Inflation is an increase in price levels, not an increase in the money supply. Inflation is a result when the money supply is expanded beyond the demand for new money, just like deflation is the result if the money supply is not expanded enough to the demand for new money.


More money will not always equal higher prices. M(oney supply)*V(elocity of money) = P(rice level)*Q(real expenditures). If real expenditures go up to match the increase in money (or an increase in money goes up to match real expenditures), the price level remains constant. Or a simpler way P = (M*V)/Q.

And higher prices are irrelevant if the new money is distributed equitably rather than as expanding credit only available to banks, a sentence you ignored.


It is really rather simple: if you pay a 0.01 fee on a transaction, the odds of you being awarded 1 coin for that transaction is made to be no less than 1 in 101. Transaction fees are required under this model, as they will eventually be under bitcoin.


Uhh gee I dunno, maybe because this has shit all to do with the actual money supply?


I didn't? Besides, are we to assume that an economy can grow on bad investments? I mean, isn't this what causes the business cycle?


Do you even know what wikileaks does and why it accepts bitcoin donations?


How willing will investors be to fight over 0.1%-0.5% per YEAR rather than 7% per WEEK? How willing will businesses be to take on the risk of a deflationary currency loan? There is a big difference between scam and reality.

No, it's not. Inflation is a general increase in price levels, whereas the goal of my proposal would be to keep stable price levels. And even if it can't attain that impossible goal, new money is awarded to existing account holders as well as people who transact, not to banks expanding credit--often considered the biggest problem in causing the business cycle and inflationary theft.


Takes one to know one.


I tried checking out GLBSE to see if there were any non-mining (btc currency creation) or non-ponzi investments, but I couldn't find any and their site is slow. Care to link to any non-BTC non-ponzi businesses? Wallets are not businesses. Armory is an open source client. About the only legitimate business on there that isn't illegal in many countries is camgirls, which I'll give you half a point for. It was an existing site, not one that took any investment in BTC. And really, wikileaks? You think wikileaks is a BTC business let alone a business at all? What's the point in even talking to you?


Do you really think championing the biggest bitcoin ponzi to date is helpful to your arguments? Or does it make you just look desperate? Hmm. Does it surprise me that the aggregate group surrounding bitcoin which doesn't even understand the definition of inflation gets scammed for 5 million? Not particularly.

No, I'm not. Instead I'm saying the business cycle will continue in a different form.



Why do you absolutely have to resort to some fallacious argument or another? I am not an "inflationist". You saying so does not make it true. Nor does making inflation a bad word prove that deflation is the answer.


Looks like BTC has fallen over 200% to me.


Yes, BTC-related as in "only does business in exchanging BTC to fiat".


Because impaired implies there will be no investment? Oh wait, it doesn't.


Not like you would listen or ever accept that you are the one full of fallacies.

Whoa AbelsFire, be careful when you throw around more things you don't understand.

http://en.wikipedia.org/wiki/Argument_from_authority

"Although certain classes of argument from authority can constitute strong inductive arguments, the appeal to authority usually is applied fallaciously, either the Authority is not a subject-matter expert, or there is no consensus among experts in the subject matter, or both."

Precisely the opposite of the case.

http://en.wikipedia.org/wiki/Ad_hominem

"is an attempt to negate the truth of a claim by pointing out a negative characteristic or unrelated belief of the person supporting it."

Saying you don't know what you're talking about is not an ad hominem. It's pure fact.

$6 = 6c?

The proof? Every economist who has ever lived! Austrian, Keynesian, or otherwise. You do NOT have any clue of what you're talking about.


LOL because lines of credit are anywhere near the same thing.

Stop trying to machinate bullshit to fit your view. It's wrong.

"Doing so on credit is a gamble and you're gambling with other people's money."

Whose money?

"That risk belonged properly to the shareholders"

Oh the shareholders? You mean, the people who invested in the business? As in, lending money to produce growth and ergo more money? And he says he's the majority shareholder, which is money he got one of two ways 1) a prior business that had profitable return on investment or 2) family wealth. If we only allow situation 2) we're at feudalism.

You are an economic dunce.

