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Author Topic: The hoarding problem  (Read 3397 times)
sounds
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January 16, 2013, 05:51:58 PM
 #41

The question in my original post is if the "saving" habits together with the deflationary aspects of bitcoin cause its overall impact on economy limited in scope. I fully expect bitcoin to be successful as a special "asset", but as a "currency", if it is constantly appreciating against other everyday life assets like housing/food/energy, then if people have choices of token asset to spend (either a fiat currency, a bitcoin, a central controlled electronic currency, a whatever medium of exchange with certain popularity), people will choose the one has high probability of depreciating in value to spend. The supplier, on the other hand, is in the position earning money, so usually want to accept what ever that is popular/liquid in nature. ( He can then later exchange this popular currency into a currency that is deflationary to "save" or "hoard" ). By the mechanism of these micro-economic behavior, deflationary currency have a tendency to quit the market ( as a currency, not as an asset)
That is a well thought out argument.

I think I'll argue against the tendency of bitcoin to quit the market – I'll argue that as bitcoin does leave the market, it will increase in value. Some news outlets might even start claiming "Hyper deflation!" and there may be a public panic around the enormous exchange rate BTC/USD.

However, such a process does not affect the market: purchases made yesterday for $14/BTC1 were fair, and purchases today for $14/BTC0.01 are also fair.

The primary effect of such a hyper-deflationary trend would be to devalue USD: even if there isn't USD hyper-inflation, the opportunity cost of not trading using BTC will have a downward effect on the USD.

However much the USD gets devalued, it will continue to be the common worldwide currency; BTC as a currency will only be on the fringe. Therefore think of BTC like gold. Even if gold prices skyrocket, and some stores will even trade in gold, the market doesn't come to a screeching halt.

But if gold prices are going up by 100x, you should buy gold!
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January 16, 2013, 07:31:15 PM
 #42

"hoarding" is not the same as "saving". If you put money under your mattress, you are saving by hoarding. But if you deposit money in a savings account at a bank, you are saving, but you are not hoarding. This is a very important distinction. Hoarding removes the money from the economy, but investing does not.

Hoarding bitcoins is prevalent because there are very few ways to invest bitcoin savings. Investing bitcoins will be easy and common eventually and there will be no "hoarding problem".

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January 16, 2013, 08:26:29 PM
 #43

If there not enough Bitcoin for all then new bitcoin mined and price goes up. Then we start using microbitcoin and smaller pieces. It will continue and price flies!

When price go up people who hoards the bitcoins will change the minds to sell. Because they know they can make lot of money and then them bitcoins can be use for economy. It not really a problem my friend it a good thing!

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January 16, 2013, 09:23:33 PM
 #44

Is it really that big of a problem?

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January 16, 2013, 11:42:41 PM
 #45

So this thread is saying saving is a problem? and that saving is not called saving unless you give the money to someone else to look after it for you? What planet are you guys from? Last I checked savings accounts came from the idea that people needed a place to keep there "savings" safe from theft. You paid the bank to keep your money safe later on the banks merged it all into one game. Just like over the last 20 years we have seen investment banks and regular banks become one in the same.
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January 19, 2013, 05:45:00 PM
 #46

Is it really that big of a problem?

Ultimately that depends your goal, as a asset for saving/speculation/secure transfer, all good, as a currency if that is the community goal, I would say it MAYBE, only history can tell.

We are in a great social experiment now, let history tell. I am supportive, though I have my own concerns, that is it. You are supportive, with full faith - no problem.
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January 19, 2013, 05:58:52 PM
 #47

It is important to note that inflation = money supply X monitary flow. We have limited amounts of both so we have deflation. When there is increased economic activity in btc the value will go back down. This will be offset some by the increased user base, but with them comes more flow. So I see deflation as a temporary problem.

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January 19, 2013, 06:45:26 PM
 #48

is the term hoarding the same with deflation?

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January 19, 2013, 06:49:37 PM
 #49

is the term hoarding the same with deflation?
Hoarding is behavior, deflation is phenomenon
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January 19, 2013, 07:09:45 PM
 #50

Hording is quickly remidied when inflation hits.

