Bitcoin is a Zero-Sum Game - Long-term interest bearing instruments viable?

[Etlase2]

"I am assuming real growth causes deflation"

Exactly!

And what is the cause of economic growth? Profitable investments. You are basically saying that the existence of profitable investments makes profitable investments impossible.

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

As I see it, the ball is in yours, Etlase's and other inflationist's court:

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.

1. BTC value is climbing, unless free markets are entirely devoid of any logic or reason, there must be a good reason for it.

Looks like BTC has fallen over 200% to me.

2. If deflating economies self-destruct then why are we seeing a sea of BTC-related businesses spring up?

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

3. If investments are impaired in deflationary economies why is GLBSE seeing any business? Why do people start BTC businesses instead of straight up buying BTC?

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

But you CAN'T explain that so you do ad hominem attacks,

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

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[justusranvier]

The question is what currency will optimize the balance between present consumption versus savings / investment.  I think it's a deflationary one for the reasons I've argued.

The most optimum currency can only be determined by examining what people choose when they are free to decide.

What we can observe is that people act in ways to preserve the purchasing power of their deferred consumption. Based on their risk profile they choose to store their savings in ways that maximise future purchasing power.

Currency devaluation can only be imposed on a population by force, because individuals are constantly trying to flee from it.

That tells you all you need to know about inflationary vs deflationary currency. Anything that must be imposed by force is only optimum for those holding the guns and suboptimal for everyone else.

[Adrian-x]

Here's a thought: it's impossible to save money without lending it. Imagine that you take a $100 bill and stick it in your safe for a year.  It's true that when you do so, you're not lending that money to a specific person, but you are lending the purchasing power of that money to the overall economy.

So, what how do I go about spending my share of the money people have in their safes?

Leverage the declaration - this would encourage a boom in creativity.   

[Roger_Murdock]

The question is what currency will optimize the balance between present consumption versus savings / investment.  I think it's a deflationary one for the reasons I've argued.

The most optimum currency can only be determined by examining what people choose when they are free to decide.

What we can observe is that people act in ways to preserve the purchasing power of their deferred consumption. Based on their risk profile they choose to store their savings in ways that maximise future purchasing power.

Currency devaluation can only be imposed on a population by force, because individuals are constantly trying to flee from it.

That tells you all you need to know about inflationary vs deflationary currency. Anything that must be imposed by force is only optimum for those holding the guns and suboptimal for everyone else.

I agree with almost everything you said.  But what if someone argued that a deflationary currency represented a kind of prisoner's dilemma? Maybe an inflationary currency would be better for everyone, but it would never get off the ground because individuals would tend to defect and store their savings in an alternative deflationary currency? (Note I don't think this is the case!) But my point is that the question of whether a market failure exists is a completely separate question from whether state coercion is an effective (or legitimate) response.

[justusranvier]

But my point is that the question of whether a market failure exists is a completely separate question from whether state coercion is an effective (or legitimate) response.

Are we assuming a priori that "market failure" is a valid concept?

[Adrian-x]

You spend it by spending the money in your pocket on goods and services.  Your money will now go further because the money in other people's safes is not chasing after those same goods and services.

So if everybody puts all their money in the safe the economy will be booming from all the money it's borrowing, right...? This theory is obviously just more rationalization from deflationists.

Deflation leverages the creative class they can do more with less - programmers - designers all are now free to create,  in an inflation economy designers and programmers don't borrow because there outcome has no guarantee. But when free to do R&D  ( leveraging deflation) the ones who innovate, now have a tool to solicit investment, and we get quantum leaps in progress.

[Roger_Murdock]

But my point is that the question of whether a market failure exists is a completely separate question from whether state coercion is an effective (or legitimate) response.

Are we assuming a priori that "market failure" is a valid concept?

I don't think so. I think you can argue that regardless of whether you believe that market failures exist the voluntary adoption of a fixed supply currency is not a market failure. Sort of like how you could argue that a particular horse is not a unicorn by pointing out that he doesn't have a horn. The question of whether unicorns exist (they do) is separate.

[justusranvier]

I don't think so. I think you can argue that regardless of whether you believe that market failures exist the voluntary adoption of a fixed supply currency is not a market failure.

I can't argue that because I don't know what a "market failure" is until the term has been adequately defined.

[Adrian-x]

2. If deflating economies self-destruct then why are we seeing a sea of BTC-related businesses spring up?

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

On this point I agree with you there is an abnormality. Bitcoin is experiencing hyper-deflation. This is new to the field of social science in economics and I am not sure how it evolves. My thoughts expressed elsewhere.  

[Grinder]

No, obviously everyone should spend all of their money as fast as possible Brewster's Millons-style. Think of all the jobs that would be created!

