Deflation and Bitcoin, the last word on this forum

[MoonShadow]

Deflation itself wasn't a problem, just the panics every other year.

Which, in your view, is the cause and which is the effect?

Yes, those empires did exist, and as far as one might consider an empire to be 'successful' they certain were, for a time.  If the laws of economics were not slow in action, even you wouldn't be advocating what you do.

All I am advocating is free market currency. Every single one of the downfalls of the aforementioned currencies falls on to the fact of monopoly control.

I can agree with that statement.

"No State shall make any Thing but gold and silver Coin a Tender in Payment of Debts."

Article 1, Section 10, united States' Constitution

Really?  Is that what you're going with?

What does a limitation on the states have to do with the federal government?

It's a prohibition on states issuing unbacked currencies, but not a prohibition on the actual coining of gold or silver by those same states.  Granted, the Constitution doesn't explicitly prohibt the federal level from FRL; but the implicit idea was that the federal government couldn't do such things when the individual states would still be producing gold & silver coin.  (They apparently didn't understand Gresham's LAw. which is understandable since it didn't yet exist)  There is some eividence that, after the collapse of the Second Bank of the US, SCOTUS was willing to interpret likewise should it had come to that in the early 1900's.  For this reason, the public/private hybrid central bank created by the Federal Reserve Act was neccessary under the idea that a private bank was not prohibited from creating debt instruments or loaning the federal government those same instruments, while still being shackled by the federal government as a matter of regulations.  It was, and remains, a legal workaround; but the practical results are very much like a true central bank owned by the government itself.

Article I, Section 8: Enumeration of Powers

"To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;"

There ain't no gold and silver clause there. Of course the exact meaning was and is up to the judicial system. But the founding fathers were well aware of the concept of paper money.

Yes, they were well aware, which has much to do why they stated it that way.  The Contenintal Congress had issued paper script and debased it so fast that the phrase, "Not worth a Contentintal" was in common use for another 100 years.  The clause above is the justifications for the Federal Mint, but I have met no one educated on the matter who would claim that the phrase "To coin Money" could have been interpreted as to mean anything other than actual coins, regardless of what metal that was used.

His reasons for doing what he did were not relevant to the  point.  You claimed that they were "replaced", I said that they were defaulted upon.  The treasury sticks were deliberately burned to erase all evidence that a debt ever existed.  Are you actually incapable of seeing your own error?

The tally sticks weren't defaulted on, it was the contract that was defaulted on by the king (he could have just as easily defaulted on gold). But the only real losers were the goldsmiths. Well, and the country at large for single-handedly ruining the image of what was probably the best system of currency in history. I should concede that it was debased though, but really only because it put gold in circulation as a replacement.

Interesting logic.  Do I really need to point out the errors here?

Whether or not you agree that gold was "useful" for the masses or not is also irrelevant.  I highlighted your error, and you dismiss it as not useful.  Priceless.

As I mentioned, you posed a red herring to the discussion. And you did so via your unwillingness to understand my argument (you admitted so yourself) because you would rather attack what you think threatens the foundation for your misguided logic in what could make a sound currency. Even though I have Hayek on my side. You did not highlight any error.

You make the claim that gold was not used in a free market during a economic boom in the absence of fractional reserve banking (I think you really mean credit expansion, which is different) so I pointed out that it ceratinly was, just not by whom you consider to be part of the market.

Where did you argue "efficiency" before I jumped in?  If you did, I missed it.  Of course, that would be easy since I tire of reading your BS.  I already am again.  I was not, and am not, arguing the relative "efficiency" of gold.

I argued the inefficiency of gold by arguing that the free market had not particularly chosen gold (or other PMs) as its currency of choice until the advent of fiduciary media. This, I believe (I am speculating), was due to a lack of availability more so than any other reason.

