BTW, its perhaps appropriate to remind you all that credit money isnt a government invention. It was created by the free market in response to a demand for credit when gold was our monetary base and there wasnt enough to finance our economic growth. It wouldnt be different with bitcoins if it were to become as popular as  gold once was,  there would always be demand for credit that bitcoin by itself could not satisfy. So someone is going to create credit money based on it, pretty much like ripple is trying now.  Which in the longer run will again beg the question why there is a need for the monetary base to begin with; particularly if its peer 2 peer issued credit.

In my opinion; of course not. Although credit money and bitcoins are not necessarily antagonistic, as ripple demonstrates.


no, why?
Its deflationary nature  is only a problem for bitcoin to become a mainstream currency, or it could be a problem for the economy if it somehow were forced on us. But the mere existence of something that can store wealth and cant scale with the economy is no threat to the economy. For argument sake; there is only a limited number of Rembrandt paintings; that may make it a worthwhile investment; but I dont see why that would wreck our economy. Then again  no one claims we could use rembrandt paintings to replace credit money, and if we were to try it anyway, I think we can agree it wouldnt end well.


Its rather the opposite.

There is always a conflict between interests of the individual and society. I dont like paying taxes any more than anyone else, but that doesnt mean a society with no taxes is actually feasible or desirable.
Secondly;  the tool that works for you doesnt work for a business that needs credit to invest. It doesnt work for the majority of people wanting to start a business, buy a house, or even a car. So you are a tiny minority.

Let me repeat; I have nothing against bitcoin. Its a great concept, a powerful tool and potentially a lucrative investment; bitcoin is possibly an alternative to gold but anyone who thinks it can actually replace credit money is seriously misguided. You cant have a flourishing  economy without credit and you cant have credit with a hugely deflationary currency. Ripple might fit the bill and could potentially be a more credible alternative to fiat, even if bitcoin is used as its monetary base, like gold used to be our base under the gold standard, but then the obvious question becomes why in the long run you would need that monetary base to begin with.

I would appreciate a little less presumptiveness (if not even condescension). Its been almost 20 years since anyone called me a young man: I also dont feel like I somehow have to justify my motivation for posting here; nor do I see you as my professor.

I will respond to the other points when I have time.

So predictable: the infamous libertarian rewriting of roman history. Here is some the other side of roman coin:
http://socialdemocracy21stcentury.blogspot.be/2011/06/debt-deflationary-crisis-in-late-roman.html


There is no arguing that: It just seems you want our society to use a tool that works for you; I will buy such tools myself and prefer society uses a tool that works for society.

Distribution of wealth actually matters very, very much.
But thats not the point Im making, as it isnt about wealth; its about availability of credit.  You (usually) dont get significantly more or less wealthy if you invest your credit money for instance in the stock market. But what you do achieve is making credit (ie money) available for businesses and generally thats a good thing for the economy. If everyone would hide their fiat under their pillow you would have a problem. Thats why I say the small disincentive inherent to inflationary  credit money is actually a  good property for the economy at large.


Sure; but you dont have to save in  fiat currency: buy gold; buy stock; buy bitcoins; buy land, start a business. Credit money isnt meant to be the best possible preservation of wealth and that its not  is therefore not in the least a problem. Its by design.  The most important goal of a monetary system is not to preserve my wealth,  it has to do enable our economy.  And thats what credit money is much better suited for than bitcoins.


Before bitcoin,  you truly found nothing to invest your money in?


You are completely misreading me. Im neither risk averse nor anti bitcoin; I just acknowledge what bitcoin is and what it isnt: A viable universal alternative to credit money; it is not: Something like ripple OTOH perhaps might be one day.

Of course the Cypriot government will blame the EU. In most EU countries the governments take credit for anything they do right and will gladly blame the EU for anything that goes wrong:
Not that its  always completely unwarranted,  but still..

