Very funny. Except MaidSafe was already in the works before Bitcoin was released. So SafeCoin will hardly be an "altcoin". It's not an alternative, it's a new paradigm.

I think Bitcoin will be surpassed by a better digital currency somewhere in the coming years. It's head start and network effect will be too small to be immune from a significantly superior competitor.

The author of this very interesting webpage agrees with that: http://www.moneyasdebt.net/

Debt still has to grow forever though, even the rate at which more debt is created cannot slow down, or else the system will collapse.

This. So much this. Human desires/goals are shaped by the process of evolution, that's why we're selfish. If the artificial intelligence is "simply" created without selfish desires/goals it's in my opinion very likely that it'll be the most benevolent creature to ever exist.

If in your example there would be deflation due to an increase in aggregate supply then you're simply failing as a company to keep up with the rest of the economy, since apparently your company's increase in productivity did not match the economy's average.

If on the other hand in your example deflation is due to a collapse in aggregate demand, then yes, the company has a problem.

I disagree that there are no benefits. The currency would be a better store of value for one.

Also, we want a different economic system, one that is more free and more sustainable, where common people don't become debt slaves en masse and the banking pyramid doesn't rob people en masse. Where the main currency isn't money by decree of government but by choice of the majority of individuals.

If people are going to pick a currency themselves they're probably not going to pick one that constantly devalues. It's nice to be able to have savings in money that doesn't vaporize over time.

Yes, but it's not the only possible cause. It's also possible to have deflation due to an increase in aggregate supply. Then it's benign deflation. So whether deflation is good or bad depends on the underlying cause of deflation. Obviously a collapse in aggregate demand is bad.

The relevant questions concerning this topic are:

• In the current economic system, can central banks effectively combat deflation due to collapses in aggregate demand? Are quantitative easing and zero/negative interest rate policies real solutions or does it just kick the can down the road?
• What are typical causes of collapses in aggregate demand?
• In an economy with a fixed supply of money, is a continued collapse in aggregate demand (deflationary spiral) inevitable?

Do you realize that your example has 12.5% deflation, per day? That's hyper deflation, not normal deflation. Rephrase that example to: "Would you buy something for 200$ today if you can get it for 196$ next year?" (2% deflation per year).

Depends on the cause of the deflation. Deflation due to a collapse in aggregate demand is bad. Deflation due to an increase in aggregate supply is good, at least in a healthy economic system. Any deflation is bad in the current system because there's way too much debt.

We should really start discerning between deflation due to a collapse in aggregate demand and deflation due to an increase in aggregate supply. The former is bad, the latter is good.

In general I am of the same mind as the OP. We need to move away from the system of Big Debt.

Btw, it's pretty funny to see Bitcoin and other "deflationary" currencies being attacked while at the same time the current supposedly "inflationary" monetary system is suffering heavily from structural deflation, despite QE and ZIRP/NIRP. Looks like the collapse in aggregate demand due to Big Debt can't be solved through expansion of the money supply. The side effects (financial bubble) will only do more damage in the end.

Two reasons: Debts and austerity measures. As mentioned before, it depends on how well Greece would fare after a default & Grexit. I personally believe they would do fine after a short bit of pain, especially because Russia and/or China will take the opportunity to make such a strategically important friend in Europe.

I definitely don't buy the doom about a famine, those have even become rare in Africa. The international community won't let Greeks die of hunger en masse.


Have you seen the unemployment ratings in those countries, especially among the younger generations? Have you seen Podemos in the polls? There is a very big chance of a domino effect.

The big question is why specifically Bitcoin will become the "digital gold" of the future. Just because it was the first crypto-currency? I don't think so, the head-start is so small in the large scheme of things. At some point there will be a crypto-currency that has such vastly superior features and so much more adoption for whatever reason that everyone will forget about Bitcoin.

Have you ever been to Greece? I have, and I've seen plenty of people working their asses off. Calling all Greeks lazy is short sighted and untrue. The problems of Greece are corruption, socialism, a culture of tax evasion, lack of a decent industry sector, the Euro, and currently austerity. So yes, Greece has plenty of problems, but I wouldn't list overall laziness.

Regardless of whether Greece leaves, the EMU is in big trouble. The EMU has a huge structural problem, and there's no way out. If the rest of the EU gives in to Greece's demands, Spain will want the same treatment, and after that Portugal, Italy and France as well. Continued austerity doesn't improve the Southern economies either, eventually turning them into Third World countries.

The EMU was never an economically sensible project, it was an idealistic political dream project to some and at the same time a French plan to contain Germany's economic power, and now faces harsh reality. A monetary union in such divergent economies without a full political union was simply a retarded plan, the strong economies will destroy the weaker ones due to a lack of control over national currency valuation, and then they drag down the strong ones with them. At the same time the weak economies abuse the relatively strong currency and low interest rates with irresponsible financial policies.

If Greece exits the EMU their economy will probably start growing after the initial chaos, possibly with deals with Russia and China. Greece is geopolitically important, so even if it doesn't pay off immediately, they'll be interested.


That's not what's going to happen. The differences between EU member countries are way too big to unite politically. It's completely unrealistic. It's about as realistic as Mexico and the USA joining politically.

Defaulting is not paying back, so that first sentence is incorrect. Due to interest on debit being higher overall than interest on credit, there is always more debit than credit in the system, and debit will always grow faster. If everyone would pay their debts or otherwise default and lose any collateral, the banks would end up with most of the world's property. That by itself shows the banks being parasites, since they never created anything of value themselves, they only moved and manipulated money, yet they'd own almost everything.

