[2015-08-22] Bank of England: Bitcoin is “Harder Money” than Gold Due to Deflati

[LiteCoinGuy]

Bank of England: Bitcoin is “Harder Money” than Gold Due to Deflation

During a presentation on digital currencies entitled “Old Money, New Money,” Andy Haldane, Chief Economist and the Executive Director of Monetary Analysis and Statistics of the Bank of England and his team stated that “Digital currencies are ‘harder money’ than a gold standard” because “sustained adoption [of bitcoin] would see ongoing deflation.”

https://bitcoinmagazine.com/21647/bank-england-bitcoin-harder-money-gold-due-deflation/

[bryant.coleman]

Deflation will become evident only after a few decades time. Right now, new Bitcoins are being mined at a rate of BTC1,312,500 per year (in 2015), which represents an addition of 10% per year. On the other hand, some 3,000 tons of gold is mined every year, which represents an increase of just 3% to the overall stocks.

[Carlton Banks]

Deflation is only really "bad" for producers, not consumers.

Hard money forces you to make hard decisions: do I really need this frivolous purchase? A certain type of producer (generally the more unscrupulous) doesn't favour those kind of incentives; they want the customers to return to the them sooner rather than later.


And it's kind of interesting that the BoE should use that angle to malign bitcoin, because apparently, the people who work at the BoE have a tendency to be hard money fans.

[Lethn]

It's not even that bad for producers because if everything is deflating then that means they have to pay less to get the materials they need. The only people who bitch and moan about deflation I've discovered are the various people who benefit from price fixing and inflation, so certain sectors like the housing market are a classic example of people who would freak out over deflation.

[Carlton Banks]

It's not even that bad for producers because if everything is deflating then that means they have to pay less to get the materials they need. The only people who bitch and moan about deflation I've discovered are the various people who benefit from price fixing and inflation, so certain sectors like the housing market are a classic example of people who would freak out over deflation.

Excellent points.

The housing market is mildly terrifying IMO, the reality is that houses/buildings are essentially depreciating assets; it costs significant time and money to keep houses and buildings properly maintained.

Sure, the market price can plausibly buffet around a bit. But if it's soaring year after year, that's not the result of the building becoming more valuable. What's happening is that the currency it's valued in is losing it's purchasing power.

[Skinnyman]

What do they mean by 'harder money' exactly? I think bitcoin being deflationary is one of its key features. Money should grow over time and be its own investment, not devalue every year like fiat does.

[Carlton Banks]

What do they mean by 'harder money' exactly? I think bitcoin being deflationary is one of its key features. Money should grow over time and be its own investment, not devalue every year like fiat does.

The reason for the "harder than gold" statement is a little fantastical, but I can't be too perjorative about it as I kind of agree with them.

Bitcoin is limited in quantity by a man made limit, enforced by an open access infrastructural co-operative (the mining network).

Gold is limited by the number of gold atoms in the universe.... which isn't fixed, as stars that go supernova causes the fusion of the atomic nuclei of the hydrogen/helium mix that the star constituted prior to the explosion. This process produces more gold (as well as virtually every other element in the periodic table) than existed in the universe previously.

A lot of these newly fused gold atoms will accrete into meteroites, planetoids and planets. The planet we live on received it's gold supply in that way... except for all those other meteorites and planetoids that have collided with Earth in the past, that may well have deposited some extra gold here.

Those meteorites haven't stopped forming, or hitting the earth. It may seem a little like that, but that's just a result of a little 20th century-wide luck. Furthermore, I believe it was Elon Musk that expressed an interest in developing techniques/technologies that could capture mineral rich asteroids and meteorites, for the purpose of extracting the minerals.


tl;dr The hard limit on gold is local to planet Earth.