Why does Bitcoin subsidize saving?

[justusranvier]

Bitcoin has no mechanism to implement demising returns on saving.

Every economy has that:
Gold: Physical wear, increased storage space higher cost of guarding.
Fiat money: Inflation
Barter economy: Depreciation of goods
IOU trust network alas ripple: Increased counterparty risk.

With bitcoin the fundamentally best strategy to reach highest economical authority is to never spend them ever, which is obviously not feasible.
I don't speak out against the fixed supply, but it needs some mechanism to encourage spending for luxury like demurrage for example.
A concrete scenario for many bitcoiners is to save them for cases where they are either overvalued (from their personal perspective) or to save them as an insurance against economic turmoil while at the same time doing nothing to prevent that scenario from occurring.

The main reason I am opposed here is the self interest of bitcoin hoarders to justify their own behavior and keep up the public perception of bitcoin.

Somehow I doubt that's your actual motive.

People are attracted to bitcoin precisely because it has no mechanism to implement demising returns on saving.

I suspect you're more interesting preventing the spread of the idea that it's possible to have a currency which is not intentionally devalued because of how popular this idea is one people hear about it. Bob forbid that people could store their deferred consumption themselves instead of losing large parts of it to rent-seeking assholes.

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[ElectricMucus]

go for it

[JoelKatz]

Here is the fundamental flaw of bitcoins economic model in one sentence:

Spending because of a need is fundamentally less than because of a want.
(I would be surprised if this gets any insightful answers)

It doesn't matter, it's production that builds the economy, not spending. If we can get the same production with less spending, that's better. So just encouraging spending is not what you want.

[ElectricMucus]

Here is the fundamental flaw of bitcoins economic model in one sentence:

Spending because of a need is fundamentally less than because of a want.
(I would be surprised if this gets any insightful answers)

It doesn't matter, it's production that builds the economy, not spending. If we can get the same production with less spending, that's better. So just encouraging spending is not what you want.

No.

You simply can't get the same amount of production with less spending. Modern production is exclusively driven by demand, overproduction more or less is a thing of the past.

[JoelKatz]

You simply can't get the same amount of production with less spending. Modern production is exclusively driven by demand, overproduction more or less is a thing of the past.

If you can make a car efficiently enough to sell it for $15,000, you can make that same car and sell it for $30,000. The reverse is, of course, not always true. But it's not always false either.

The concern is not "overproduction" but insane production. For example, just prior to the mortgage crisis, the economy was insanely overproducing luxury goods. This was largely because the overvaluation of homes was stimulating spending. This spending was bad spending and the economy still hasn't recovered from the harm this overspending did. The economy should not have diverted scarce resources to producing luxury goods that people incorrectly believed they could afford.

The amount of spending doesn't so much determine how much production takes place in terms of how much human effort is expended. People who need jobs will work whether they're making 100" plasma TVs or running a soup kitchen.

We can increase spending dramatically by paying people a million dollars a day to dig trenches with teaspoons. But we only want to encourage *sensible* spending.

[ElectricMucus]

lol

No that was because the spending was based on debt and the currency was based on debt.
Don't ever apply the idiocracies of the fiat economy to anything else except itself. 

[justusranvier]

I think it's time for this:

[ElectricMucus]

I am not trolling, but feel free to push that orange ignore button maybe there are enough ignorant asshats out there so I can get into the red territory.

Definitely time for this:

[JoelKatz]

No that was because the spending was based on debt and the currency was based on debt.

Not true. The spending was not based on debt, the spending was based on expected future revenue from selling a house. That would exist in any economy.

Don't ever apply the idiocracies of the fiat economy to anything else except itself. 

I try not to. If you can show why that makes a difference, please do. Spending is not inherently good, more spending can change the type of goods an economy produces such that it's producing short-term consumed goods rather than long-term investment goods. That can be bad.

[ElectricMucus]

No that was because the spending was based on debt and the currency was based on debt.

Not true. The spending was not based on debt, the spending was based on expected future revenue from selling a house. That would exist in any economy.

Ok, corrected it was partly based on debt because at some point the expected return was higher than the interest payments.

Don't ever apply the idiocracies of the fiat economy to anything else except itself. 

I try not to. If you can show why that makes a difference, please do. Spending is not inherently good, more spending can change the type of goods an economy produces such that it's producing short-term consumed goods rather than long-term investment goods. That can be bad.

Only overextended spending is bad. The reason why overextended spending is so bad in the fiat economy is because of debt and the tendency for the controlling entities to issue more currency the more debt there is and in order to pay off debt. This can simply not happen in another system.

I am not talking about spending strictly from a consumer standpoint but from a "prosumer" standpoint. For a money system to support such an economy it is beneficial to encourage spending.
It is my belief that if bitcoin were to implement demurrage, even on a voluntary basis economic growth would shoot through the roof. A mandatory system would require too drastic changes to patch it in now but if bitcoin misses this train another cryptocurrency which has this feature from the start will overtake it in my opinion.

[Etlase2]

It doesn't matter, it's production that builds the economy, not spending. If we can get the same production with less spending, that's better. So just encouraging spending is not what you want.

How do you produce without investment? It is investment, after all, that is the problem that the OP has brought up. Saving is clearly not investing by any stretch of the imagination when it comes to bitcoin. In a typical fiat economy, saving is investing because banks are putting your money into investments. Here, that is not the case. It is not encouraging spending that we're looking for, it is encouraging investment. If investments are sane (which they are not when the people who control money printing leverage themselves a thousand times over), then production and spending will follow in a similar, sane manner.