People will default on debts when they become insolvent, and those who lent out Bitcoins have no choice but to take their losses, and maybe default themselves if they have debts as well. If those defaults happen gradually at the correct moment, when the debt has obviously become a 'bad debt', it's not necessarily a large scale problem. It becomes a large scale problem if deception is used to delay necessary defaults, because the bubble will build up and the eventual burst will be far more damaging to anyone directly and indirectly involved in the chain of bad debt. In the current fiat system, that's basically everyone. In Bitcoin, those who have their coins on the blockchain itself rather than in a bank or an exchange are not affected, because actual real Bitcoins on the blockchain is not debt-based money.

All creditors to those who default get screwed over. That's why the banks are considered 'too big to fail'. Everyone with savings in banks is a creditor to that bank, and that's the majority of the first world's population. If those banks default, all those people lose their savings. Not only that, but financial infrastructure is also dependent on those banks. Printing money is not a solution, it devalues the currency and will eventually backfire. In the long run it destabilizes the monetary system even more, causing a big swing from deflation to hyperinflation.

That's why having your life savings in fiat currency is dangerous, especially if it's on the balance sheet of a bank. I'm not saying people should throw it all into a crypto-currency, but definitely diversify. Real-estate, gold, silver, crypto, you name it.

This is not surprising, considering Syriza is a socialist/communist party, i.e. collectivist. The printing press of a central bank is their best friend. He has a point about Bitcoin's whales, but that is a problem specific to Bitcoin, not a problem with crypto-currencies in general. As for the dreaded deflationary spiral, that is a Keynesian view, not a fact, and there are already topics on this forum that make strong cases against it's validity.* In addition, it's possible to make an inflationary crypto-currency, even a democratic one where people vote on inflation rates. So again, a problem specific to Bitcoin.

I was excited to see Syriza win, but mostly because Greece stirring the status quo has the most chance of initiating the end of the Euro, whether it is because of a Grexit or the EU caving in to the demands of Greece, which would be followed by similar demands from countries like Spain, Italy and Portugal. Even if the Northern EU countries would accept those demands, which would essentially amount to a transfer-Union, a lot more QE would be needed. The EMU would become a free-money zone. Since the Euro is not the world's reserve currency, it'll suffer more devaluation than the USD did so far with it's major QE programs.

Crypto-currencies won't see sudden mass adoption until the hyperinflation of the major fiat currencies starts. It won't be long now until the central bank's lose all their credibility, and the deflation will switch to (hyper)inflation.


* This is probably one of the best scientific papers debunking the myths of deflation: http://object.cato.org/sites/cato.org/files/serials/files/cato-journal/2008/11/cj28n3-1.pdf

And you don't believe that that is a bad thing? Debt is ever rising faster than credit in the current monetary system, and it would happen to Bitcoin as well. Usury and debt-money are at the core of the world's economic problems. The savings of the common populace are in peril due to fractional reserve banking, just a few economic shocks, some panic, a bank run, and most people can wave goodbye to their hard earned savings.

What the world needs is a move away from such a system. Debt money and fractional reserve banking should become exceptions rather than the status quo. The common people should have most of their money savings in secure storage, backed by a 100% positive balance, not dependent on someone else's ability to pay their negative balance.

http://object.cato.org/sites/cato.org/files/serials/files/cato-journal/2008/11/cj28n3-1.pdf

"The second type of deflation, however, is the result of positive
aggregate supply shocks that are not accommodated by an easing of
monetary policy. Such aggregate supply shocks are the result of pos-
itive innovations to productivity or factor input growth that lower per
unit costs of production and, in conjunction with competitive market
forces, create downward pressure on output prices. Unlike a collapse
in aggregate demand, positive aggregate supply shocks that are not
monetarily accommodated generate a benign form of deflation
where nominal spending is stable, because the decline in the price
level is accompanied by an increase in the actual and “natural” level
of output."


That article's point is that the gold standard isn't a good idea because it can be abolished or adjusted. Like fiat being "money created out of thin air" a gold-standard is a "promise out of thin air". It basically argues that you can trust neither government nor private central bank with control over your monetary system.

Anyway, I wasn't arguing for a gold-standard.

You haven't given any argument why it's different in macro. Your iPhone example would mean that iPhones wouldn't sell well because people defer their purchase because new models constantly come out. Yet iPhones sell extremely well.

The argument is that if something can be gotten cheaper a year later than right now, people tend to defer their purchase. This ignores the fact that having something right now is more useful than having something at a later date. Having a roof over your head tonight is more valuable than having a roof over your head next week. Having a new phone right now is apparently more valuable than having to deal with an older phone for another year to get the new phone at a lower price, or an even better one at the same price.

It may be true that some people might defer because of lowering prices, but this doesn't make it a spiral, because things that have practical utility are more valuable in the now than in the future. The cost of postponing must be lower than the profits of postponing.


What makes deflation dangerous in our current monetary fiat system has to do with the reason behind the deflation. That reason is usually an excess of debts causing liquidity problems, effectively a reduction of the money supply. Those in monetary debt are more likely to default in times of deflation, because their debts increase in value. If they default, their creditor (like a bank) has to write off that debt. If the collateral didn't cover the value of the debt, and if the creditor (bank) also has debts to others it might default itself, which may bring it's creditors in trouble as well. It can become a chain-reaction.

So deflation in a debt-based monetary system like we have right now is lethal to governments and banks due to all the debt, and thus lethal to the fiat currency. A reduction of prices in a fixed money supply system due to economic growth is a completely different thing, and is actually benign. The "deflation is bad because of hoarding" argument is bullshit. It only distracts from the real problem, the ever-increasing debt due to higher interest rates on debit than on credit.