Ah, and there it is again.  Then you were arguing the inefficiency of gold using a false premise which should have been easy enough for you to correct with a little google-fu.  The 'market' chose gold, not only before the advent of "fiduciary media" (it would help to precisely define that term), it was chosen as  money among the greater part of known civilization prior to the event of writing.  The fact that other cultures used other commodites much later, or that gold was not the only such free market money in common use, doesn't change the fact that gold is and was money.  The common citizen of the Roman republic was as likely to use black iron nails in place of denarius (where we get the common Imperial unit for nails, the "penny" or "pence" while the written unit is a lower case "d" for denarius) or salt as change away from the coast (where we get the term "not worth his salt"); but he still regarded the value of such things relative to their trade value in the silver coin of the realm, the denarius.

Yet gold was in use as money for at least 6000 years, while silver only has a known history to about 4000 years.  Silver corrodes, after all.

[1714071737]

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[1714071737]

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[1714071737]

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[Etlase2]

Which, in your view, is the cause and which is the effect?

They are both effects of a limited commodity currency.

It's a prohibition on states issuing unbacked currencies, but not a prohibition on the actual coining of gold or silver by those same states.  Granted, the Constitution doesn't explicitly prohibt the federal level from FRL; but the implicit idea was that the federal government couldn't do such things when the individual states would still be producing gold & silver coin.

You are right on pretty much all counts in regards to the arguments about the US. My view was occluded by later interpretations. I concede and appreciate the lesson.

Interesting logic.  Do I really need to point out the errors here?

No.

You make the claim that gold was not used in a free market during a economic boom in the absence of fractional reserve banking (I think you really mean credit expansion, which is different) so I pointed out that it ceratinly was, just not by whom you consider to be part of the market.

I did not. I said that gold was not chosen in particular. The person I had originally responded to made the claim that "the free market has chosen gold/PMs" which fails a simple logic test.

http://dictionary.reference.com/browse/particular "of or pertaining to a single or specific person, thing, group, class, occasion, etc., rather than to others or all;"

And I used evidence of prior fiat-like money and the massive economic expansion under those schemes to make a case that gold does not need to back free market currency and implied that it might hinder growth. I also used bitcoin as an example.

The fact that other cultures used other commodites much later, or that gold was not the only such free market money in common use, doesn't change the fact that gold is and was money.

Again, I did not say that gold was not used as money.

[MoonShadow]

Which, in your view, is the cause and which is the effect?

They are both effects of a limited commodity currency.

I disagree.  If they are both effects, then they are both effects of the business cycle, which I know that you don't believe in.  Any amount of a commodity currency is a correct amount, so long as it cannot change faster than the knowledge of that change can distribute across the market.  An inflexible commodity money adjusts value in the marketplace just fine, if left alone to regulate itself.  The real problem is that it's often not in the interests of the soverign powers to permit self-regulation.

You make the claim that gold was not used in a free market during a economic boom in the absence of fractional reserve banking (I think you really mean credit expansion, which is different) so I pointed out that it ceratinly was, just not by whom you consider to be part of the market.

I did not. I said that gold was not chosen in particular. The person I had originally responded to made the claim that "the free market has chosen gold/PMs" which fails a simple logic test.

Then our disagreement here is one of semantics, not substance.  I would agree with the general idea the free market has historically chosen precious metals as money, but I also agree that was far from universal.

And I used evidence of prior fiat-like money and the massive economic expansion under those schemes to make a case that gold does not need to back free market currency. I also used bitcoin as an example.

Nor can I disagree with the above statements.

[tytus]

What I don't like about BTC is the absolute lack of control of its value. Fiat money's inflation/deflation is controlled by the issuer.
In case of BTC the cost of minting it correlates with its value, but this has no (or marginal) effect on the number of generated BTC. This number is (almost) constant. But what happens if we completely stop mining? Something that is planned in near future. There will be absolutely no control of it and the price will be determined only by speculators and affected by panic.