Oh enough with the bullshit. You are wrong. You either have no concept whatsoever of how the economy works, or you are just purposely turning on the blinders so that you can find some rationalization for bitcoin's economy. "LOL THERE'S NO NEED FOR LENDING LOL LET'S KEEP SOCIETY AS IMMOBILE AS POSSIBLE!" What you want is feudalism. AIN'T GONNA HAPPEN. The economy would grind to a total halt without lending. Lending is beneficial to both parties; people have money that is idle and want to increase it, other people have ideas to create or expand the economy and need money. You. Are. Wrong. Totally. Absolutely. Wrong.


I am trying to make a basis in reality whereas you want to pretend that there will be 3%+ interest rates in a deflationary economy. Yes, inflation encourages investment, and likely over-investment, but you are trying to argue that there will be at least "enough" investment to encourage growth by assuming that there will be a positive nominal interest rate that can be had for low risk in a deflationary economy. Except that there are big issues with that that you want to ignore.


Uhh, I did no such thing. "Real growth in the economy as a whole when businesses borrow money makes businesses prone to go bankrupt. In real terms, loans get harder and harder to pay back." I am assuming real growth causes deflation, thus making it harder to pay back loans. Where is the contradiction? Oh, doesn't exist. The problem is that deflation will stunt growth, and yes, there may be no deflation at all because nobody wants to risk borrowing bitcoins and thus no growth. The point I was trying to make.

But we can't assume whatever rates we want. It seems so simple to throw out figures like "this business earns 5%" or whatever, but the reality is not so simple in nominal terms.

If deflation acts faster than the interest rate, businesses are prone to go bankrupt, and you are prone to make more money by hoarding. Real growth in the economy as a whole when businesses borrow money makes businesses prone to go bankrupt. In real terms, loans get harder and harder to pay back.

Front-heavy loans don't do businesses any favors. They need time to go through the stages of production. The amount of super-credit-worthy people/businesses is not infinite, and it will be very difficult for banks to find people that are low-risk in a deflationary economy. Risk-adjusted means you just aren't going to find any decent positive returns, regardless of what numbers you plug in that don't fit in reality. You might be looking at 0.1% instead of 0.5%. Is 0.1% worth the risk of your non-FDIC backed bank going bankrupt? Is 0.5% even? 140 years to double your nominal investment?

God forbid the deflation rate go above the "expected" 3% or whatever making it even harder for businesses to pay back their loans and making it more likely that you lose all your money rather than just some of the real value of your money in the case of higher-than-expected inflation.

whoa whoa whoa, aren't we discussing real returns here? Because if deflation is assumed to be 3%, I assume interest rates are actually 0.5%. This I think was what Spike was also referring to with interest @ 2% is worse than deflation @ 3%. There is not going to be anywhere NEAR 3.5% in a 3% deflation economy. Fuck, you'd be hard pressed get that in an inflationary economy!

Not to mention the risk goes up year after year whereas the opposite is the case in an inflationary economy. Or otherwise the loan has to be very front-loaded, in which case there is very little benefit to taking a loan at all.

Because facebook was the first social network



I don't remember netscape ever supporting gopher natively. Lynx probably did, but lynx was text-based so ehhh

I said "benevolent in this sense", as in, not using his wealth to manipulate the government and the economy. I'm not sure how two can be controllers of new money when both Morgan and Rockefeller were alive during the gold standard era.

I am not arguing that having capital makes you more productive, I have been making the same argument over and over and over: control over a significant portion of the money supply by a few, wealthy or well-connected people means that they will manipulate that supply to their own ends. This results in stealing productivity and wealth from poor and middle classes and drags it up the chain. A situation that is not that unlike feudalism, though its theft was much more prominent.

Even if the supply of money does not start out skewed as it did in bitcoin, the property of the currency still allows for the situation to develop because of lending, or big industry as in the case with Rockefeller. Just as the situation did not start out so skewed with gold, but we ended up with a few financiers controlling the world.

This, however, is not particularly the subject of this thread. I only brought it up because you realized the problem of bitcoin distribution then attempted to solve it without really considering that nothing has changed in your solution, except perhaps who might be in control.

Well the primary argument of Hayek is that if you defer consumption by saving (in banks), you are increasing non-consumption growth. If you hoard, that growth may indeed be split depending on how the money supply reacts to these changes to effect the same velocity.


