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Author Topic: Deflation and Bitcoin, the last word on this forum  (Read 128422 times)
MoonShadow
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September 12, 2012, 08:11:46 AM
 #521

@Adrian-x

A deflating bitcoin will not solve any of the problems You are talking about. An inflating bitcoin can solve my problem of providing liquidity for start-up companies.

The reason why now You need 2 incomes to support a US family is lack of inflation ... decades of relative overvaluation of $ compared to other currencies and now You have competition from low-cost-labor countries that purposely kept the value of their currency low. Such a competition can eliminate the value collected in BTC very fast.

Wow, I'm continually amazed at the economic ignorance of some forum members.  While it's a bit of a distortion to blame all of the economic woes of our modern world on inflationary monetary policies, inflation in general solves only one problem.  That one problem is the access to liquidity of those who have the the legal authority to create new funds and the people and industries that are most closely connected to that entity.  In the modern case of the US; those entities include the Federal Reserve & member banks, the federal government, & any major corporation or lobbying group with close ties to said government.  That does not, ever, include middle class American households. 

And any economic advantage that inflation may hold for a particular nation's trade policy is 1) always a temporary effect that lasts only as long as it takes for the international community to adjust to the changes in relative value and 2) only applies if no one else is also debasing their currency at the same time, which is clearly not the case in our modern world.

Also, bear in mind that nations don't actually trade, people do.  So any advantage in trade imbalances due to one-sided inflationary policies benefit a corporation on one side of that international trade, not even a government and never a population.

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
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September 12, 2012, 10:02:20 AM
 #522

And any economic advantage that inflation may hold for a particular nation's trade policy is 1) always a temporary effect that lasts only as long as it takes for the international community to adjust to the changes in relative value and 2) only applies if no one else is also debasing their currency at the same time, which is clearly not the case in our modern world.

Also, bear in mind that nations don't actually trade, people do.  So any advantage in trade imbalances due to one-sided inflationary policies benefit a corporation on one side of that international trade, not even a government and never a population.

Are You sure this applies to China ?

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muyuu
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September 12, 2012, 11:25:41 AM
 #523

Just posted this https://bitcointalk.org/index.php?topic=108964.0 (cryptocurrencies and monetary supply).

Looking for general opinions/insight on this matter.

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MoonShadow
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September 12, 2012, 03:30:27 PM
 #524

And any economic advantage that inflation may hold for a particular nation's trade policy is 1) always a temporary effect that lasts only as long as it takes for the international community to adjust to the changes in relative value and 2) only applies if no one else is also debasing their currency at the same time, which is clearly not the case in our modern world.

Also, bear in mind that nations don't actually trade, people do.  So any advantage in trade imbalances due to one-sided inflationary policies benefit a corporation on one side of that international trade, not even a government and never a population.

Are You sure this applies to China ?

I'm positive.

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
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September 12, 2012, 04:48:46 PM
 #525



The difference between Bitcoin and gold is (technically) you can't plunder and steal Bitcoin by force.

That's not technically true.  If a thug knows who has access to the wallet.dat, all that is required is a little uninterrupted time with an Alabama lie detector.  The trick is that, since they are not a physical object, they need not exist in any particular place (i.e. a safe) that can be compromised.

Yip u agrees, but it does look easier to protect. I know In Bitcoin's short history a fare bit has been stolen, but it looks like it is easier to prevent theft by brute force than gold.

With a brain wallet technically you can mug me but you can't steel my money, - well you can but being a 7' Viking with an axe does not make it any easier to steel.   

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MoonShadow
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September 12, 2012, 05:45:52 PM
 #526



The difference between Bitcoin and gold is (technically) you can't plunder and steal Bitcoin by force.

That's not technically true.  If a thug knows who has access to the wallet.dat, all that is required is a little uninterrupted time with an Alabama lie detector.  The trick is that, since they are not a physical object, they need not exist in any particular place (i.e. a safe) that can be compromised.

Yip u agrees, but it does look easier to protect. I know In Bitcoin's short history a fare bit has been stolen, but it looks like it is easier to prevent theft by brute force than gold.

With a brain wallet technically you can mug me but you can't steel my money, - well you can but being a 7' Viking with an axe does not make it any easier to steel.   


It does if I'm willing to cut off your fingers one at a time until you give me your brainwallet seed.

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
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September 12, 2012, 05:57:16 PM
 #527

It does if I'm willing to cut off your fingers one at a time until you give me your brainwallet seed.

I AM A 7' Viking - be careful but if you an 10 other people do pin me down.
I'll say "Don't cut off my other finger, I told you I don't know what Bitcoin is you can have whatever you want just let me be, please."
(and if you kill me every one else benefits indirectly and you cannot benefits directly reducing the motive.)


