You are begging the question. Accepting something as truth with no evidence. There are people and businesses on the other ends of those investments that must pay the price if investments provide a unilaterally better return in a deflationary economy. The rate of deflation *must* be taken into account to provide an accurate real interest rate, just as banks take into account inflation.

http://fskrealityguide.blogspot.com/2008/11/interest-rates-in-true-free-market.html

"Suppose the free market interest rate is 2%. I predict I can earn a 4% rate of return on my business. Therefore, it pays for me to borrow at 2% and invest in my business yielding 4%. Of course, I should include a margin of error in my calculation.

Suppose the free market interest rate is 6%. I predict I can earn a 4% rate of return on my business. Therefore, it does not pay for me to invest in that business. I'm better off doing something else."

The real interest rate will be interest + deflation, just like the real interest rate in a typical economy is interest - inflation.

Since bitcoin is a free market currency, the interest rate will be determined by how willing people are to borrow money vs. how much is available. If deflation is 5%, do you really think anyone trying to borrow money is going to pay 5% + the nominal interest rate? Or are they going to say "I'm better off doing something else"?

And of course the issue economists fear is what happens if the deflation rate makes a big leap one year? Say 8 or 10%? A whole lotta bankruptcies.


You are right that the government/central bank unfairly favors certain institutions with new purchasing power without creating any new value. But you're ignoring the fact that Bitcoin does the same thing for wealthy holders. And it also comes from everyone else using bitcoins.

Say person A is a wealthy businessman who maintains a running personal savings of about 1000BTC. He spends a lot of it but brings the balance back up through his business venture.
Say everyone else has a total of 1000BTC that moves around the economy.

MV = PQ
M = money supply equals 2000 BTC
V = velocity of money, we'll just call it 1
P = price level, we'll call it 1
Q = quantity of real goods and services in the economy

2000*1 = 1*2000 (solving for Q) is our status quo

Now say wealthy businessman A wants to retire, but just for the sake of example spends no money whatsoever and removes his 1000BTC from the economy. So the velocity of money drops by half, and the price level drops by half (we'll completely ignore the unemployment implications and the fact that the businessman is unlikely to announce his plans to give the market perfect information to account for this collapse).

2000*0.5 = 0.5*2000

10 years later, new products, new people, new whatever has entered into the economy and it has doubled. To adjust for this, the price level has fallen further.

2000*0.5 = 0.25*4000

Now the wealthy businessman decides he's going to go on a spending spree and put his money back into the economy. Now:

2000*1 = 0.5*4000

He got to buy everything before the prices double to account for his money being put back in circulation. The market can't possibly adjust instantaneously. And everybody who saved a dime now has a nickel's worth.

How is this thematically any different from the current system?

Even if the economy stays even, even if removing his portion of the money causes no problems, he can still buy stuff for half price while everybody has been making half-wage and whatnot and cause a major upset in savings. Do you think the Bit Street elite don't get this? Do you really believe that increased purchasing power happens in a vacuum?

Just in a general sense. Depending on how the final consensus mechanism ends up working, they may actually only need to be online for very short periods of time when they have to create a transaction block or sign someone else's transaction block. But the best that will do is be something like "you must be monitoring the network at 6am GMT" etc., so it will usually just be more convenient to remain online, though not strictly necessary.

Shareholders will also be allowed to sign off of the network for extended periods, but this can't be an instant process as the rest of the network needs to come to a consensus on it. The total network reputation that is online cannot be allowed to go too low though, so there have to be limits on this. Some of this is detailed in the consciousness stream linked in the OP. There will be a system of penalty points that, when accrued, prevent you from gaining your share of the tx fee profits for a certain amount of time (like 1 point = 1 day that you must be signed into the network and perform your duties for the point to disappear). There will also be a kind of "three strike rule" where if you miss your required duties too many times or stay signed out of the network for too long within a 1 year period, you will be kicked out of the shareholders, lose your reputation, and be refunded only 75% of your share value (the rest will be destroyed).

These mechanics also tie in to what happens if there is a network split.

I didn't say they'd be huge, but they certainly won't be free. "Very low transaction fees" is all you have to say to not make a bald-faced lie.