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January 19, 2013, 08:25:32 PM
 #51

"hoarding" is not the same as "saving". If you put money under your mattress, you are saving by hoarding. But if you deposit money in a savings account at a bank, you are saving, but you are not hoarding. This is a very important distinction. Hoarding removes the money from the economy, but investing does not.

Hoarding bitcoins is prevalent because there are very few ways to invest bitcoin savings. Investing bitcoins will be easy and common eventually and there will be no "hoarding problem".

Wrong, hoading is just a negative word for saving.
Putting the money in a bank is investing, at least in the current type of banks who invest or lend to businesses or private.

Saving is not a problem. A saved sum of money is taken out of the effective money supply for a while, but as the money has no value except its moneyness, it does not harm the economy, it only increases the value of the remaining money. This is normally innoticable, as some save and some use their savings according to their life situation.

It may become noticable if there is a major shift in the habit of savings, for example if people around the world at the same time believe that something bad is going to happen.

When you earn some money, or are given some money, you can
1) save
2) lend the money to someone for the market-decided interest rate.
3) invest in something safe for a return close to the market-decided interest rate
4) engage in some entrepreneural business with the opportunity for extra gain or risk of loss.

Most people want some money ready for needs in the immediate future. If you have too much for your liking, you would lend or invest. If you have too little cash, you could reduce your investments.
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January 19, 2013, 08:34:51 PM
 #52

"hoarding" is not the same as "saving". If you put money under your mattress, you are saving by hoarding. But if you deposit money in a savings account at a bank, you are saving, but you are not hoarding. This is a very important distinction. Hoarding removes the money from the economy, but investing does not.

Hoarding bitcoins is prevalent because there are very few ways to invest bitcoin savings. Investing bitcoins will be easy and common eventually and there will be no "hoarding problem".

Wrong, hoading is just a negative word for saving.
Putting the money in a bank is investing, at least in the current type of banks who invest or lend to businesses or private.

Saving is not a problem. A saved sum of money is taken out of the effective money supply for a while, but as the money has no value except its moneyness, it does not harm the economy, it only increases the value of the remaining money. This is normally innoticable, as some save and some use their savings according to their life situation.

It may become noticable if there is a major shift in the habit of savings, for example if people around the world at the same time believe that something bad is going to happen.

When you earn some money, or are given some money, you can
1) save
2) lend the money to someone for the market-decided interest rate.
3) invest in something safe for a return close to the market-decided interest rate
4) engage in some entrepreneural business with the opportunity for extra gain or risk of loss.

Most people want some money ready for needs in the immediate future. If you have too much for your liking, you would lend or invest. If you have too little cash, you could reduce your investments.



so when someone says hoarding is a type of behavior and deflation is the phenomenon, does this mean that if hoarding is a negative word for saving, it means "spending" then?

Sorry im totally new to this..

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January 19, 2013, 08:44:25 PM
 #53

"hoarding" is not the same as "saving". If you put money under your mattress, you are saving by hoarding. But if you deposit money in a savings account at a bank, you are saving, but you are not hoarding. This is a very important distinction. Hoarding removes the money from the economy, but investing does not.

Hoarding bitcoins is prevalent because there are very few ways to invest bitcoin savings. Investing bitcoins will be easy and common eventually and there will be no "hoarding problem".

Wrong, hoading is just a negative word for saving.
Putting the money in a bank is investing, at least in the current type of banks who invest or lend to businesses or private.

Saving is not a problem. A saved sum of money is taken out of the effective money supply for a while, but as the money has no value except its moneyness, it does not harm the economy, it only increases the value of the remaining money. This is normally innoticable, as some save and some use their savings according to their life situation.

It may become noticable if there is a major shift in the habit of savings, for example if people around the world at the same time believe that something bad is going to happen.

When you earn some money, or are given some money, you can
1) save
2) lend the money to someone for the market-decided interest rate.
3) invest in something safe for a return close to the market-decided interest rate
4) engage in some entrepreneural business with the opportunity for extra gain or risk of loss.

Most people want some money ready for needs in the immediate future. If you have too much for your liking, you would lend or invest. If you have too little cash, you could reduce your investments.



so when someone says hoarding is a type of behavior and deflation is the phenomenon, does this mean that if hoarding is a negative word for saving, it means "spending" then?

