 Show Posts
|
|
Pages: [1]
|
|
If anything, adoption of Bitcoin would make their debt worse. One of the reasons why government loves having their central bank institutions is that they can print money over time and basically inflate their debt away. So whilst in the fiat world debt is relatively decreasing over time - tending towards 0, in the world of bitcoin there is mild deflation throughout. This means the value of their debt is relatively increasing every minute of time that passes. This will make it much worse for them! Except if they somehow negotiated a deflation linked payment plan with their creditors.
|
|
|
|
|
This is exactly what happens when the people lose the say in the future of the country. Germany has taken away Greece's sovereignty and assets. Even South American countries, when in the same position as Greece have defaulted and come back stronger. Greece needs to leave, default, devalue and build again.
|
|
|
|
|
Well I think your argument is false then. The economy is made up of individual companies, acting through individual rationals to better themselves. For as long as everyone acts in their own interest, transacting and exchanging in order to increase their own wealth then there are no winners or losers. Wealth is not created or lost through inflation or deflation. Only the people who don't deserve to do be wealthy in the first place would lose out!
|
|
|
|
In terms of the production cycle I think you have completely missed my point. The production cycle for a producer is naturally something that varies. That being said, there are very few producers who take enough time from the start of production to the end of production that their inputs would be significantly more expensive at the end (relatively) - even if they were, then the beauty of the free market is that they can change their prices in order to price in this situation.
If I buy raw materials for $5 and want to sell the finished product for $10 at the end of the production process I am not forced to stick to this price - I can raise it in order to account for the fact that my raw materials are more expensive Raw materials become more expensive relative to a producer's cash flow (revenue), which I also emphasized. And you can't raise prices. This is a given, since under money appreciation prices decline, by definition. If you could, there would not be appreciation of money in the first place... You have to accept it (and as well learn what production cycle actually means) Just out of interest, who is stopping the individual company from keeping their prices at the same level?? Price levels are calculated on the basis of food/oil/tobacco and a whole bundle of goods. When consumers see these falling prices and their spending power increased they are only going to consume more! So even if the profit margins fall (disputable as I have already proven) the rules of supply and demand will dictate that the producers sell more!! |
|
|
|
|
In terms of the production cycle I think you have completely missed my point. The production cycle for a producer is naturally something that varies. That being said, there are very few producers who take enough time from the start of production to the end of production that their inputs would be significantly more expensive at the end (relatively) - even if they were, then the beauty of the free market is that they can change their prices in order to price in this situation.
If I buy raw materials for $5 and want to sell the finished product for $10 at the end of the production process I am not forced to stick to this price - I can raise it in order to account for the fact that my raw materials are more expensive. So with a 5% appreciation (as you suggest), I would either raise my price to $10.50 or choose not to. If I raise the price then consumers are no worse off and I am no better of. The same people who would have bought my product to start off with - would still buy it today. I would question where you have seen an economy which fits your ideology (in the developed world) where competitive businesses cannot choose the prices they sell at.
Perhaps you should take a look at any economics textbook and a look at the real world around you?
|
|
|
|
These poor beggars are the producers of all those goods, whose profits are being mercilessly socialized through money appreciation. The key to understanding the mechanism of expropriating profits in this way lies in the non-obvious discrepancy between how money appreciation affects prices and profits. At first glance, it may look that profits are affected in absolutely the same way as the prices (as the dude from my quote above innocently assumes). If it were so, we would most certainly have the case where "there arent less profits either". The major problem is it is not. If we had a production cycle of a company equal to one year, its profit margin at 10% (before money appreciation), and an annual rate of money appreciation at 5%, that would give us a whopping 50% decline in profits, since at the end of the production cycle the company would be able to sell its product only at 95% of its original price with a profit of only 5%. That is two times less, with the rest being eaten and socialized by money appreciation
Thereby, the raw materials that the company bought at the beginning of the production cycle turn out to be more expensive for the company relative to the income it generates from selling its goods. In other words, it should have bought them 5% cheaper to balance out the drop in profits. If the company decides to keep up the profit margin at its original level, it would have to buy less raw materials in the next cycles (which effectively means the same), i.e. reduce production, and with each consecutive production cycle accompanied by money appreciation the profits will be diminishing in absolute terms up to a point where production stops completely and the business winds up...