It's also not correct. Zero != not zero. And fees are only really low because of the mining subsidy. But evoorhees bending the truth whenever it suits him is nothing new or surprising. And sure whatever you say bro on the last sentence.

lol @ zero transfer fees and instant transactions

Feel free to critique the proposal in my sig.

The value of an expanding currency has to go somewhere. In bitcoin, very little of it goes to miners as there is competition to spend more and more money to get a larger piece of the same pie and make the ROI as low as possible. This money that bitcoin mining wastes helps only the electric company, ATI (or ASIC manufs), and people previously holding bitcoin. So only two types of people using the network benefit: 1) miners (barely), 2) existing holders of currency. Under the decrits system, it is: 1) miners (who only mildly compete with each other, spending 5x the money on video cards will not bring 5x the return, it keeps the "hardware tax" low), 2) existing holders of currency (who also receive half of the "free" money based on their holdings), 3) people who trade. This opens up a whole new dimension of who benefits from using the currency while at the same time reducing the amount of hardware/electricity waste. There is no reason that people who do nothing productive in expanding the economy should see all the benefit of expanding the economy. Have you heard of Wall Street? Because that's exactly what they do.

The "meta" of rewarding trade with new currency (and unbounded mining) also counteracts Wall Street-like symptoms. If capital accumulation becomes the goal of the financial market rather than productivity and economic growth, the unbounded supply, a currency that "the people" can create, will devalue the power of that capital accumulation. It will stop greedy people in megacorp banks from causing the business cycle. Because of price stickiness it's very hard to see the effects of a recession, but in gasoline it was obvious in 2008. It dropped dramatically in half in price because the US dollar experienced a big slow in the velocity of money which caused deflation, even though it was not all that evident in most prices. It was certainly evident in unemployment, though. A fun and informative video: http://www.youtube.com/watch?v=qOP2V_np2c0 (note that this video is intentionally from a Marxist perspective on capitalism--I'm not promoting marxism, only stating the obvious that capitalism has no countermeasure for when it gets out of hand, and that this is a problem of the system of money, not so much capitalism itself)

You can call this devaluation theft, but it is the natural order of things when the greed of a few massively outweighs the benefit to society. Play too many games with the financial market, and people just create their own currency on the side anyway, effectively diminishing the power of the existing, forced currency. This happened in hundreds of communities during the great depression. What if the currency could have this property baked in?


As I told Realpra, the answer to this is simple in that the odds of getting free money are not outweighed by the transaction fee. Such as if the transaction fee is 0.01 and the award is 100x the tx fee or 1 coin, then the odds being awarded that coin are 1 in 101 (but really half that as either the sender or receiver may be rewarded, so it's 1 in 101 only if you're trying to game the system and send to yourself). I haven't come up with the exact solution of how to do that, but it will likely have to do with hash comparisons or hamming distances or the like. It's essentially just based on "refunding" tx fees with new money.


It does and I have. https://bitcointalk.org/index.php?topic=110708.0. Keynes said "saving causes recession because of lack of growth" hayek says, "you stupid son, saving causes an increase in non-consumption growth because banks use the money to loan." Since nobody needs to put money in bitcoin banks, and indeed it would be silly as there is no way you are getting a return on savings in a deflationary economy, nobody will "save" in the sense that it is used for non-consumption growth. So rather the ONLY kind of bitcoin growth will be when people holding bitcoin fall to the pressures of consumption at reduced prices. That's right, bitcoin can only grow via consumption (or lololol via speculation). If you have a better idea of how the economy works than Hayek's excessively intuitive logic, I'm all ears. But know that I will call you out on any begging the question fallacies.


According to Hayek, there is a clear distinction we can make between saving and hoarding, and bitcoin is hoarding. Too much debt in fiat is the nature of a debt-based currency, one which Decrits would not be. "Overconsumption", if we could ever find a way of actually defining that, is probably more of a problem of government policy than the currency itself. Either way, you can't use what happens in fiat as an argument against an unbound free market currency. I can just as easily argue that bitcoin will forever be entrenched in a business cycle of slow recession with periodic economic booms as the deflationary pressure causes a rash of consumption. The money shouldn't be what encourages or discourages anything, it should be as neutral as possible. That's why price stability is important. If people want to consume and your free market currency penalizes consumption, then they will not use your currency.