Actually my university text book defines deflation as a general decline in prices; as do most places  I can find online:     

In economics, deflation is a decrease in the general price level of goods and services.
http://en.wikipedia.org/wiki/Deflation

Definition of 'Deflation'
A general decline in prices, often caused by a reduction in the supply of money or credit
http://www.investopedia.com/terms/d/deflation.asp

"What Is Deflation?"
Answer: The standard deflation definition is when asset and consumer prices continue to fall.
http://useconomy.about.com/od/pricing/f/Deflation.htm

So yes; the bitcoin economy is very much deflationary right now and will likely remain so for the foreseeable future.  


reread the phrase; I said deflation will get worse. Im not sure who you want me to attribute that to.


I guess those are all made up then:
http://en.wikipedia.org/wiki/Deflationary_spiral#Historical_examples

That said, what counter examples would you give of prosperous societies with permanent deflation?

Seems to me the government in Cyprus made good on its deposit insurance. You cant reasonably expect more and at the same time demand those governments deregulate and dont meddle with private banks as long as they are winning their bets and collecting their bonuses. Either you are in favor of banksters being free to play like degenerate gamblers with other people's money (and consumer responsible for selecting a solvent bank),  or you are in favor of sufficient financial regulation for a government to be able to guarantee deposits. I dont see a third way.

For society at large.
And as the owner of the currency you are completely free to choose your method. BUt you seem to want the government to guarantee the return of your "investment" when you decide to keep it in fiat? Why? They arent promising you that, in fact they will pretty much guarantee you take a small haircut each and every year. Still, its your choice.

A government can create the legal basis to tax anything they like; including the gold in your safety deposit box or bitcoins.
So I guess your point is that investing in land is a poor way to evade taxes,  legally or illegally?
Sure,  bitcoin does look better in that regard.
Still I wouldnt worry an investment in land would lose 50% or 90% of its value in a short term.  Something I cant say of bitcoin or many other investments.

I dont disagree with that and I also think its dangerous and stupid to give that money to the banks.
Even so; if someone lends you money at zero interest rate and you gamble it away in a casino, I wouldnt point fingers in the first place at the lender. Its still your responsibility:

Well; its called a  current account  here and it does bear interest, even if its almost symbolic (less than 1%).

Either way; the moment you give your money to the bank its no longer your money; it is the banks money to do with as it pleases within the rule of law. If you want assurances you will need someone to assure it. I would expect the libertarians to rely on free market insurance and private due diligence. Others may call on the government, and the government did do it for sub 100K accounts but its unreasonable and stupid to demand even more from the  government if that same government doesnt have  oversight and enough regulation in place to be able make those assurances. You cant have it both ways.

From what I heard Cyprus had extremely lax banking oversight and next to no regulation. Thats its government choice (and assuming a functional democracy, the will of the people). There are potential consequences to that. When things went well you reaped its rewards; now that it  went sour  I dont think its reasonable to  expect other taxpayers in countries with more stringent laws and oversight to bail you out, let alone claim they are robbing you.

First of all; Ive never heard of an account not paying interest. Low as it may be these days. Secondly its not because interest is low or even non existent that it logically follows there is no risk. What makes you say that? 
 Not so long ago people bought german debt at negative interest rates because of the perceived low (but still not non existent) risk.


Who do you think raided your banks?  Honestly, Im not privy to all the details, but shouldnt your anger be directed in the first place to the bank executives who played in the casino of financial derivatives with your money and lost?

So we agree deflation and hyperinflation are both bad
At least with hyperinflation you could compensate with higher interest rates. If interest rates are higher than the inflation rate, I dont see why I wouldnt lend.


Currently its actually incredibly deflationary if you define deflation as price deflation. If you are only referring to the increase of money supply, then it wont take nearly that long for the supply rate to be exceeded by the economic growth rate. If you only look at the bitcoin economy thats obviously already the case and thats only going to get worse if you have any confidence in bitcoins adoption.

