If making a green circle widget maker is their highest use, the market won't bear the 50 BTC price, and it would have to be adjusted accordingly. So the bottom line is I'm just not seeing how deflation interferes with an efficient allocation of capital and other resources.
You're only looking at a single point in time though, that's the problem. Investments are weighed in how long they take to pay off - the Return On Investment. Your example is bad, because there IS no long term investment. All a person is doing is assembling two parts, and then immediately selling it. There's no overhead, no buildings to purchase and depreciate, no tools needed to manufacture these items, nothing. So if he buys the parts for 99.5 BTC, puts them together on his kitchen counter, and resells the completed version for 100 BTC, he'll still turn a profit every time. Now, say I want to invest in a company that creates green widgets. I want to buy a building for 100,000 BTC, and install an assembly line for 10,000, buying 100 of the green-widget-making-machine. My overall capital investment is then 110,000 BTC. Assume the deflation rate is 5%. Assume my return on investment after depreciation of my building and manufacturing equipment is 3%. When will I recover the 110,000 BTC I invested? I NEVER would. I would only recover 3/5 of it, maxing out at 69,300 BTC return on my investment. Turning it around, if I had bought the building and equipment for $1.1M, and assumed an inflationary rate of 5%, when would I recover what I had invested? I would recover it after just over 20 years. So, if I had the option of investing in a green widget manufacturing facility expected to generate a 3% ROI in a 5% deflationary economy, I absolutely wouldn't do it. If I had the same investment option in a 5% inflationary economy, I absolutely would do it. I feel like I am just repeating myself here, but I'm not sure what else to do. You aren't separating capital investments from variable costs in your analysis. Your take on variable costs is exactly right - variable costs will change with the economic environment. But capital expenditures, spent with the expectation of recovering those costs down the road, is where a deflationary or inflationary economy will affect investment decisions. |
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Well, I understand your position, but how many reports of BTC not being paid out do you need before a "community consensus" is reached? He's not paying out on his advertiser platform either. With dozens of people reporting failed payouts, I would think the onus would be on him to prove his innocence.
I sometimes do use reasoning like that to decide scammer cases, but I feel that Andrew Bitcoiner has a strong case. His site ToS says: Any and all units of the Bitcoin digital currency deposited into a BitcoinAdvertisers.com Bitcoin address becomes the sole property of the Service until such time that the Bitcoin(s) is transferred to a third party Bitcoin address at the sole discretion of the Service. I would still tend toward marking him as a scammer if he clearly kept deposited BTC for absolutely no reason, but he claims that all of the people with frozen accounts violated aspects of the ToS and he is therefore within his rights to keep the BTC. This may be true. I have no way of verifying whether or not people broke the site rules. Fair points, thanks for the response. |
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Mods - why does Andrew Bitcoiner NOT have a scammer tag yet??
I can't independently verify that scamming occurred. Well, I understand your position, but how many reports of BTC not being paid out do you need before a "community consensus" is reached? He's not paying out on his advertiser platform either. With dozens of people reporting failed payouts, I would think the onus would be on him to prove his innocence. How do you normally verify that scamming has occurred? |
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Mods - why does Andrew Bitcoiner NOT have a scammer tag yet??
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However, it's not a straw man at all.
With a currency that doesn't inflate or deflate, anything above 0% (after calculating for risk) makes sense as an investment. With a currency that deflates at 3%/year, the investment has to make more than 3% (after calculating for risk) to be profitable. Therefore, in a deflationary economy, we lose out on all investments estimated to pay back 0%-3%, after calculating for risk. This results in a smaller, less productive economy.
You are confusing the real return with the nominal return. To see it, just continue your idea. If 3% deflation means that investments with a nominal return of less than 3% are pointless, and 0% inflation/deflation means that any nominal return is good, then in 3% inflation, any investment with a nominal loss of less than 3% is good, right? Didn't Zimbabwe recently inflate itself into prosperity by inflating enough to include these otherwise unprofitable activities in their economy? Yes - it would be better to invest in something that loses 2%/year than to hold fiat that inflates at 3% per year. I do not see how this conflicts with my idea. But it does go to prove my point that an inflationary currency can encourage bad investments. You say that an economy based on a deflating currency necessarily rejects some investments, and is thus less productive. An economy that is neither inflating nor deflating is also rejecting some investments, those with a negative nominal return that would be possible under inflation. And an inflating economy is smaller than one that is inflating a lot. And so on. Clearly, we need an infinite rate of inflation to allow the maximum possible range of economic activities. Worked for Zimbabwe, right? P.S. You are still confusing real and nominal. Well, my argument is that the optimal amount of investment is made at the point where a currency neither deflates nor inflates. An inflationary currency encourages too much investment - that is, investment in opportunities that lose money. Over spending/over lending is also a problem, and ends up causing the sort of economic trouble that we see in the world economy today. I am adding real and nominal interest rates together because both of them need to be considered from an investor standpoint. Please provide more specific direction if you still believe I am confusing the two. Show the maths.  What math? Just ignore the nominal return and concentrate on the real return. Why? The investor needs to take both returns into account to make a proper investment decision. And when we're talking about economic growth, a large part of it is reliant on how investors invest. Both rates are completely relevant to this discussion. |
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Ok that makes sense, just looked funny. I had not read the other threads with the info in it. But why would he only mine with them sometimes? Whats with the increase and drops in hashrate, if he is mining for someone, Would he not keep it on 24/7?