  

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Adrian-x
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September 12, 2012, 06:14:39 PM
 #528

@Adrian-x

A deflating bitcoin will not solve any of the problems You are talking about. An inflating bitcoin can solve my problem of providing liquidity for start-up companies.

The reason why now You need 2 incomes to support a US family is lack of inflation ... decades of relative overvaluation of $ compared to other currencies and now You have competition from low-cost-labor countries that purposely kept the value of their currency low. Such a competition can eliminate the value collected in BTC very fast.

Ask better question get better answers, the real problem is not a lack of start-ups. The problem you have identified is that in an inflationary system, start-ups are not enabled or can't afford to do R&D. In a Deflating economy as a start-up your operating costs decrease so innovation is stimulated. Much of the creative capital we enjoy today and many of the innovations that peculated through the 4 decades following the 30's was a result of the depletion.  Look at computers the wide spread adoption and innovation is a result of deflation - if the cost of computers inflated there would be little innovation.   (Inflation is what is killing the creative class in the economic environment today.)

The real problems are harnessing to collective creative and economic power of the world population (some 80% are out of the system) and living sustainably on a plaint with finite recourses. (1 start-up isn't going to solve that problem but a million start-up will have an impact and only a few will hit on solutions)

The life education I have earned suggests both these problems are a result of our economic system.  Look at the fundamentals of how to solve the energy problem (spending fixed capital - on operating costs leads to bankruptcy) IE: Coal and oil (Ancient sunlight is a fixed asset that condenses millions of years of solar energy) invested in (the ongoing expense) of driving to and from work creating and disposing of products into land fill with no long term tangible result, other than a the degradation of our ecosystem results in bankruptcy.

The solution is not to change human nature, ( you can't control the eating habits of the 70% of the population who are overweight- or at least we don't want to live in a system where you can) the solution is: create a physical balance eg. if you gorge now you can't gorge later if you gorge later you can't gorge now. And when you have the hardwired checks and balances and the system self regulates.

A fixed supply of a criptocurrency is the most exciting invention I have ever seen, iyt is the underlying solution to every imbalance I see in the world toda - its time is ripe.

The alternate is a managed economy (communism), and ever increasing regulation that will eventually affect your right to swallow.   I have seen what happens in a managed economy eg. you tell the factory you want 10 tons of nails per month and you get 10 tone of huge nails, but in a free market, the entrepreneur that make huge nails sells nothing and is eliminated from the system and the entrepreneur that finds the optimum strength size and production cost wins. (Some useless background -believe it or not nails have been used as currency) The managed economy fails because the entrepreneur is disempowered, but in a free system he balances the hate for loosing with the desire to win thus keeping the economy on track. 

If you have a central bank they manage they economy by encouraging investment in everything even more unneeded nails and then the resulting surpluses stimulate a more complex ecosystem that ultimately collapses when the central bank discourages investment (increases interest rates). The results of this is catastrophic and unpredictable. (Hats of the West for taking it so far but it is becoming unmanageable). 

On your assumption lack of inflation is the cause of the increased cost of living explain this?
When I was small a cold pop from the corner store cost me $0.10 and $0.05 was the deposit on the bottle ($0.05 net total), today it costs me over $1.00.

How consider all the improvements in technology, the warehousing, the number of distributers, the transportation and is more efferent, production of the sugar in the pop is more efficient, cooling the pop is more efficient. After all the gains in technology (as a business man, I know theses companies didn't invest in the upgrades because they were less cost effective than the current system) the money supply has increases so much that the price used to describe the product has increased, this is inflation. The inflation we see is on top of teh technological benefit that makes life better, Inflation has eroded my ability to invent new product, I can only afford to improve my existing products, I need deflation to free up my ability and stimulate the need for new product categories.

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September 12, 2012, 06:33:14 PM
 #529

Look at computers the wide spread adoption and innovation is a result of deflation - if the cost of computers inflated there would be little innovation.   (Inflation is what is killing the creative class in the economic environment today.)

I could just as easily, and probably more accurately, say that the widespread adoption and innovation of computers caused price deflation. Competition in a perfect market causes price deflation because people will find new ways to be efficient and innovative because there is a profit motive. Industries that are not capable of keeping up with currency appreciation because for whatever reason their market is incapable of increasing productivity at the same rate or better than other industries will ultimately fail, and often unnecessarily (though certainly not always). You can't force innovation down the market's throat. A free market will do that on its own. The currency should not be the avenue deciding what is and is not worthwhile. The currency should be as neutral as possible.

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September 12, 2012, 06:39:24 PM
 #530

@ Adrian-x

In the model You present there is no competition.