When You estimate the value of an asset that You want to invest in You take the future projection of its value and the RISK associated with the asset. It is very difficult to predict the future value but it is much easier to estimate the risk. The estimation of risk is based on previous fluctuation of the value of the asset (companies don't like it's stock value to go up and down to much). The RISK is a factor that reduces the value of an asset.

My thesis is that in the "post mining" era BTC will fluctuate a lot and it's value will be continuously depreciated due to the associated risk. This will inspire a sharp reduction of the value up to a complete elimination and there will be no counter measures that can be applied.

A deflating currency has a big advantage. Nobody expects it to keep its value, so there is no panic :-)

[Etlase2]

I disagree.  If they are both effects, then they are both effects of the business cycle, which I know that you don't believe in.

Uhh where have I ever expressed a disbelief in the business cycle? Where our opinions clash on the matter is that I quite strongly believe that a limited commodity currency is no solution to the business cycle.

An inflexible commodity money adjusts value in the marketplace just fine, if left alone to regulate itself.

When gold was left to regulate itself, FRB was its and anti-regulation's lovechild.

Then our disagreement here is one of semantics, not substance.

The so-called semantics led to your red herring and misrepresentations of my position. As I would be wise to be more careful about history, you would be wise to be less quick to judge.

[MoonShadow]

What I don't like about BTC is the absolute lack of control of its value. Fiat money's inflation/deflation is controlled by the issuer.
In case of BTC the cost of minting it correlates with its value, but this has no (or marginal) effect on the number of generated BTC. This number is (almost) constant. But what happens if we completely stop mining? Something that is planned in near future. There will be absolutely no control of it and the price will be determined only by speculators and affected by panic.

When You estimate the value of an asset that You want to invest in You take the future projection of its value and the RISK associated with the asset. It is very difficult to predict the future value but it is much easier to estimate the risk. The estimation of risk is based on previous fluctuation of the value of the asset (companies don't like it's stock value to go up and down to much). The RISK is a factor that reduces the value of an asset.

My thesis is that in the "post mining" era BTC will fluctuate a lot and it's value will be continuously depreciated due to the associated risk. This will inspire a sharp reduction of the value up to a complete elimination and there will be no counter measures that can be applied.

A deflating currency has a big advantage. Nobody expects it to keep its value, so there is no panic :-)

There will be no "post-mining" era, nor is there any planned cessation of mining.  Fix your misconceptions about bitcoin, and if you continue to have complaints, restate them and we can have a conversation.

[MoonShadow]

I disagree.  If they are both effects, then they are both effects of the business cycle, which I know that you don't believe in.

Uhh where have I ever expressed a disbelief in the business cycle? Where our opinions clash on the matter is that I quite strongly believe that a limited commodity currency is no solution to the business cycle.

Now you are misstating my own position.  I have never claimed that hard money is any solution to the business cycle.  I have stated, and stand by the statement, that history of hard money and modern FRB confirms what we should have already known; that a flexible monetary base can and will be manipulated in every manner possible, and this amplifies the business cycle rather than dampens it.

The business cycle is the cumulative effects of many a natural aspects of a diverse marketplace, free or otherwise, and cannot practically be "solved" in any acceptable fashion.  A gold standard will not change this, Bitcoin will not change this, and nothing that you can offer will change this.

An inflexible commodity money adjusts value in the marketplace just fine, if left alone to regulate itself.

When gold was left to regulate itself, FRB was its and anti-regulation's lovechild.

Wow, how does that worldview not make your head expode?

Then our disagreement here is one of semantics, not substance.

The so-called semantics led to your red herring and misrepresentations of my position. As I would be wise to be more careful about history, you would be wise to be less quick to judge.

Perhaps I would be, but I'm too old to wait for all the data.