Sorry im totally new to this..

Hehe, no, hoarding is a word with negative connotation. It is the same as saving.

I forgot that increase in spending also is a choice if you come over some money. Reduction in spending is a choice if you feel you have to little money. So is increased working.
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January 19, 2013, 08:58:58 PM
 #54

Inflation has currently a dual meaning: Inflation of the money supply, or inflation of prices. Both are impossible to decide decisively, as money is more than the base money supply (dollar notes and coins). Inflation of prices is also difficult to measure, because you need to decide the prices of all goods and services, and find suitable weights for each. Since nature, technology and individuals' preferences continually change, a measure of inflation can only be approached. Generally, a money supply inflation will lead to price inflation after the dust settles.

Deflation is opposite, there can be deflation in the money supply and deflation in prices. In a discussion you should specify which.
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January 20, 2013, 01:08:24 AM
 #55

Hoarding or not bitcoins also well know scheme know so either division or people might start new additional coin scheme Cheesy

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January 20, 2013, 01:14:53 AM
 #56

That must be why gold has become valueless. People hoard it.

The supply of Gold to all intents and purposes is limitless, bit coins only have 21million.

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January 20, 2013, 01:21:32 AM
 #57

That must be why gold has become valueless. People hoard it.
The supply of Gold to all intents and purposes is limitless, bit coins only have 21million.

 Huh

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January 20, 2013, 01:29:14 AM
 #58

The supply of Gold to all intents and purposes is limitless,

A total of 171,300 tonnes of gold have been mined in human history, according to GFMS as of 2011.[2] This is roughly equivalent to 5.5 billion troy ounces or, in terms of volume, about 8876 m3, or a cube 20.7 m on a side.
Doesn't seem so limitless to me.

bit coins only have 21million.
21million what?
Look again at the wiki-quote about gold above, there's only 1 cube 20.7 m on a side of gold, a single one! Compared to that 21million sounds like A LOT.  Cheesy
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January 20, 2013, 01:33:49 AM
 #59

It is important to note that inflation = money supply X monitary flow. We have limited amounts of both so we have deflation. When there is increased economic activity in btc the value will go back down. This will be offset some by the increased user base, but with them comes more flow. So I see deflation as a temporary problem.

Because of the limited supply of BTC, it is extremely unlikely the BTC price versus fiat will decrease with an expanding bitcoin economy. In fact, common sense says the price per BTC must rise exponentially, unless there is a significant outflow back to fiat keeping the net demand (buys versus asks) for bitcoin low.

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January 20, 2013, 02:29:59 AM
 #60

Wrong, hoading is just a negative word for saving.
Putting the money in a bank is investing, at least in the current type of banks who invest or lend to businesses or private.

Saving is not a problem. A saved sum of money is taken out of the effective money supply for a while, but as the money has no value except its moneyness, it does not harm the economy, it only increases the value of the remaining money. This is normally innoticable, as some save and some use their savings according to their life situation.

It may become noticable if there is a major shift in the habit of savings, for example if people around the world at the same time believe that something bad is going to happen.

When you earn some money, or are given some money, you can
1) save
2) lend the money to someone for the market-decided interest rate.
3) invest in something safe for a return close to the market-decided interest rate
4) engage in some entrepreneural business with the opportunity for extra gain or risk of loss.

Most people want some money ready for needs in the immediate future. If you have too much for your liking, you would lend or invest. If you have too little cash, you could reduce your investments.


I don't want to get into an argument over semantics or whether or not "hoarding" has negative connotations, but let me just say that when you ask anyone what they do with the money they "save", they will say they invest it or put it in bank account (also "investing"), and they won't say they store it in a safe ("hoarding"). Thus in practical terms, "saving" is more "investing" than "hoarding".

My main point is that the hoarding problem (if it is even a problem) is due to the lack of investment opportunities. On the other hand, Bitcoin will eventually experience FRB and then there could be an inflation problem! People that predict absurd values for BTC often overlook this eventuality.

Also, I think it is interesting to note that you can't hoard bitcoins forever (unless they are lost). Eventually, they will be spent or transferred to someone else. So, even hoarded bitcoins are part of the money supply in the long run.

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