To sum it up, there is no free lunch, and still more so for the ignorant (no regrets)
But why are you concerned with lauding the companies that produce? There are countless companies that would produce - these people are not the creators of value in an economy. For every business that shuts down there are 10 more that set up to try and do the same thing. Producers are interchangeable and as such However, if the producer is the spectacular business that you observe it as being, then they will be the only people able to do what they do? And if they are the only people that know how to do what they are doing, they are, by definition; price setters. If they are price setters then an appreciating currency will see them keep their prices the same, and they would see their profits increase. No one agrees to a trade where you don't become better off as a result of doing it - why would you do it otherwise? You have also unrealistically assumed that raw materials are not subjected to a increase decrease in price too, how did you arrive there? I quote " it would have to buy less raw materials in the next cycles". This is simply not true. If (as you say) consumers of goods benefit from an appreciation in the currency then so do the consumers of raw materials (producers). Furthermore, as a producer you don't buy all of your goods for your years production in one go, you buy them as you need them - either just in time or just in case. Either way, if you, as a producer cannot negotiate prices downwards when the currency is appreciating then you should be forced out of business as you clearly have no understanding of the market or how to negotiate! |
|
|
|
EU reaches $3bn deal with Turkey to curb refugee crisis
Just another way in which the EU is going down the wrong track. Seems like a desperate political move from an unelected commission trying to solve the refugee problem. Not sure how they think they can combat it better by opening up the borders to more people? |
|
|
|
One of the hardest things to really accept is that because Bitcoin has a finite supply, and the emission of said supply is decentralised, it would be difficult to ever maintain any real stability of it. Monetary policy and government intervention is actually what safe-gaurds most people's money, as well as keep it relatively stable to the extent that we can price things in fiat without having to de-base it and change the price of things all the time.
Do you not think that monetary policy and government intervention is what makes storing your money in fiat more dangerous? At the drop of a hat they can flood economies with trillions of dollars all under the name of 'quantitative easing'......everyone suffers then. |
|
|
|
$713  |
|
|
|
They won't be able to do this since their prices are determined on market terms, i.e. through the balance of demand and supply. If the currency is appreciating, raw materials actually end up more expensive to you, since your profits are diminished when you sell finished goods for less price (due to currency appreciation)...
I have explained it many times already how exactly an appreciating currency hurts producers up to a point they begin suffering losses and stop production
Sure I think that you're right to some extent, but you are only focusing on the supply element of the trade. If people have the feeling that they are wealthier then they will naturally pay more in order to maintain the same standard of living as before. Take a normal fiat economy for example. If I have $100 of savings in my account and there is deflation in the economy of 5%. A product that previously cost me $10 now costs me $9.50 - you're right, in this sense the producer has lost out - to the tune of 5%. But if the price level has fallen by 5% then it also means that the producers costs have fallen by 5% too - so technically they have not lost out at all. Furthermore, if you just focus on the consumer (the guy with $100 of savings) - his savings are now worth 5% more than they were before. So if the price of the good increased by 5% then he would still buy the good. This only doesn't hold if he is irrational and doesn't value goods based on his ability to consume. I would also make the same point again - people will adapt to continuous deflation. If you have a deflation-linked salary then you remove any excess saving incentives. In the same way that by having inflation linked pay rises in the public sector acts to protect workers from their earnings being eroded over time. There is a simple free market solution to any of the problems from companies suffering losses- they either increase prices or as you mentioned stop production. As the least efficient leave the market it allows room for the most efficient to flourish and rebalance their supply to meet the demand. |
|
|
|
If the economy expands, more goods are being produced overall, but given the limited money supply, it leads to currency appreciation (more goods chasing less money) which allows the savers to become richer for doing virtually nothing (by being able to buy more with their stash). It essentially means that producers are sharing (socializing) their profits with do-littles...
I didn't quite understand what you meant by "monetary system which is backed up with something intrinsically useless"
I think that is true, but I would imagine that producers would be changing their prices in order to make sure their production remains profitable for them. If I was a producer, then I would also be profiting from the fact that the revenue I am receiving is constantly appreciating, so my raw materials will end up being 'relatively' cheaper. Furthermore, if the currency is appreciating then I can pay my workers less and they will maintain the same purchasing power, this gets carried through the economy and as long as producers/workers are dynamic then it should not cause problems. Sure there are some people who have a 'stash' but there is a limit to how long they can keep this without spending it, I guess this is the 'payoff' from being someone who adopts the technology early and bears the risk of it failing. In terms of my comment on monetary system, I just meant that it is impossible to have a medium of exchange that isn't intrinsically useless. Even systems like the gold standard relies on people's perception that gold is valuable. People can argue that it is nice for jewelry/pretty but that is mainly because it is expensive to start off with - like everything else, the value is based on societies perceptions (rightly or wrongly we cant change this!) |
|
|
|
Okay, I agree that my example is an oversimplification of matters. But it still serves the purpose of showing the major flaw behind the Bitcoin monetary model, namely, that the savers (who produce nothing) obtain an unjustified privilege of sharing profits with producers (who actually make society richer)...