So you say. But I could just as easily argue that bitcoin will always be irrelevant because few, in the grand scheme of things, will use it. Bitcoin doesn't offset anything if people still universally use fiat.


And it will probably never achieve the network effect because people will get wise to the fact that they're buying into a pyramid. Rant about whether or not it's a pyramid scheme all you want, the fact of it all is that 50% of all the currency to ever be distributed will have been distributed in the next few months, and this may be stunting growth much more than you realize. *I* could sleep soundly at night, in the future, after having released Decrits knowing that there won't be hundreds of videos on Youtube calling it a pyramid or ponzi scheme.


A black market being the only real source of growth in an economy is not exactly a ringing endorsement of that economy. It just means the benefits for the black market outweigh the downsides.

No, we don't have a lot of problems with anyone 51% attacking bitcoin because it costs a lot of money. IP addresses do not.


:sigh: Bitcoin does not ignore byzantine fault tolerance. It's part of that whole distributed-consensus block chain thingy you might have heard of.
"If u asked 100 providers and more than 50 said "yes", than u should consider it's legit qubic. If u r not satisfied with numbers than just ask 1000 providers and keep asking as long as u wish." - This reeks of byzantine failure. I am not familiar with Paxos, but by a brief overview it looks like it is made for a centralized service with distributed fault tolerance, not a distributed network protocol.

It depends on the government's policy towards spending into existence more than they bring in in taxes. If they spend more than the increase in demand for new money due to growth, then real interest rates will fall. If they keep extra spending at around the rate of new growth, then interest rates should be mostly determined by the free market. But the goddamn genius part of governments spending new currency into existence is that THEY DON'T HAVE TO PAY INTEREST ON IT. Thus there is no incentive to create more than necessary as they don't need to worry about reducing the effective debt. Well, other than political corruption. But at least in a "democracy" we have some (little) choice in electing people to government, politicians who cause inflation or direct new money to poor causes can be voted out. We have no such choice in electing central bank chairmen.

Imagine how much lower the tax burden could be if, in the US at least, we didn't owe an entire year's worth of GDP in debt! The British empire did this for 700+ years with tally sticks. But then the Rothschilds got ahold of England. It makes so much more sense than the current system you have to wonder how fricken stupid or greedy people were to get us to where we are today.

You claim a sybil attack can't be mounted easily, but the only defense you seem to have is that honest people will have more. One botnet could have thousands or hundreds of thousands of IP addresses. Once IPv6 is the norm, governments and ISPs will have easy access to billions of IP addresses. The trust system might work among providers that know and trust each other, but this does nothing for people trying to use the network. They will be inundated with all kinds of providers and have no clue as to which ones are trustworthy. Not to mention since each provider will likely have a different idea about who is trustworthy, trust can't be used to weigh votes on how many coins are created. So someone with tens of thousands of IPs can just say "I want 9999999" tens of thousands of times (good lord the data consumption) and destroy any value to the currency.

you gotta solve this too: http://en.wikipedia.org/wiki/Byzantine_generals

You might be interested in this: https://github.com/FellowTraveler/Open-Transactions/wiki

Fair enough. But don't go around using the term "productive and unproductive labor" if you don't want Marxism being brought up.


It is not the system that existed prior to the fed, that was still based on gold. A free market monetary system is not, it is "voluntary fiat" or whatever you'd like to call it.


I agree.


I don't really think you can compare a food-based economy to a growth-based economy. We have, at least in many countries, considerably reduced the need for food as a primary incentive. Now we need to advance as a society. Bastiat is quite famous for debating how interest on capital is a good thing. But it is only a good thing, imo, when the money supply can't be manipulated and the interest can't be manipulated.


This is all well and good, but as I've stated before, FRB exists because the opportunity for it to exist is there. It effectively creates new money but it has the big catch of the money not actually existing. But it works because people are willing to pay the interest--there is demand to grow. If the free market can create currency, there is no need for FRB. Bitcoin doesn't allow for new currency, so I see FRB as a foregone conclusion.


Except that the direct market feedback loop can be manipulated by those with exceptional wealth (or control of it) in a closed supply. So it's not so direct as it first seems. Central banks were created by the Rothschilds and Morgan, people who were heavily in tune with how to manipulate the supply of money. So the "regression theory of central banks" leads back to "wealthy manipulators". Something they were only capable of doing because gold is relatively fixed.