The amount of trade that is happening is what defines the size of the economy. When you trade away your money you have to do something to get new money, and this is what adds to the economy. Lots of people stacking almost all the money in a safe for later does not. Every day you don't trade anything is another day you haven't added anything to the economy. That does not mean that that every trade that is possible to do is smart to do, but with no trade there is no economy, and with little trade you have a little economy. Lots of trade means a big economy.

It's really that easy, and that's why currencies which creates price deflation gives a smaller economy than one which creates inflation. I also know you will never accept this because just like religious people you have decided on what you want to believe first and then make up "facts" which fits your belief.

[Realpra]

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.

I skimmed YOUR alt currency proposal and it contained the idea of adjusting the block reward at economic down turn or something like that. Here it is:

•   Decrits will work to keep a relatively stable value over time by having an unbounded coin production that is related to the time, hardware, and energy costs required to produce new currency.

"Unbounded" - That's also called inflation.

As for inflation used as a bad word, I am not, it just so happens that you have a link in your signature to an inflationary alt currency and
it just seems clear to me that some here believe in inflation or deflation, so I grouped them.

Looks like BTC has fallen over 200% to me.

That is a local change seen over ~1 year after a huge run-up, how about the more relevant 2-3 year range?

You're looking at a fluctuation trying to refute my argument that the market thinks BTC has real value - who's fallacious now?

"Cherry picking" is that the fallacy you used here?

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

MPEX, GLBSE, Android wallets, Satoshi dice, silk road, armory, coinabul, BTC camgirls, BTC poker and at least one Chinese businessman said he used it with benefit... is wikileaks a business?

That's more than I can count fiat/BTC exchanges btw.
Is ignoring the realities a logical fallacy? I am really not versed in logical fallacies
(Arhhh its ALSO "cherry picking")

There are probably more I don't remember or don't know about.
... and for a start up currency I don't see the problem with a bunch of exchanges. Its just the first needed thing really so your counter-argument makes no sense either way.

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

But GLBSE is not just seeing a trickle; pirate alone had 500K in debts which is 5% of ALL currently existing BTC and there is a whole BUNCH of other stuff on there that people are investing in.
What percentage of their dollars do people invest, do you even know?

And you just accused me of arguing there would be NO investments when in fact my wording was not near as strong as that - a straw man fallacy.

Do you understand the economic consequences if only very few DID invest in a BTC world? Clearly those few investors would have MUCH more clout as economy is all relative so the net effect is the same.

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

Yeah right. These "logical fallacies" can be applied to almost any argument, though of course yours are begging for it.

[Roger_Murdock]

The amount of trade that is happening is what defines the size of the economy. When you trade away your money you have to do something to get new money, and this is what adds to the economy.

Voluntary exchange is what produces growth because both parties benefit -- not just lots of trades.  In contrast, printing new fiat money (aka counterfeiting) is a form of involuntary exchange or theft. I don't buy the argument that the latter is needed to encourage the former.

Lots of people stacking almost all the money in a safe for later does not. Every day you don't trade anything is another day you haven't added anything to the economy.

Again, there's no reason to expect that most people would stack "almost all the money in a safe for later." There's always going to be a balance between present consumption, savings, and investment.  And again, you ARE adding something to the economy when you simply save your money as previously explained.

I also know you will never accept this because just like religious people you have decided on what you want to believe first and then make up "facts" which fits your belief.

Whoah, lighten up, dude. Anytime I'm engaged in a debate about anything, I try to keep in mind two possibilities: (1) I might be wrong; and (2) that might be ok.  I'd encourage you to do the same.

[Grinder]

Voluntary exchange is what produces growth because both parties benefit -- not just lots of trades.  In contrast, printing new fiat money (aka counterfeiting) is a form of involuntary exchange or theft.

As I said, this is just hypocritical. If you call inflation theft then you are inconsistent when you don't call deflation an involuntary theft from those who invest to those who put the money in the safe.

I don't buy the argument that the latter is needed to encourage the former.

You just said that it will, even though you for political reasons call it involuntary to give it a negative spin.

Again, there's no reason to expect that most people would stack "almost all the money in a safe for later."

Let's just ignore the fact that that's exactly what's happening in the Bitcoin economy.

Whoah, lighten up, dude. Anytime I'm engaged in a debate about anything, I try to keep in mind two possibilities: (1) I might be wrong; and (2) that might be ok.  I'd encourage you to do the same.

I most certainly do. While I agree that it's very practical for people like me who like to save to be able to just put all my money in a safe and still reap most the value that other people's trade adds to the economy, that effect is clearly bad for the economy as a whole. I am not going to rationalize that fact away just because it doesn't fit what I ideally would like to be true.

[Roger_Murdock]

Again, there's no reason to expect that most people would stack "almost all the money in a safe for later."