I think he's hopping between pools? |
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He said he would not use butterfly labs to his advantage as a miner? or did I read that wrong? Or did he get rich?
He is mining on behalf of other people who are planning to upgrade and elected not to have their units shipped to them, but instead have Josh mine for them. This saves them the time lag between shipping the old units back and receiving ASICs, as well as shipment-back costs. See above. He is not mining on ASICs.
Q. You are going to have an unfair advantage when it comes to mining equipment, you’ll be able to get as much as you want before anyone else!
A. I will not be expanding my mining footprint as it would be a conflict of interest. I will continue with my current obligations and already acquired/paid for equipment but will not be purchasing or utilizing additional equipment as part of my mining operations. This is one of the hardest changes I will be making, as I firmly believe there are plenty of opportunities in this space that I am going to be missing out on, but I believe I can do more good for the bitcoin community as a whole working to provide that equipment to people as opposed to using it myself.
Just saying... should stick to the plan man... it looks bad to keep your word. Don't look like your missing out lol He didn't expand his mining operations. He had a huge farm already, but he is also mining on behalf of other people. See above. |
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Btw I heard that BFL doesn't have a working, completed ASIC in their hands yet but they managed to go to some sort of conference and show one off then auction it off...DAFUQ?! Hmmm...
I just talked to someone who went, and he confirmed that there were NO ASIC's at the conference. |
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However, it's not a straw man at all.
With a currency that doesn't inflate or deflate, anything above 0% (after calculating for risk) makes sense as an investment. With a currency that deflates at 3%/year, the investment has to make more than 3% (after calculating for risk) to be profitable. Therefore, in a deflationary economy, we lose out on all investments estimated to pay back 0%-3%, after calculating for risk. This results in a smaller, less productive economy.
You are confusing the real return with the nominal return. To see it, just continue your idea. If 3% deflation means that investments with a nominal return of less than 3% are pointless, and 0% inflation/deflation means that any nominal return is good, then in 3% inflation, any investment with a nominal loss of less than 3% is good, right? Didn't Zimbabwe recently inflate itself into prosperity by inflating enough to include these otherwise unprofitable activities in their economy? Yes - it would be better to invest in something that loses 2%/year than to hold fiat that inflates at 3% per year. I do not see how this conflicts with my idea. But it does go to prove my point that an inflationary currency can encourage bad investments. You say that an economy based on a deflating currency necessarily rejects some investments, and is thus less productive. An economy that is neither inflating nor deflating is also rejecting some investments, those with a negative nominal return that would be possible under inflation. And an inflating economy is smaller than one that is inflating a lot. And so on. Clearly, we need an infinite rate of inflation to allow the maximum possible range of economic activities. Worked for Zimbabwe, right? P.S. You are still confusing real and nominal. Well, my argument is that the optimal amount of investment is made at the point where a currency neither deflates nor inflates. An inflationary currency encourages too much investment - that is, investment in opportunities that lose money. Over spending/over lending is also a problem, and ends up causing the sort of economic trouble that we see in the world economy today. I am adding real and nominal interest rates together because both of them need to be considered from an investor standpoint. Please provide more specific direction if you still believe I am confusing the two. Show the maths. |
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I found out the other day that a credit card can actually have a positive balance if you pay more than what is owed on the card. I wasn't able to find out more about this strange fact on Google, and I had some questions about it.
What does the bank do with the funds that make up the positive balance? They don't pay you interest on the positive balance. Do they loan those funds out?
If you don't go below your positive balance, does this still help your credit score?
Weird... so it's like, a prepaid debit card without fees?  |
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Good answers, thanks for the insight Nolo. I keep meaning to send you a tip, but forget every time I am at the computer actually holding my coins. I will get to it someday though, I promise. Lol if I had a BTC for every time a client has told me the check is in the mail  Hah, I bet! Thing is, I hold myself to my word, and think it is despicable when others do not do the same. I don't have a lot of money (certainly not compared to a lawyer's salary!) but I will give you a tip at least! |
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However, it's not a straw man at all.