Investment - Production - Consumption

Not true. The spending was not based on debt, the spending was based on expected future revenue from selling a house. That would exist in any economy.

I mentioned in the other thread where I was rabidly attacked by Realpra that regardless of consumer debt, government debt exists and forces us to work harder and longer and produce more than necessary because we are tied down by that debt, regardless if we have any of our own debt. It is a vicious circle that can only be escaped by getting rid of the notion of a currency based out of debt. So yes, bitcoin solves that problem--somewhat. Lopsided distribution based on luck still leaves an awful lot to be desired. The great majority of bitcoins can only enter the economy via debt. This is the same problem with gold and goldsmiths and moneylenders and what have you. Rather than any particular economic merit, it is only the luck of the mine that makes you rich. It is a silly concept that spawned thousands of years of servitude, and one that has no business being echoed by something touted as the future of money.

[JoelKatz]

How do you produce without investment? It is investment, after all, that is the problem that the OP has brought up. Saving is clearly not investing by any stretch of the imagination when it comes to bitcoin.

Yes, saving is investment with Bitcoin. When you save Bitcoins, you've investedwhatever productivity you exchanged for the Bitcoins you saved.

In a typical fiat economy, saving is investing because banks are putting your money into investments. Here, that is not the case.

Yes, it is. Except it's just not the banks that do it. If I work at a factory, I produce value. That is value that I "deposit" into the economy. I am fully entitled to "withdraw" based on that production and destroy/consume some of the value I created. But if I save, instead of withdrawing that value, I leave it earning interest in the economy.

It is not encouraging spending that we're looking for, it is encouraging investment. If investments are sane (which they are not when the people who control money printing leverage themselves a thousand times over), then production and spending will follow in a similar, sane manner.

The most useful and beneficial investment is usually to labor to produce exactly what people most want without consuming any of the value you produced. That is, saving.

[Etlase2]

I am not going to argue with the inane definition of investment that you've created to suit your own purposes. If you want to treat bitcoin itself as an investment, fine, but then it is a currency-like commodity, not a currency. And then you have the same issues of lack of production that a lack of putting money to use will incur.

Earning interest for doing nothing is exactly what banks do when they print money, but you want to suck on that same teat because you believe you're entitled and you must rationalize this in some other way.

[JoelKatz]

Earning interest for doing nothing is exactly what banks do when they print money, but you want to suck on that same teat because you believe you're entitled and you must rationalize this in some other way.

It is astonishing to me that you would consider earning money to be "doing nothing" but destroying goods to be something worth encouraging.

[unclescrooge]

Earning interest for doing nothing is exactly what banks do when they print money, but you want to suck on that same teat because you believe you're entitled and you must rationalize this in some other way.

It is astonishing to me that you would consider earning money to be "doing nothing" but destroying goods to be something worth encouraging.

Keynes for the win

[paraipan]

Earning interest for doing nothing is exactly what banks do when they print money, but you want to suck on that same teat because you believe you're entitled and you must rationalize this in some other way.

It is astonishing to me that you would consider earning money to be "doing nothing" but destroying goods to be something worth encouraging.

Keynes for the win

+1, this world is slowly getting out of hand...

[Etlase2]

Earning interest for doing nothing is exactly what banks do when they print money, but you want to suck on that same teat because you believe you're entitled and you must rationalize this in some other way.

It is astonishing to me that you would consider earning money to be "doing nothing" but destroying goods to be something worth encouraging.

Are you hard of reading? I said "earning interest for doing nothing", that is quite different from what you claimed I said.

And how does saving with the intent to destroy more goods later than less goods now solve anything? Hint: it doesn't. You are just trying to rationalize again. "lol maybe if i leave off half the equation he won't notice!"

[unclescrooge]

And how does saving with the intent to destroy more goods later than less goods now solve anything? Hint: it doesn't.

It does.

Delaying consumption is actually how economic progress is made.

[Etlase2]

If you're quoting Rostow or something unclescrooge, you're quite misguided. Big surprise there.

http://en.wikipedia.org/wiki/Rostow's_stages_of_growth

The take-off also needs a group of entrepreneurs in the society who pursue innovation and accelerate the rate of growth in the economy. For such an entrepreneurial class to develop, firstly, an ethos of "delayed gratification", a preference for capital accumulation over expenditure, and high tolerance of risk must be present.

Explain to me how non-productive capital pursues innovation or accelerates the rate of growth in the economy. Or are we just going to say that capital sitting in a wallet accruing deflationary interest at little to no risk is productive again? Innovative, even?

Alternatively, please link me to your sources or the book you wrote explaining your statement.

[unclescrooge]

If you're quoting Rostow or something unclescrooge, you're quite misguided. Big surprise there.

http://en.wikipedia.org/wiki/Rostow's_stages_of_growth

The take-off also needs a group of entrepreneurs in the society who pursue innovation and accelerate the rate of growth in the economy. For such an entrepreneurial class to develop, firstly, an ethos of "delayed gratification", a preference for capital accumulation over expenditure, and high tolerance of risk must be present.

Explain to me how non-productive capital pursues innovation or accelerates the rate of growth in the economy. Or are we just going to say that capital sitting in a wallet accruing deflationary interest at little to no risk is productive again? Innovative, even?

Alternatively, please link me to your sources or the book you wrote explaining your statement.

Money is not production, it's representation of production.

If I work for 100 000 dollars and let then this dollars in a mattress (or actually burn them), what really happened is that I produced something real and useful for others, while not consuming what I produced. Which then lead, all things else been equal, to lower prices of good for others > economic progress.