Let's just ignore the fact that that's exactly what's happening in the Bitcoin economy.

I've got to head out in a few minutes so I don't have time to respond to everything right now, but I think I addressed your point above in comment #86 of this thread.

[kjj]

Voluntary exchange is what produces growth because both parties benefit -- not just lots of trades.  In contrast, printing new fiat money (aka counterfeiting) is a form of involuntary exchange or theft.

As I said, this is just hypocritical. If you call inflation theft then you are inconsistent when you don't call deflation an involuntary theft from those who invest to those who put the money in the safe.

No one here believes that but you (and maybe a couple of others).  It is hardly an established fact.  It is, I think, the central question here, and you can't claim it as evidence of it's own truth.  (To do so would be to beg the question.)

[Grinder]

Again, there's no reason to expect that most people would stack "almost all the money in a safe for later."

Let's just ignore the fact that that's exactly what's happening in the Bitcoin economy.

I've got to head out in a few minutes so I don't have time to respond to everything right now, but I think I addressed your point above in comment #86 of this thread.

Not really. If the deflation was lower there would be less incentive to save, but as long as there is deflation the effect would still be there. It would suppress people's wish to trade, just like inflation would encourage it. See, I can used loaded words as well.

[Grinder]

No one here believes that but you (and maybe a couple of others). 

I would expect nothing else on a forum which has a deflationary currency as topic.

[Etlase2]

"Unbounded" - That's also called inflation.

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.

"Cherry picking" is that the fallacy you used here?

Takes one to know one.

MPEX, GLBSE, Android wallets, Satoshi dice, silk road, armory, coinabul, BTC camgirls, BTC poker and at least one Chinese businessman said he used it with benefit... is wikileaks a business?

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?

But GLBSE is not just seeing a trickle; pirate alone had 500K in debts which is 5% of ALL currently existing BTC and there is a whole BUNCH of other stuff on there that people are investing in.
What percentage of their dollars do people invest, do you even know?

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.

[Dalkore]

After reading the last 2 pages I have a thought.


Bitcoin is a currency but it not being used as one at the moment, even though people do trade with it.    It is being a wealth reserve asset and we have only seen a couple items that actually made the cut, ie: gold & silver bullion.  People are purchasing and holding (saving) in Bitcoins because they are more adverse to the current condition of their local currency, being that that are all inflating at amounts that are giving you negative rates of return.   What I think makes Bitcoin more attractive than Gold and Silver is that you "can" trade around with it easier than having to walk to your nearest rare coins dealer and exchange your bullion.  

We can not focus on the "fixed" aspect enough.  Have we really ever had a fixed asset that truly could not be expanded so that is should in theory hold some value permanently?   Remember all the electricity and capital equipment (computers) that it took to get this many coins into circulation.  

On the other had, fiat currencies are not "wealth reserve assets", you can try and call them that but they do not hold value over time and in scenarios where they are holding value, they are in debt instruments which are actually pulling value from the future to maintains its own value.  

With this said, Bitcoins might be on a track to actually have trade continue to decline and only be used for major transfers of value where you need faith in that value or purchasing items where the quasi-anonymous nature lends to these transaction.



Food for thought...

[Realpra]

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.

I am not saying it is bad I'm just calling it what it is. You even mention "new money" in your quote above.

More money will always equal higher prices at some point.. unless you also plan to remove credits?

Off topic, but I also don't see how your system avoids being gamed to death: Hold a bunch of coins, send them to your own addresses once in a while - system awards you with new coin due to you being an "account holder that is trading".

If you are truly giving the money to everyone why not just make a Bitcoin client that moves the comma once in a while?

"Cherry picking" is that the fallacy you used here?

Takes one to know one.

I don't do that stuff.

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?

You never mentioned anything about the investments being GOOD, just investments in general - you're "moving the goal posts". Surely the real world is no less riddled with bad investments and scams.
If something good did come along, and it will I think, people should start to choose that over the scams.

Wallets are not businesses.

Its an app that has a paid version... how is that not a business?

Armory is an open source client

I was talking about the TOR amory site for illegal guns.

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.

Dice and poker is legal in many countries I think.

And really, wikileaks?

News reporting is a business right? Fox news, CNN - all businesses, why not wikileaks?

Alpaca socks are also legal

Here's a list of more businesses: https://en.bitcoin.it/wiki/Trade#Toys.2C_Games_and_Hobbies

Anyway BTC is only a few years old so a "few" businesses is fine for now. I promise you I will be the first to complain if golden opportunities arise and people just sit on their BTC.

Do you really think championing the biggest bitcoin ponzi to date is helpful to your arguments?

When discussing the investor willingness in a deflationary economy; yeah it immensely helps my case that people gave a guy named "pirate" 5% of the entire economy (okay maybe he only got 0.5% for real, who knows).