I am not ignoring that a free market competitor offers all of these exact same advantages.

That doesn't seem like the supply side is boosted to me, it just seems that one person defers consumption so that others may consume. In the end a net zero. Perhaps in the end, slight overconsumption when the person who deferred calls in to collect.

It's not that I don't understand the Cantillon effect, or that of those who control the money, it's that I find the distinction irrelevant. I have used the phrase "control the money" just as often as "have the money control the economy". If you enable this possibility, it will happen due to greed for wealth and power. Bill Gates may be benevolent in this sense, but JP Morgan and John D. Rockefeller most certainly were not. And they were more than enough.

What about the force of finance? (As misquoted by Rothschild below)

Not a real quote.

Not a real quote.

Not that I disagree with the sentiments, but they don't add any weight.



I'm curious as to the case that can be made. It would seem that both Austrians and Keynesians disagree with you here. Trinkets and toys and other things that are consumable and very useless would be encouraged in fiat, heavily discouraged in bitcoin, and in both cases it is hard to discover whether or not there is a real market need for these items. If by mildly discouraging these things or being indifferent, perhaps the free market would eventually be allowed to figure out exactly what is the best use of money, and hoarding would never be it.


This does not address the business cycle. The banking system->capital accumulation->derivatives->over-leveraging, etc. A competition between free market currencies would be one, partial solution, but that means that there is still something wrong with each currency.


If bitcoin is only good as a store of value, it's a digital pet rock/digital gold/what have you. With the coin distribution system especially, I don't see how a continuous supply of people wanting bitcoins will keep the price propped up if there is no economic reason to back it. Gold (sort of) works because gold is real and tangible. Bitcoins are not only not tangible, but easily manipulated with the concentration of supply. I don't think an unfixed supply means that something is not a good store of value if designed correctly. I don't want to derail this about my ideas, but I did send you a PM the other day so review that thread and respond if you are so inclined.

But inflation is an effect, not a cause. I mentioned somewhere else that it isn't very fair to compare bitcoin to fiat because bitcoin is free market and fiat is not. Fiat encourages too much debt as a matter of policy--new money goes to banks, and inexplicably governments take on debt. A free market currency with an unfixed supply would do no such thing. You are aware, Spike, that I've spent a lot of time trying to figure out how to do that.

I think the paradox of thrift would be counteracted to a small degree if the distribution were changed to the ease-in, ease-out model. You still have the situation where people with the money control the economy. If lenders don't lend after previously lending, recessions will be easy to induce and allow the wealthy to become even wealthier (in real and durable goods).


Analogs of gold and silver shouldn't be what we're looking for though. You never responded to my long-winded post on this.

It makes you have to wonder how Keynes became the economic heavyweight while more logical people such as Hayek fell to the wayside. Could this possibly be another case of the "powers that be" interfering with public opinion on this subject? Or not even that, just old-fashioned government expansion? Canada's competitive, regional banking system fared quite well vs. the US during many times of US economic depression. Yet Canada still fell for it eventually. It's still really odd though that instead of printing money on its own, governments choose to give this power to a private corporation.


And many bitcoin proponents will argue that this is just another opportunity. However, this is the same mentality that got us to an inflationary crash in the first place. To compound the effect, bitcoin is a voluntary currency and no one will likely ever need it to buy food for a very long time. Therefore I think the only "opportunity" you gain is one where you think you're smarter or quicker than everyone else to predict when the next crash will happen. Will businesses and markets think that this is a better system than the gradual inflationary one (excluding the real possibility of hyperinflation)? In the long run, both would seem to cause business cycles, except that bitcoin's would seem to gradually recess and then have economic boom ("easy" money). But if nobody is doing business with bitcoin during the inflation boom because of the prior gradual recession...


These seem to be conflicting viewpoints. Is it just the idea of a free market currency that you love?

The malady of investing in Bitcoin is compounded by the fact that investing lowers the price of money. If more money is available, interest rates go down (and likely exchange rates), at least in a free market that isn't dominated by a central authority's funds. I have a thread sitting in this forum with 1 anecdotal reply and zero discussion on what Austrians actually think of this situation. Apparently head-in-sand bitcoinomics is much more comforting.