[tytus]

What I don't like about BTC is the absolute lack of control of its value. Fiat money's inflation/deflation is controlled by the issuer.
In case of BTC the cost of minting it correlates with its value, but this has no (or marginal) effect on the number of generated BTC. This number is (almost) constant. But what happens if we completely stop mining? Something that is planned in near future. There will be absolutely no control of it and the price will be determined only by speculators and affected by panic.

When You estimate the value of an asset that You want to invest in You take the future projection of its value and the RISK associated with the asset. It is very difficult to predict the future value but it is much easier to estimate the risk. The estimation of risk is based on previous fluctuation of the value of the asset (companies don't like it's stock value to go up and down to much). The RISK is a factor that reduces the value of an asset.

My thesis is that in the "post mining" era BTC will fluctuate a lot and it's value will be continuously depreciated due to the associated risk. This will inspire a sharp reduction of the value up to a complete elimination and there will be no counter measures that can be applied.

A deflating currency has a big advantage. Nobody expects it to keep its value, so there is no panic :-)

There will be no "post-mining" era, nor is there any planned cessation of mining.  Fix your misconceptions about bitcoin, and if you continue to have complaints, restate them and we can have a conversation.

Ok ... new complaint:

If the earnings from generated blocks are much smaller than the total value of BTC in circulation then the temptation for a take over attack is much higher.
Falling rewards from mining will push miners to shut down their operation and sell older ASIC chips for close to nothing. Mining will be continued in few places that can handle the huge transaction log and have relative small energy costs giving these miners an advantage over others.
Now instead of mining for profit groups of organized BTC crime will combine their retired hashing power not to get block rewards but to facilitate double spending.

... now here I am again not aware what is actually in the code of the bitcoin client and whether mining two consecutive [or a series of] blocks is really sufficient to send two transactions with the same source of BTC.

My thesis is that mining should remain a significant part of the BTC economy for security reasons (and as a mean to absorb volatility).

[MoonShadow]

If the earnings from generated blocks are much smaller than the total value of BTC in circulation then the temptation for a take over attack is much higher.
Falling rewards from mining will push miners to shut down their operation and sell older ASIC chips for close to nothing. Mining will be continued in few places that can handle the huge transaction log and have relative small energy costs giving these miners an advantage over others.
Now instead of mining for profit groups of organized BTC crime will combine their retired hashing power not to get block rewards but to facilitate double spending.

... now here I am again not aware what is actually in the code of the bitcoin client and whether mining two consecutive [or a series of] blocks is really sufficient to send two transactions with the same source of BTC.

My thesis is that mining should remain a significant part of the BTC economy for security reasons (and as a mean to absorb volatility).

The assumption is that, as the bitcoin economy grows, both the value of bitcoins and the absolute number of transactions will rise.  Right now, many transactions are free because there is little to scarcity of room for new transactions on the next block.  When there are 10K transactions moving across the bitcoin network per minute (or whatever) there will be time delays.  If you are someone who has a need to get your transaction in a block soon, you're going to end up paying a transaction fee to jump the line of free & nearly free transactions.  Miners would, logically, favor fee paying transactions and include as many of them as they can fit into their current block in order to collect those transaction fees.  The current blocksize limit is 1 megabyte, and we know that isn't going to be large enough, but it protects the lower end participants in the full network in the meantime.  Eventually, maintainning a full client on the bitcoin network is going to be like drinking from a firehose, and even with only 10K fee paying transactions in a single block at 0.005 BTC each the transaction fees would be 50 BTC on top of the blcok reward itself.

[tytus]

I agree that the mining profits will later come from transactions fees [a fixed or a minimum transaction fee would help and would not be a problem for most businesses].
But I was trying to point into a different direction. BTC has no mechanism to control its value.
This is not such a big problem for people who use BTC only for transactions, but this is potentially a huge problem for people who decide to invest in BTC. I think it would be fair to discourage people from investing in BTC by designing BTC as an inflationary currency.
I understand that initially the investment prospects were the main basis to give BTC any value, but the currency is now mature and it could function perfectly without the hoarding group.
You could say this is not my problem. Nobody pushes me to hoard BTC.
But it is my problem if the currency experience extreme speculations and panic sales.