It is what Hayek has essentially said with regards to free market money.

Referring to Sweden's effort to stop minting gold coinage and the predicted rise in value of that coinage above the value of gold:

"I quote this only as illustration of what among the economists who understand their subject is now an undoubted fact, namely that the gold standard is a partly effective mechanism to make governments do what they ought to do in their control of money, and the only mechanism which has been tolerably effective in the case of a monopolist who can do with the money whatever he likes. Otherwise gold is not really necessary to secure a good currency. I think it is entirely possible for private enterprise to issue a token money which the public will learn to expect to preserve its value, provided both the issuer and the public understand that the demand for this money will depend on the issuer being forced to keep its value constant; because if he did not do so, the people would at once cease to use his money and shift to some other kind."


Counterpoint: Allowing capital accumulation to get to a point where a large portion of currency is in the hands of the few, not allowing anyone to create currency is in effect allowing them to steal wealth. Because all they have to do is stop investing or stop spending and then the currency deflates--forcing unnecessary bankruptcies and theft of productivity because of the increased value of currency which is unilaterally more beneficial to the rich than the poor or middle classes. What have the uber wealthy done in recent years with capital accumulation? Play games. Credit default swaps, deca-trillions derivative markets, and other "unproductive labor" that squeezes the economic progress of society to the top. More money is used only to chase more money, not economic progress--to not only the detriment of society as a whole, but also its regression.

Should this unproductive money not be devalued? (See: Demurrage) It stalls progress and causes misery to the vast majority of people so that a few can increase their balance sheets. What is the human capital cost of thousands of intelligent minds going to work on Wall Street because "it's where the money is at" rather than aerospace, pharmaceuticals, or what have you?


See: history. Yes bitcoin is a free market currency and that makes all the difference in the world. It means it will fail. It might stick around through a few excessive deflation/inflationary boom cycles, but people will get tired of it and switch to something like Decrits.


You've forgotten finance again. In a sane economy where half the money was not dropped in a helicopter over the Hamptons, financiers would have a hard time making deflationary loans. But when you have multiple people or groups with 500k+ bitcoins, they can loan at 0% interest down the road to expand the economy, then decide to stop lending or raise interest rates significantly and cause a credit crunch, and boom the wealthy get wealthier. If they don't do this, it's just as likely that the economy will never grow significantly because of the catch-22 of deflationary growth causing difficulty and bankruptcy in paying back loans for business. Either way, people aren't going to put up with this shit when it's optional.


No, the bitcoin wealthy could buy businesses and durable goods as well. Assuming the world economy somehow manages to get through the massive amounts of stumbles along the way to make this possible.


I don't know why you're so optimistic that it won't happen again even though the setup is primed and ready with the new elite.

Here's another fake quote, "from" Albert Einstein, for you: Only two things are infinite, the universe and human stupidity, and I'm not sure about the former.


Aaaand the initial distribution is not "the" problem, only one problem. It doesn't fix the long-term effects of a closed currency, no matter how you might hope and wish it will be different this time.

Do you not absorb anything? Are you just going to keep going round and round?

DEBTORS does not equal CONSUMERS. Get it out of your head that this has anything to do with credit cards. This is about economic growth. Not only new growth, but also existing value brought over from fiat.


If you never try to make up a type of fallacious argument again, the world will be a better place. I also did not say that they should be treated equally, I said ONE IS NOT FAVORED OVER THE OTHER. See the difference? I explained further in the post why deflation is not good for debtors--it will cause them to go bankrupt. This will stunt economic growth as even viable industries will fail. I'm sorry if I don't spell out each and every argument within one sentence. Inflation isn't good for creditors because, presumably in a non-debt based currency/society, most people will be creditors via interest earned on savings. Inflation/central banking steals a good portion of that.


Sure sounds like the current situation on Wall Street today.


Where do you see this as a loss? Morgan purchased massive equity in banks and trusts and organized the deflated stock market buy up. Remember when Citigroup shares were $550 a piece and then suddenly $10 a piece a few years ago? These are the times when Morgan propped up the economy. If you're referring to the "$21 million loss" referenced in the wiki article, that is a reference to his existing stock holdings. Did you not read far enough to see this tidbit?