Why would producers want to miserably give away a part of their revenue for something which doesn't even have value of its own?
But isn't that the problem with any monetary system which is backed up with something intrinsically useless? Having a means of exchange which lets you buy services without having to do direct swaps with something you have produced is incredible practical and something that I don't think anyone would want to get rid of. Personally I don't want to have to carry around loads of t-shirts that I've made until I find a restaurant owner who is willing to give me a meal in exchange for one of my t-shirts. Having a token which expresses and proves the value of my production, although technically worthless, is worth something as long as someone else is willing to take it. However, I think I might have missed the point you're trying to make? |
|
|
|
Thereby we emitted two bitcoins and agreed not to mint any more bitcoins (the 21 million cap). In this way you have one bitcoin and I have one bitcoin, and we set the price for apples and oranges at a bitcoin per piece. So far so good. In a short while, I produced an extra apple, while you produced nothing. Now we have two apples and one orange in the economy, but we still have only two bitcoins, thereby bitcoins appreciate in value since we can trade for bitcoins only...........
It is obvious that I will shrink from trading my apples for bitcoins, and unless trading makes me richer, I won't produce either
I think that the fundemental flaw in the argument is to do with minting the new coins. This example would be the same if we produced extra coin. Unless you give the coin to one individual who becomes richer as a result of that - not through his production, then you have to split the coin equally. If both individuals are left with 1.5BTC, then they have the same dilemma. It is not a question of not having the money in question, it is the point that there has been an over-production of one good which has caused it to fall in price/value. Even if this was an economy which didn't have a fixed monetary supply there would still be the dillema. If you valued the orange at more than the value of two apples, then you would do the trade. In the same way, if I thought that my orange was worth what it was at the start (one apple) then I would still do the trade too. In your example it is a question of utility preferences for each good, not a problem with the monetary supply. |
|
|
|
I think what they used to forget is temptation to temptation to avoid spending a deflationary currency and keep accumulating instead as that money is getting more and more valuable. This will move most of the money supply into a speculative circle of bubbles and bursts, so it will eventually lose its currency characteristics, as no one will use it for actually buying stuff.
Hmm I think that this is not necessarily true. Obviously in a hyper-deflationary currency then this would be the case, but in normal times I don't think that the 'Bitcoin economy' would react like that. Most developed countries operate with low levels of inflation, this doesn't stop them spending all of their money as soon as they earn it- despite it devaluaing every day that it is kept in the bank account. People have to spend money to live, so I don't see this being an issue. However, if bitcoin is working alongside a two-tiered currency system then I do think there is an incentive to hold and speculate- but all it takes is a shock in the other monetary system for that to change.... |
|
|
|
|
What things do you think they forget?
In my mind deflationary currency is not inherently better or worse than inflationary currency, it just depends how able people are to adapt to the new way of doing things in the economy.
If people can shift focus away from wage increases, and realise that they are matching their purchasing power taking wage cuts then I dont think it is a problem...
|
|
|
|
|
Hey,
Thanks a lot for the feedback, I will definitely improve the tipping element, though it isn't a big motivator for doing this.
I think that I mainly found it difficult to find the articles all together. It's ok going through google scholar and looking for all relevant articles, but I think this can be a good starting point for anyone trying to find interesting stuff to read.
I have actually now included the white paper in the 'recommended reading' section, but I think I will put it into the other sections.
Thanks a lot for taking the time to look through!
|
|
|
|
Hi Everyone, I have just put a blog online ( bitcoinacademic.wordpress.com) - which lists relevant academic research from the fields of Economics, Finance, Computer Science and Law. Obviously there is quite a lot of stuff missing at the moment, but I would be really happy to hear any feedback or suggestions you may have, as well as any research/articles you have particularly enjoyed and would like to see on the site! Many thanks |
|
|
|
Thanks a lot for all your replies!  They have been really helpful, I am actually moving forward in a slightly different way. I will be modelling the impact on an economy of using two currencies at the same time, especially when one of them is inflationary and one is deflationary. I think it will be particularly interesting to look at hyperinflationary economies which have switched to other currencies (Zimbabwe $ - USD) and seeing what would happen if that other one was BTC. |
|
|
|
|
Hello all,
I am an economics student and looking to write my dissertation on bitcoin. The problem is that it is so broad that I am struggling to narrow down my choice into a real question or issue to focus on. I have seen some interesting work done on establishing the fair price of bitcoin (using total capitalisation and velocity of money) and would be interested to hear anyone's thoughts on how this could be taken further, or in a new direction!
|
|
|
|
|