Volatility is another problem which does hinder its adoption but it has nothing to do with inflation or deflation: If bitcoin reward halving protocol were devised differently so it would perpetually grow by 1 or 2% per year you would still have that. I do agree volatility is mostly because its so new and its unavoidable; but its not the fundamental problem I see with it.

Why? Why is it good to keep your savings in something which prime function is allowing commerce? Its better to have that money available for commerce than idling under your mattress.
Just put your savings in to something thats more suitable for it than credit money: Its not like you dont have a million things to choose from.

Look; I would be angry if I lost my money too. Im not saying it doesnt suck. It certainly does suck.
That said  the fact of the matter is that those banks bankrupted themselves and now we have hoards of libertarians suddenly demanding government bailouts. Probably the same ones that oppose government regulation and financial oversight. That doesnt make sense.

AFAIK the government guaranteed the first 100K euro. Thats what they should stick to (and if I understood correctly; they now will); you cant fault a saver for actually believing the government. 

Anyone with more money on there  should have done their own due diligence.  You might want to make an exception for anyone transferring money briefly; like when buying a house or something; but beyond that I dont see why big deposit holders should be treated any differently from shareholders or any other creditor those bankrupt banks owe money to. No one guaranteed them their funds and I dont see why any taxpayer be it from cyprus or elsewhere should compensate their loss.


True, it will have an ugly cascading effect. Its not like I rejoice in someone else's misery; but the facts are what they are.
Maybe something else can be done for those businesses like extending them credit to help overcome this problem, or perhaps you can put them in the same category as "house buyers", but the solution cant be to prop up failed banks.

I wouldnt say consumption is incentivized; after all you can just as well invest your money if you dont want to spend it.
All that is desincentivized is hoarding of money; I see nothing wrong with that; quite on the contrary if you agree the prime purpose of money is making commerce easier.

If you look at it as an investment today, yeah maybe; though much, much higher risk and potential reward. Land is probably about as stable as an investment as you can get while bitcoin is on the other end of the scale.

But thats not my point. I dont have a problem with a risky or potentially lucrative investment; Im saying you cant use it as a universal currency to replace credit money.  No one is making that claim for land or gold either.
It just wont work if its value keeps going up. Among all other problems inherent to a deflationary currency,  no one will be able to afford a loan and no one will be willing to give one. 


YOu seem to look at money purely as an investment. To me its prime function is facilitating commerce and enabling economic prosperity.
Bitcoin might be suitable for the former; its far less so for the latter. 
Pretty much like gold and land.

Buying land is an investment and like any other investment it can turn out good or bad. If you think it consistently gains value then you are misguided or you havent gone through a severe recession yet. Check out land prices in greece or spain, and if that doesnt look bad enough, adjust for inflation.  LIke any other investment Im aware off, its true value (purchase power) is linked to the overall economy and in the long run isnt going to outperform it.

But even if land were the only risk free investment in the world that was guaranteed to increase its inflation adjusted purchasing power over time, it would do little to refute my argument because land isnt our currency. Our wages are not paid in acres, food prices arent set in it, loans are not made in it and its not what drives our economies primarily. I can do business without owning any land, I cant to business without having any money.


And when would you consider it established? If bitcoin were to become the default world currency, its actual purchasing power would go up along with the world economy because each bitcoin would represent 1/21000000th of it.  So it would go up year after year unless you foresee a future with permanent recession (which is actually more unlikely in this scenario).  You cant have it both ways. You cant have economic growth and stable value if the amount of money is unable to adjust to the economy the way credit money can.

As for gold; I already pointed out its not deflationary.  We mine over $100B dollar worth of the stuff per year or roughly 1-2% of reserves.
Thats hardly less inflationary than fiat money.

As for the gold standard, the huge difference there is that even under the gold standard, money was credit money and its supply could vary along with the economy even if we didnt mine a single ounce of gold. Something bitcoins can not (ripple could however).


Of course it is, or at least will be in a decade or two. But more important is that its infinitely more deflationary than even credit money under a gold standard.