"The committee issued a scathing report on the banking trade, and found that the officers of J.P. Morgan & Co. also sat on the boards of directors of 112 corporations with a market capitalization of $22.5 billion (the total capitalization of the New York Stock Exchange was then estimated at $26.5 billion)."


It's unfortunate that you claim I have my facts backward when you don't get it.


<insert lulwut pear> I have no idea what the hell you're talking about.


I hope you don't play chess. The whole crisis would have never happened if the supply of money was not illiquid. But it was, and people in New York buying food from the fall harvest caused drops in liquidity every year.


It is similar, yes. The interest rate will change in a free market to adjust to the need for money, and no other factors need come into play.


LOL because BTC is stable.


"You can lead a horse to water but you can't make it drink."


That's BTC's problem.


Make a currency ripe for bubbles and bubbles are what you get. In the Decrits proposal, the more people that mine the more money is created, so any upward pressure on the price will be quickly deflated. Since everybody knows this, it is in the best interests of people holding currency to sell while it is above its cost to produce, further reducing the possibility of a bubble.


Or you could actually read what I said about arbitration.


No, it's not an ad hominem, it would be a strawman. Gotta work on that. Ad hominem - attacking the person in lieu of the argument; strawman - attacking an argument that the person did not make in lieu of the actual argument. Anyone who doesn't spend/receive money in an expanding Decrits economy suffers some opportunity cost--they won't receive any of the new money given to transaction activity.

You've got a lot of work ahead of you if you think this can be used as a way to bring consensus. In a decentralized system, there has to be a way for everyone to eventually come to an agreement on what has happened.


No one else knows this information including people who want to transact on the network. Determining who to trust will be impossible and sybil attacks will be easy.

Because assuming the supply is expanding because there is more demand for the currency (and not because of reduced cost of producing the currency due to hardware efficiency gains or whatnot), rewarding people for trading incentivizes them to trade in it, not just hoard it. As in, legitimate existing businesses will want to take the currency, and people will want to spend it. It means you don't have to be digital-currency-wealthy to benefit from using it when the market expands. It's also "free" money that gets its value from reducing the value of fiat rather than paying for it in excessive hardware and electricity costs. It changes the objective from "buy and hold until a good fiat exchange opportunity arises" to "buy and use".


No... artificially low interest rates are due to the central bank issuing new money to banks at low interest rates. It has everything to do with a centrally planned economy and nothing whatsoever to do with the money supply being unbound. It is fake market vs. free market, not inflation vs. deflation. There is little that is sound about bitcoin, and I have no idea why you think interest rates would rise in a deflationary economy, except for the incredibly unsound idea that no one will want to lend at negative interest so long-term interest instruments will be excessively scarce. You say "of course" yet this thread is 12 pages of people arguing about how long-term interest bearing instruments may or may not be viable. Again, you can't just add 3% on to the real interest rate and expect businesses to just hum along as if nothing has changed.

And 3% is only the best-case scenario where a large portion of the world has adopted bitcoin. Prior to that, deflation periods will be much, much heavier as the only way to expand the market is to increase the amount of deflation. Businesses who take loans in BTC will be punished for doing so because they expand the market and the demand for money making it much harder to repay the loan. But taking loans in BTC is the best way to get businesses to want BTC in exchange so that they can pay those loans back! It is a catch-22.

There is nothing in that equation about printing money. It compares the demand for money to the price level. It applies to stable, inflationary, and deflationary economies.


Stable prices do not favor creditors (deflationary does) nor debtors (inflationary does--to the extent inflation goes beyond the baked in rate). Stable prices do not favor those who hold wealth in real assets (inflationary does) nor money (deflationary does). Assuming stable prices are achieved, that means the the supply of money isn't being manipulated by central bank inflation or those who control vast amounts of wealth (see panic of 1907 and how handsomely JP Morgan profited off of others' misery--and odds are good he caused it). Stable prices do not encourage over-investment to recoup inflationary losses nor under-investment because holding currency is the safest bet. It reduces or eliminates menu costs and the money illusion.


Money demand doesn't assume anything, it allows you to solve for one of the variables if you have the others or it allows you to predict what the change might be if one or more of those variables change. Just like the equation of exchange (MV = PQ).