=> What are the proposals for maintaining the value of BTC ?

[MoonShadow]

I agree that the mining profits will later come from transactions fees [a fixed or a minimum transaction fee would help and would not be a problem for most businesses].
But I was trying to point into a different direction. BTC has no mechanism to control its value.

Neither does gold, which is the physical analog money that bitcoin aims to emulate as much as possible.

This is not such a big problem for people who use BTC only for transactions, but this is potentially a huge problem for people who decide to invest in BTC. I think it would be fair to discourage people from investing in BTC by designing BTC as an inflationary currency.

If you think that this is fair, then try forking the code and doing it yourself.  I predict that it wont end well, though.

I understand that initially the investment prospects were the main basis to give BTC any value, but the currency is now mature and it could function perfectly without the hoarding group.

Those same early investors who gave bitcoin it's initial value did so because of the potential bitcoin presented both as a currency and as an investment.  Bitcoin still needs that support, and it would vanish rather quickly if anyone could manage to alter the protocol  in any way, because that ability alone would present a flaw in the system.  It should not be possible to alter the protocol in such a significant way at this point.

You could say this is not my problem. Nobody pushes me to hoard BTC.
But it is my problem if the currency experience extreme speculations and panic sales.

=> What are the proposals for maintaining the value of BTC ?

Supply and demand.

[tytus]

=> What are the proposals for maintaining the value of BTC ?

Supply and demand.

In other words the value will be random. It will follow chaotic movements :-)

I believe that gold is not a good currency because in fact it actually fluctuates too much (nobody would sign long term contracts in gold because it's value in 5 years is completely unpredictable). I feel that most members of the forum criticize central banks as regulators of money supply, but do we have a better way to control the value of any asset. The central banks are maybe not perfect but I can't say that BTC has a better model implemented :-) [try ensuring an inflation rate between 2%-4% for BTC :-)]

My statement is that hoarding is a very serious threat. The number of hoarders/speculators will increase as long as the value rises and their BTC assets can easily reach > 90%. The valuation of BTC by the speculators is extremely prone to rumors / accidents. Something like a hacked BTC/forex exchange can provoke a devaluation of BTC in the mind of let's say 5% of speculators. 5% of speculators hold more BTC that is in circulation at that time (!). Because there are so many hoarders (long term BTC investors) this small impulse will cause a huge value drop that can reach 50-90% (seen before).
Now let's be optimistic and add to this scenario a sharp recovery of the BTC price to previous levels. The hoarders will be pleased but ... business will depart from BTC. A highly fluctuating currency is very risky (why are ASIC equipment preorders denominated in USD?) and merchants will go to other media of payment. But they are the ones that add any real value to BTC. Then You have dropping income from hashing (lower fees), departing miners, falling confidence ... it will and with a massive sell off. ... because the ponzi concept remained dominant in the BTC economy.

I take the argument that modification of the bitcoin client that affect the acceptance of a transaction block will cause confusion. But I think it is better to do this now than in 3 years. Now is also a good time to learn how to implement changes.

[MoonShadow]

=> What are the proposals for maintaining the value of BTC ?

Supply and demand.

In other words the value will be random. It will follow chaotic movements :-)

I believe that gold is not a good currency because in fact it actually fluctuates too much (nobody would sign long term contracts in gold because it's value in 5 years is completely unpredictable). I feel that most members of the forum criticize central banks as regulators of money supply, but do we have a better way to control the value of any asset. The central banks are maybe not perfect but I can't say that BTC has a better model implemented :-) [try ensuring an inflation rate between 2%-4% for BTC :-)]

