see some short term rise in the price...or even better, if they can hoard it for a longer period, until the price increase.
Yes, this is price manipulation....but it's being done will all commodities, eg. {Oil / Corn / Gold etc. etc...} ....so why must Bitcoin be any different?
True, what you suggested will increase the holding time and make those coins disappear from exchange for even longer time, and my use case just showed that even BitPay instantly convert the BTC into fiat, the bitcoin that used for transaction would still be occupied during the transition phase, which is 3 hour maximum, and 1 hour minimum. During this time frame the bitcoins for that specific transaction were not available on exchanges In MV=PQ formula, V (money turn over times per year) is 0.05 when you hold coins for 20 years as a retirement fund, and it is 365 when you spend coins once a day, in my use case it is 365x8=2920 (8 times per day, and 365 times per year) for a immediate transaction. Then M is 21 million, Q is world GDP at 75 trillion, then you get a P of 1223 dollar per bitcoin if bitcoin is used every 3 hours, and 8x that value if used once a day, and 96x of that value if used once a year |
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That's totally possible if bitcoin were just used for store of retirement fund alone, not even mention other usage The world population is increasing at 370K per day, and bitcoin net supply on market is about 5000 coins, that gives each person 1,350,000 satoshi to use to store his retirement fund, if that fund is 1,350,000 dollar, which is a decent amount in today's standard, but might not be a big deal in 20 years after continuously inflation of USD, then 1 satoshi will equal 1 dollar Another way to calculate is use MV=PQ formula, where M is 2100 trillion satoshi, V is 0.05 e.g. money saved for use every 20 years, and Q is world GDP at 72 trillion USD, then you get a P of 1.45 satoshi per USD, more or less in the same magnitude Money in retirement funds have the slowest move speed thus impact the money supply in the most significant way, other usages like daily trading or monthly spending does not have the same effect on money supply I just discussed the effect of mirroring the economy into bitcoin by passing all the transactions through it An easy way to make bitcoin worth millions of dollarshttps://bitcointalk.org/index.php?topic=987110.0But in that case V will be more than 12 (monthly turnover), then the effect on P is very limited, 100 satoshi for a USD is enough to deal with the world GDP And suppose that some day bitcoin becomes some kind of world reserve fund, and will be stored for more than 70 years for some countries, then it will give it an even larger push |
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Mobile operators have been fighting against banks for several years to establish their own financial system since the success of M-PESA, but they were constantly blocked by banks in developed countries, now they are seeking some new opportunity to get rid of banks' control once and for all  |
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then you might need an extra database to track the balance of each clients. What if I don't want to? You are the one wanting to decrease the already existing utility!!!!!!!!!!!!!!. I am not really upset about it, I am just pointing out what you propose may sound good "in theory" but the repercussions will effect a lot of things that you may not have thought of. I still don't understand how removing some coins from exchanges will decrease the already existing utility? what utility? What I propose is not something new, some bitcoiners have been advocating this for years, I just got it more clearly recently. What do you think made up those large sales number that reported by those merchants? I suppose a large part of those sales consists of this kind of "pass through" transactions, and it indeed have some positive effect on increasing merchant adoption and stabilizing the exchange rate |
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Why do people automatically think that holding BTC will result in earning more? First, if you own BTC10 now, and hold them in a wallet you'll still have BTC10 in a year, 5 years, or 10 years. Second, there's no guarantee that the exchange to fiat will increase either.
The blind optimism is what an asset bubble smells like.
Buying and holding btc has the same effect as FED selling assets in exchange for USD, it reduces the money supply and increases money's value |
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...
johnyj
Getting millions of users to spend BTC all within three hours does not sound easy to me!
On the other hand, I just did my part a little ago while spending some BTC. When my purchase arrives, I will post my experience in whatever relevant thread at that time.
But, I will HODL most of my BTC, at least for now.
Indeed. If I want to reduce the money supply in circulation, the easiest way is to buy large amount of bitcoins and hoard them, thus this part of bitcoin is removed from circulation However, that requires large amount of capital, not every one have that amount of extra reserve. But it is possible to use your daily consumption to achieve the same goal As explained in the use case, holding one bitcoin indefinitely has the same effect as spending it again and again so that it is constantly in use. Suppose that you have a monthly spending bill of $2000, if you let all these spending go through bitcoin, then it will achieve almost the same effect as you just bought $2000 worth of bitcoin and hold them indefinitely |
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