Ahh the meaningless "gotcha!" moment. How do I lower prices from when bitcoin was at its $32 high? The simple answer is: I don't. No currency is immune to a loss of faith or demand. But, when you're in the unique situation where everyone has a good idea of how much it costs to produce new currency, and the currency is obviously undervalued, it opens up the opportunity for arbitrage. People will buy it just like any other asset they believe is undervalued. There are ways of making it return to stability quicker such as destroying transaction fees, but all this does is punish the people who still use the currency even more.


Each individual ware does not change in price all the time. This is known as sticky prices, and it causes problems up and down the economy when the value of the currency does not remain stable. But it's OK for each individual commodity to fluctuate because that is simply supply and demand, the basis for all pricing. Stable, inflationary, or deflationary doesn't change that. If technology and productivity increases allow for a reduction in price (the common computer hardware example), everyone's purchasing power increases and is wealthier as a result.


"Hey, I knows a guy! He can hook you up real good" said the spider to the fly. Don't forget that high interest rates are bad for business and therefore bad for economic growth. Future productive opportunities for your money are diminished. Also, "1-3.5" real interest equates to "-2 to 0.5" nominal interest in a deflationary economy at 3%.


It just tells you that a central bank is controlling the interest rate rather than the free market. "Force" more debt on people and businesses and hope it fixes the problem.

From what I gather this is somewhat based off of the Chaumian-style digital cash.

1. How does the system prevent sybil attacks without proof of work?
2. How is consensus reached on how many and what coins exist?
3. What the hell does "Coins "look" like real coins" mean?
4. How long do you expect it to take consensus to be reached to prevent double spending?

I have never used nor implied any "running out" of loans etc. only that a deflationary currency makes loaning a dangerous affair for both parties. So, paradoxically, a deflationary currency might make for high-interest and presumably short-term only loans. Not the type of loan you can do capital investment with--more akin to loan sharking.

I will, against all better judgment, assume that your question is genuine and your insulting strawman was a misunderstanding.

https://en.wikipedia.org/wiki/Demand_for_money - The demand for money is the desired holding of financial assets in the form of money: that is, cash or bank deposits.



where M^d is the nominal amount of money demanded, P is the price level, R is the nominal interest rate, Y is real output, and L(.) is real money demand.

L(R,Y) is called liquidity preference which is a Keynesian idea, but Austrians have time preference which can be substituted and the situation works out roughly the same.

Keeping a stable price level P means that whenever output is increased, the demand for money M^d will increase in the same fashion, or prices will not be stable--they will have to decrease. Because the money supply is so restricted in bitcoin, this will generally be the case. When the central bank increases the supply of money, P rises then M^d rises. They can't happen at the same time because the money supply is narrowly focused to private banks. This is where the "theft" comes in because the prices increase before any of us have any say in the matter or see any benefit to new money. When the supply of money can meet new demand quickly, prices do not decrease. When money is not given to sacrosanct institutions first, but equitably across the economy, M^d and P can move at the same rate, if necessary (or L() can cancel it out).


It is not, because you have forgotten the cost factor to mining. Miners are held in check by the potential of inflating prices by overproducing and making mining unprofitable. "Cash-hoarders" are held in check by miners because miners create new money that will presumably put to use, stifling deflation. If the demand for money gets too high, interest rates should increase as well, also prompting cash-hoarders to stop hoarding and invest at interest. It is a balance from all angles that can't be manipulated. There is also, at least in my proposal, a large chunk of the new money that goes straight to trade, which is why I chose my words carefully and said "equitably" instead of "equally". Trade is where new value is realized and it should be rewarded in kind.


The fees aren't there to control price levels.


The miners don't have anything to do with the fees. Mining isn't required at all. When the demand for money is in line with the supply, mining stops. No electricity usage at all.


Well there you go! There was some heated discussion a year or so ago on how deflation might somehow be prone to negative interest rates. CD rates nowadays are around 1%. Admittedly, that is with central bank theft of interest rates, but even when they were not manipulating as much, the best, safe interest rate in a typical 2-3% inflationary economy is going to be 2-3%. Riskier investments can lead to around a solid 5%, but they tank when the economy as a whole tanks (see everybody's IRAs, 401ks, etc. over the last few years). If deflation is 3%, 3% must be taken off of the interest rate. CDs can't pay you 1% if deflation is 3%, that would be a real 4% interest rate. Right now you're looking at -2% with inflation on a real return from a CD, how do we get from real -2% to real +4% just by using deflation? Magic? 6% better interest doesn't just come out of nowhere.