It does not make sense to drive cars now because in 5 years they will be twice as fuel efficient and the oil resources are limited. So what ? if You prohibit driving cars in this country Your neighboring country will allow it, will reduce the 2h commuting to work per day per person and will produce goods faster an cheaper and the goods You have will not be sold.

The same applies to inflation and deflation. You need to keep an inflating economy not because it is better but because You fight with the competition. the same applies to BTC. You have to compete with other currencies and commodities.

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September 12, 2012, 06:47:52 PM
 #531

Look at computers the wide spread adoption and innovation is a result of deflation - if the cost of computers inflated there would be little innovation.   (Inflation is what is killing the creative class in the economic environment today.)

I could just as easily, and probably more accurately, say that the widespread adoption and innovation of computers caused price deflation.

I agree 100% with your point it is a predictable result, but the deflation in computer prises, has enabled other (unpredictable) innovations, is my point.

The art and technology and the power you have to innovate and invent Bitcoin is to a large degree a result of the deflation in the cost of computers.


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September 12, 2012, 06:53:03 PM
 #532

I agree 100% with your point it is a predictable result, but the deflation in computer prises, has enabled other (unpredictable) innovations, is my point.

And this had everything to do with the free market working and absolutely nothing to do with a price deflationary currency. Just because a price inflationary currency may cause bad investment choices does not mean that a price deflationary one will cause good choices. Both interfere with the operation of a free market.

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September 12, 2012, 07:19:24 PM
 #533

@ Adrian-x

In the model You present there is no competition.

It does not make sense to drive cars now because in 5 years they will be twice as fuel efficient and the oil resources are limited. So what ? if You prohibit driving cars in this country Your neighboring country will allow it, will reduce the 2h commuting to work per day per person and will produce goods faster an cheaper and the goods You have will not be sold.

The same applies to inflation and deflation. You need to keep an inflating economy not because it is better but because You fight with the competition. the same applies to BTC. You have to compete with other currencies and commodities.

Ok this is entertaining,
Americans are not more productive (maybe more free) because of cheap oil, the productive places in the word don't squander the valuable recourses like oil on commuting to work it is invested in elsewhere (admittedly they cant afford to invest match and given the choice they will probably screw it up too), living in a city where you can walk or ride is more cost effective. (It makes better use of your fixed capital). I am suggesting driving to work is spending fixed capital on an ongoing expense and leads to bankruptcy (no use in preserving or trying to optimise a broken system with efficiency all you are doing is delaying the inevitable.)

In 100 years ( or 200 if you must) people will still need to go get to work, they will look back at you and say I can't believe those people had such amassing recourses at their disposal and they burned it up wafting in traffic.) why didn't they think to build X or do Y.  


I don't want you to chose judge or argue that I am right or wrong, with a fixed money supply anything goes no one needs to pass judgment, the system governs itself, an inflating money supply needs governance, and unless you know the answer to X and Y now you can't govern effectively.

But when a government simulates an economy or expand make freeways build ever expanding megalopolises of urban dwellings, and does not look past 5 years into the future, the system is subject to corruption, disagreement, artificial unsustained growth and conflict, they create artificial choices ( the environment or the economy) I don't want to have this debate, I just want to wait for the inevitable result.  

In the process I would rather you or we weren't armed with the tools for self annotation, I would rather the rules were fair for everyone and the best man won. It is not a choice between the environment or the economy or security and energy dependence)  

I only want Bitcoin to succeed when the early majority get the point described in my previous posts, if you don't get it play with Bitcoin as a toy, trade, go work for Lockheed Martin, (I here they are hiring Bitcoin enthusiasts). Bitcoin doesn't need to compete in my mind, it just needs to stand up to every attack and criticism imaginable, and then it will be there when we need it.  

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September 12, 2012, 07:28:11 PM
 #534


And this had everything to do with the free market working and absolutely nothing to do with a price deflationary currency. Just because a price inflationary currency may cause bad investment choices does not mean that a price deflationary one will cause good choices. Both interfere with the operation of a free market.

Yes the free market is so amassing it can even counter the negative effects of inflation to a point.

This angle doesn't counter my point, (computer prises falling is an example of deflation) - the cause is irrelevant for illustration purposes.

My point is moderate corrective deflation is good. It inspires unpredictable innovations like cell phones the internet and twitter and Bitcoin and 3D CAD and Blogs and the ability to find and talk to you.