My statement is that hoarding is a very serious threat. The number of hoarders/speculators will increase as long as the value rises and their BTC assets can easily reach > 90%. The valuation of BTC by the speculators is extremely prone to rumors / accidents. Something like a hacked BTC/forex exchange can provoke a devaluation of BTC in the mind of let's say 5% of speculators. 5% of speculators hold more BTC that is in circulation at that time (!). Because there are so many hoarders (long term BTC investors) this small impulse will cause a huge value drop that can reach 50-90% (seen before).
Now let's be optimistic and add to this scenario a sharp recovery of the BTC price to previous levels. The hoarders will be pleased but ... business will depart from BTC. A highly fluctuating currency is very risky (why are ASIC equipment preorders denominated in USD?) and merchants will go to other media of payment. But they are the ones that add any real value to BTC. Then You have dropping income from hashing (lower fees), departing miners, falling confidence ... it will and with a massive sell off. ... because the ponzi concept remained dominant in the BTC economy.

I take the argument that modification of the bitcoin client that affect the acceptance of a transaction block will cause confusion. But I think it is better to do this now than in 3 years. Now is also a good time to learn how to implement changes.

Satoshi and every one of those early adopters & 'hoarders' that you speak of disagree with your economic worldview.  If we did not, there would have not been Bitcoin, because it would have died in infancy without widespread knowledge that such a thing had ever existed.  The exchange value of gold is only unpredictable in the sense that you don't think in value terms relative to the metal, otherwise it would be the value of fiat currencies that was unstable.  Regardless, the voltility of the exchange rate will dampen as the bitcoin economy grows.  Again, you can start your own version of bitcoin by forking the code and changing whatever you like, but don't count on success because there have been many before you with the same idea, and everyone failed.

[YokoToriyama]

the way bitcoin is going it cant be stopped

[JoelKatz]

My statement is that hoarding is a very serious threat.

What you call "hoarding" is actually production. It's kind of strange that you see it as a threat because that is the broken window fallacy. If you imagine that Bitcoins are the primary currency, to "hoard them", what do you do? You produce something of value and .. that's it.

By this logic, the guy who works for a living, buys a plasma TV, and smashes it is better for the economy than the guy who works for a living and saves his money. But they are both contributing equal value to the economy. The former guy is just destroying more value than the latter. That you see this as better shows you have swallowed the broken window fallacy.

[Etlase2]

I think that one can make a very strong case that there is a big difference between saving and hoarding: https://bitcointalk.org/index.php?topic=110708.0

And that hoarding is good for the hoarder, bad for the rest: https://bitcointalk.org/index.php?topic=112269.msg1224110#msg1224110

But if you guys want to give up on Austrian economics and stick with bitcoinomics, that's fine.

[tytus]

My statement is that hoarding is a very serious threat.

What you call "hoarding" is actually production. It's kind of strange that you see it as a threat because that is the broken window fallacy. If you imagine that Bitcoins are the primary currency, to "hoard them", what do you do? You produce something of value and .. that's it.
By this logic, the guy who works for a living, buys a plasma TV, and smashes it is better for the economy than the guy who works for a living and saves his money. But they are both contributing equal value to the economy. The former guy is just destroying more value than the latter. That you see this as better shows you have swallowed the broken window fallacy.

I had to look up what is "broken window fallacy"

http://en.wikipedia.org/wiki/Parable_of_the_broken_window

and there:

Criticisms
The interpretations assume that the "window" has positive value and that replacing it is not a good investment. In the broader scope, offsetting factors can reduce or even negate the cost of destruction. For example, new technologies developed during a war and forced modernization during postwar reconstruction can cause old technologies to become valueless. Also, if two shopkeepers keep their "window" beyond the point where it would maximize their profit, the shopkeeper whose window is broken is forced to make a good investment - increasing his comparative profit, or rather, reducing his comparative loss. Regardless, while wanton destruction of real value may not be a net loss, it is of course still a misfortune, not a blessing.[9] Others argue that the broken window may not lead to reduction in spending by the victim, but rather, a reduction in excessive savings.[10] "The logic of limited resources only applies when the economy is using most of those limited resources. If there are slack resources, we need merely mobilize some of the slack resources." The reducio ad absurdem of breaking 100 windows, then, only applies once underutilised resources have run out, and the tailor is forced to divert resources from more productive means.
It has been argued that the 'parable', while intuitive, does not correspond to actual evidence. For instance, researchers have found that natural disasters can often lead to improved growth in both the short and long term.