And this is assuming a nice, gradual, 3% year after year, with no one but the wealthy bitcoin holders who may or may not be manipulating the supply to keep that stability. If one year happens to be 6%, do you realize what that means to a business's profit margins? Bankruptcy. Many businesses run on very tight margins of only a few percent. An unexpected upswing in the deflation rate will simply bankrupt them. This is why economists are afraid of deflation.

I don't know if any economist has tried to define what a "good" (real) interest rate is in a stable economy, but it's gotta be somewhere in the range of 0.5-2%. If it goes higher than that, that's a sign that there isn't enough money to meet the demand for money, and economic progress will be retarded because businesses can't afford loans (which are going to be at a higher rate because of the bank's cut, of course). The higher the REAL interest rate, the worse it is for business. This is why the central bank tries to manipulate this situation by lowering interest rates to bring us out of a recession. The problem is, since the consumer level doesn't see any new money and is in fact penalized for this by reduced value in savings, there is less incentive to save and less purchasing power for a given amount of money. It doesn't fix the root of the problem and just puts everyone in greater debt. It is idiocy based on Keynes and it doesn't work.

FRB being theft is pretty debatable. It allows people who store their wealth in banks to earn interest rates. Central-banking interest rates is absolutely, unequivocally theft. Instead of free market competition, nobody earns anything now on saving money, and they in fact lose value because of these uncompetitive interest rates and the inflation caused thereof.


Again, this is a problem of a centrally controlled economy, not FRB. While FRB started out under false pretenses, that is hardly the case now and in a competitive market people would earn competitive interest. However, FRB does have its own problems such as bank runs, but I don't think that it is the root of all economic woe. FRB does compound the problem of low interest rates from a central bank and quantitative easing because it maximizes the "Cantillon effect" if you want to keep calling it that. Again, the problem still lies in central banking. And if a way to do FRB in Bitcoin can be accepted by the general population, it is going to happen there too. It benefits everyone but large holders of bitcoin.


I'm sorry, but this is a bullshit rationalization with no evidence whatsoever. "It happened before, but it won't happen again just because!" ? Does bitcoin ring some kind of Marxist vibe for you?


Was it you I asked about what made you so sure that the New powers will be any better than the old? Because in a fixed supply of currency, the new power certainly isn't going to be democratic in any way, shape, or form. It may take time (then again, probably not with the big bitcoin players that already exist), but as bitcoins accumulate in certain hands, they will gain power exponentially instead of linearly, at least assuming a closed system. The reality is that bitcoin will probably crash when people see the manipulation and they will flock to another another currency, but in the mean time a lot of wealth will be transferred.

No, it does not.

http://en.wikipedia.org/wiki/Inflation - In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time
http://www.thefreedictionary.com/inflation - 2.  A persistent increase in the level of consumer prices or a persistent decline in the purchasing power of money, caused by an increase in available currency and credit beyond the proportion of available goods and services.
https://en.wikipedia.org/wiki/Austrian_School#Inflation - Mises argues that inflation only results when the supply of money outpaces demand for money

Mises may have waxed poetic about how calling rising prices inflation confuses the issue with monetary supply increases, but AFAIK he is the only austrian that gave a shit about the distinction. For everyone else in the world, the meaning is clear: rising prices associated with an increase in the supply of money beyond the available goods and services or whatever exact definition you want to pick.


Oh hey look, you putting ideas in my mouth that never fucking came out of it. The very definition of strawman and intelligence insulting. "OHH U THINK HERP A DERP BITCOINS WILL RUN OUT AND IT WILL FAIL"

FUCK OFF

Like providing links and information to basic economic theory will do anything to change your minds. Bitcoinomics is rampant around here and it is pretty obvious that people will believe whatever they want to believe as long as they think it's good for them and someone smarter than they can come up with some perfume-laden shit as ammo to repeat. It smells an awful lot like political positions.