With a currency that doesn't inflate or deflate, anything above 0% (after calculating for risk) makes sense as an investment. With a currency that deflates at 3%/year, the investment has to make more than 3% (after calculating for risk) to be profitable. Therefore, in a deflationary economy, we lose out on all investments estimated to pay back 0%-3%, after calculating for risk. This results in a smaller, less productive economy.
You are confusing the real return with the nominal return. To see it, just continue your idea. If 3% deflation means that investments with a nominal return of less than 3% are pointless, and 0% inflation/deflation means that any nominal return is good, then in 3% inflation, any investment with a nominal loss of less than 3% is good, right? Didn't Zimbabwe recently inflate itself into prosperity by inflating enough to include these otherwise unprofitable activities in their economy? Yes - it would be better to invest in something that loses 2%/year than to hold fiat that inflates at 3% per year. I do not see how this conflicts with my idea. But it does go to prove my point that an inflationary currency can encourage bad investments. |
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If I could dig up the $30k I'd be seriously tempted by the ASIC minirig. Somehow, though, I can't see any bank lending me that. I tried - they asked what the loan would be for, I explained mining, and they promptly sent back a professionally courteous email saying my laon request had been denied. I thought about this, and in essence it amounts to requesting a loan for de-facto gambling on a commodity market. I still love Bitcoin though and am seriously contemplating investing in a few BFL single SCs. I even spoke to Josh briefly at the London conference and he seems ok - then again, his sales pitch was hardly going to start "sorry but BFL still sucks at delivering on time", so it's not a straightforward issue. Anyway, given that I'm a bit of a n00b, and that my copy of Ubuntu 12.04 isn't even bloody installing on my lappie right now, I need to keep a cool-headed stock of everything! But why grab singles when you probably won't even be able to pay them off in a decent time frame? I only heard about bitcoin a few months ago so I missed out on all the reaping or I should say raping that went on to accumulate coin. I can live with that but like someone else wrote it seems like only the big boys will earn enough to stay in the game. I think they should open up a new type area/network for the hobby guys, just our network tied into the main big boy network so we can all get our noses wet. Well, you can still get your nose wet with a GPU, you just won't pay the cost of it back. You could always mine on test net. Or namecoins, etc. You'll get plenty of coins there. I guess I am unsure what you really want. You are sad you couldn't get in on the earlier mining opportunities that were profitable, so you are looking for ways to open up new mining opportunities that are profitable? I just love the whole bitcoin idea and the freedom it gives. Since I'm more of a technical person I wanted to try mining out at home. Then reading about how ASIC will change that forever stopped me from pre-ordering a couple single units. I basically wanted to participate in this idea, maybe make a little money and have fun. Then buy a $150 ASIC. You should be able to participate in this idea, maybe make a little money, and have fun. |
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If I could dig up the $30k I'd be seriously tempted by the ASIC minirig. Somehow, though, I can't see any bank lending me that. I tried - they asked what the loan would be for, I explained mining, and they promptly sent back a professionally courteous email saying my laon request had been denied. I thought about this, and in essence it amounts to requesting a loan for de-facto gambling on a commodity market. I still love Bitcoin though and am seriously contemplating investing in a few BFL single SCs. I even spoke to Josh briefly at the London conference and he seems ok - then again, his sales pitch was hardly going to start "sorry but BFL still sucks at delivering on time", so it's not a straightforward issue. Anyway, given that I'm a bit of a n00b, and that my copy of Ubuntu 12.04 isn't even bloody installing on my lappie right now, I need to keep a cool-headed stock of everything! But why grab singles when you probably won't even be able to pay them off in a decent time frame? I only heard about bitcoin a few months ago so I missed out on all the reaping or I should say raping that went on to accumulate coin. I can live with that but like someone else wrote it seems like only the big boys will earn enough to stay in the game. I think they should open up a new type area/network for the hobby guys, just our network tied into the main big boy network so we can all get our noses wet. Well, you can still get your nose wet with a GPU, you just won't pay the cost of it back. You could always mine on test net. Or namecoins, etc. You'll get plenty of coins there. I guess I am unsure what you really want. You are sad you couldn't get in on the earlier mining opportunities that were profitable, so you are looking for ways to open up new mining opportunities that are profitable? |
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Good answers, thanks for the insight Nolo. I keep meaning to send you a tip, but forget every time I am at the computer actually holding my coins. I will get to it someday though, I promise. |
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The correct level of investment is the level which people choose in the absence of coercion.
It is so refreshing to read some facts distilled down to their essence. I would like to comment, inflation in the economy is a lack of investment by the members in that economy. This is a result of one's actions and the encouraged behaviour is causal not coercion, and likewise deflation in a free market is the result of oversupply the encouraged behaviour causal not coercion. In contrast inflation as a result of a centrally controlled bank is coercion. Yes, I agree with you, but inflation or deflation of currency supply per capita artificially encourages or discourages the free market choices. |
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