I will respond to this interesting point with some biological examples tomorrow, when I wake up [it is late in EU].

[tytus]

I think that one can make a very strong case that there is a big difference between saving and hoarding: https://bitcointalk.org/index.php?topic=110708.0
And that hoarding is good for the hoarder, bad for the rest: https://bitcointalk.org/index.php?topic=112269.msg1224110#msg1224110
But if you guys want to give up on Austrian economics and stick with bitcoinomics, that's fine.

Etlase2, I think You should talk with a programmer. He/She may probably find some elements in Your concept that can be simplified, some that are redundant and some that are insignificant. Right now Your proposal is too complex for me to think about its implementation. Only after starting programming it, You will notice problems.
It may be easier to fix something than to design it from scratch. I know You don't think bitcoins can be fixed :-) I also gave this up :-)

[JoelKatz]

I think that one can make a very strong case that there is a big difference between saving and hoarding: https://bitcointalk.org/index.php?topic=110708.0

And that hoarding is good for the hoarder, bad for the rest: https://bitcointalk.org/index.php?topic=112269.msg1224110#msg1224110

But if you guys want to give up on Austrian economics and stick with bitcoinomics, that's fine.

I could pick through all that, but it's pretty tedious. The basic points are:

A "hoarder" must either spend the money eventually or not. If not, then it really is the broken window fallacy. All that's happened is the hoarder has produced. If the hoarder does spend the money, all they've done is defer consumption because they preferred future consumption to present consumption.

You can't assume a fixed inflation rate and then look at how the market will respond to it. That's not how markets work. If the inflation rate is 8%, it's 8% for a reason. And when people react to that inflation rate, their reaction will affect that rate.

Also, you have to be very careful when you compare the type of inflation or deflation that most economics works are talking about to what happens in the Bitcoin economy. Inflation usually refers to governments printing and spending money, not new money being created in exchange for a service. And deflation usually refers to a reduction in the amount of money in existence, not an increase in demand for a fixed supply.

[Etlase2]

A "hoarder" must either spend the money eventually or not. If not, then it really is the broken window fallacy. All that's happened is the hoarder has produced. If the hoarder does spend the money, all they've done is defer consumption because they preferred future consumption to present consumption.

No, all they haven't done is deferred consumption, because deferring consumption typically means investing in a regular economy. Whether it's with a very low interest rate via a savings account or via 401ks or what have you, the money does not leave the supply. You can pick through the thread I posted, but all of it is from Hayek. So am I supposed to trust you over an economic nobel prize winner?

You can't assume a fixed inflation rate and then look at how the market will respond to it. That's not how markets work. If the inflation rate is 8%, it's 8% for a reason. And when people react to that inflation rate, their reaction will affect that rate.

I don't know where I've assumed any fixed inflation rate.

Also, you have to be very careful when you compare the type of inflation or deflation that most economics works are talking about to what happens in the Bitcoin economy. Inflation usually refers to governments printing and spending money, not new money being created in exchange for a service. And deflation usually refers to a reduction in the amount of money in existence, not an increase in demand for a fixed supply.

No, I don't have to be careful, because you know what I meant and so does the rest of the economic world. Deflation has never referred to a reduction of the amount of money in existence. It was a term that came by well after inflation meant price inflation. If you have to redefine the word every time you make an argument, perhaps you are being a bit dense for the sake of density. Hayek decided to let this go whereas Mises could not.