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September 12, 2012, 07:35:25 PM
 #535

We agree. We want to keep BTC going.
I only view other things as a danger. You think the great idea of a deflating currency will attract enough people to cherish it. I want to make a greedy everyday's tool out of BTC that serves a purpose. I don't care too much about the ideology behind it.
You will say that making it inflationary will not make it any better or save it. I think it will be a small improvement but maybe not sufficient to save it. But I also hope that You are right :-)
We have just invested in this commodity by buying 1k BTC, expecting a rise of ca. 100% in the coming 6 months :-)  

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September 12, 2012, 09:52:36 PM
 #536

@ Adrian-x
In the model You present there is no competition.
Think of the forest as an economy. Competition is everywhere.
All plants are competing with all other plants for the limited sunlight, they all are learning to take advantage of every available resource use less water (study it for a lifetime and you will learn some new angle or interdependence every day)   

Now add animals to the mix they too compete with eat each other and the plants (not to mention fungi) this creates complex interdependent relationships.  All the wile everyone is competing to the best of their ability and trying to take advantage of the system to get more nutrients posing each other gets more water study it and you will see this is amassing.

If a tragedy falls apron the forest and there is no water both the animals and plants are forced to pull back equally to take advantage of the available recourses on one benefits long term at the expense of any other.

The one common medium of exchange in this ecosystem that is not influences by any special interest or tragedy or water availability is the air, it is exchanged oxygen for CO2, CO2 for oxygen, back and forth, everything competes but the one common medium of exchange is the Oxygen.

Bitcoin is the Oxygen/ CO2 in the economy, I don't care if it is called unobtanium or argon, but there is no need for a competitor to the Oxigen/CO2 in the system, the system is resilient and it has enough competition without the need to start introducing a new life form that is breathing unobtanium.

If the forest has a central government with a central bank it would start to manage the ecosystem  influence the supply of either CO2 or Oxygen,  and it would have far reaching consequences for either the animals of the plants, - say the government decided there were too many animals and cut of the supply of Oxygen to regulate the ecosystem it wouldn't be of benefit to the long term stability of the plants and would defiantly be bad for the animals and - so a mess that needs managing is created. 

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September 12, 2012, 09:56:28 PM
 #537

Bitcoin, it's crypto oxygen!™

 Grin

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September 12, 2012, 09:57:41 PM
 #538

We agree. We want to keep BTC going.
I only view other things as a danger. You think the great idea of a deflating currency will attract enough people to cherish it. I want to make a greedy everyday's tool out of BTC that serves a purpose. I don't care too much about the ideology behind it.
You will say that making it inflationary will not make it any better or save it. I think it will be a small improvement but maybe not sufficient to save it. But I also hope that You are right :-)
We have just invested in this commodity by buying 1k BTC, expecting a rise of ca. 100% in the coming 6 months :-)  

It is a gamble, go for it.  I like Bitcoin because you don't have to manage it is self regulation provided it is used. I think the built in inflation is good enough, not convinced yet it needs to inflate over 21,000,000  

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September 12, 2012, 10:07:43 PM
 #539

http://en.wikipedia.org/wiki/Nitrogen_fixation ... let's not go too deep into biology ... it is a brutal game of killing and giving life and not a good source of proofs for Your points :-)

Let's go back to currencies. Do You think that a currency that changes value by 100%-300% is a good currency :-) Such a change would devastate business in a BTC based country.

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September 12, 2012, 11:02:59 PM
 #540

Let's go back to currencies. Do You think that a currency that changes value by 100%-300% is a good currency :-) Such a change would devastate business in a BTC based country.

The short answer is No way. That would be a S#!t currency.
But I think any currency that has a finite supply and is easily transfer anywhere in the world would be the best thing to happen to humanity in over 5,000 years.

The answer is always in the question.
Why is everyone picking on me? = bad question.
What can I do to get everyone's support? = good question.

I don't actually have an answer to your question which I understand to be: Bitcoin is a good thing how can we make it a viable currency? 

I don't think we want price stability yet. With all this fluctuation there are winners and losers even the experience traders lose and the newbie buying for the first time could be a winner, all the while the currency is being distributed.

There are industries that are profitable under the circumstances you describe and they are the early adopters, they mostly triad on Silk Road. 

Another profitable industry that triads in Bitcoins are the miners, and another market for Bitcoin are the early adopters, the people who understand the current economic problem and see a solution in Bitcoin.

To be honest, in my opinion it isn't ready to be a currency yet, not until the Bitcoin rich need something and are willing to triad in Bitcoin for it at a lower exchange rate . (I will only accept Bitcoin if I am not losing in that wild fluctuating exchange rate). That may start when Bitcoin are harder to mine.

 I may be totally wrong and out there, all I have described is why I like Bitcoin, I can't say how or if it will succeed I just know it will succeed if it is what I think it is.

 I see stability coming only some time after the World Bank becomes a World Central Bank and the SDR becomes the world reserve currency.  Until then Bitcoin is a gamble.

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