Inflation and Deflation of Price and Money Supply

[Multipulty]

this is a consistent increase in the price of goods and services over time.  During inflationary times, money loses its "buying" or "purchasing" power, and it takes more units of currency to purchase the same units of goods or services.  Over time, inflation lowers the value of each unit of currency.

deflation is  consistent decrease in the price of goods and services over time.  During deflationary times, money increases in its "buying" or "purchasing" power, and it takes less units of currency to purchase the same units of goods or services.  Over time, deflation increases the value of each unit of currency.

[jvc12]

Inflation this is the constant increase in price of goods services in an economic over times at this time money looses it buying or purchasing power at this time more unit of currency goes out to purchasing small unit goods.

Deflation this is the constant decrease in prices of goods and services in an economic over time, at this time money gain it buying or purchasing power at this time less unit of currency goes out for it purchasing more goods and services.

[FaucetRank.com]

Example: As the Bitcoin price goes from $10 to $20, the prices of goods/services goes down from 20BTC to 10BTC. As the Bitcoin price goes from $20 to $10, the prices of goods/services goes from 10BTC to 20BTC!

I'm not agree with your lines OP because if Bitcoin price goes up from $10 to $20 the prices of goods/services still remains same but the quantity of Bitcoins goes down because of increase in Bitcoin price.

Example: One Bitcoin faucet script costs $25 and current Bitcoin Price is also $25 (assuming) thus I pay BTC1 for that script but very next day Bitcoin price goes up by $1 and now I pay BTC0.96153846 Bitcoin for the same script. so here only quantity of BTC changes not the price of goods/services.

[uneng]

Example: As the Bitcoin price goes from $10 to $20, the prices of goods/services goes down from 20BTC to 10BTC. As the Bitcoin price goes from $20 to $10, the prices of goods/services goes from 10BTC to 20BTC!

I'm not agree with your lines OP because if Bitcoin price goes up from $10 to $20 the prices of goods/services still remains same but the quantity of Bitcoins goes down because of increase in Bitcoin price.

Example: One Bitcoin faucet script costs $25 and current Bitcoin Price is also $25 (assuming) thus I pay BTC1 for that script but very next day Bitcoin price goes up by $1 and now I pay BTC0.96153846 Bitcoin for the same script. so here only quantity of BTC changes not the price of goods/services.

I think you two said the same argument, but in different forms. As I understood both are right.
The goods price won't change, just the amount of necessary bitcoins to buy it, because the product cost is calculated based in dollars, bitcoin is a secondary currency in this case. Bitcoin is very changeable yet, until the price stable the best deal is to hold only.

[tradesup]

  

   It just a matter of belief.  People will buy into something they believe in, whether it works or not is secondary, if they think it has value, or future value, then that is all they care about, and that stems from their beliefs.

So if you want to see a change, don't change the money in your wallet, change your beliefs.

 

[dawnpot]

Inflation occurs when the price of goods and services rise, while deflation occurs when those prices decrease. The balance between the two economic conditions is delicate, and an economy can quickly swing from one situation to the other.

Inflation is caused when goods and services are in high demand, creating a drop in availability. Consumers are willing to pay more for the items they want, causing manufacturers and service providers to charge more whereas deflation occurs when too many goods are available or when there is not enough money circulating to purchase those goods. For instance, if a particular type of car becomes highly popular, other manufacturers start to make a similar vehicle to compete. Soon, car companies have more of that vehicle style than they can sell, so they must drop the price to sell the cars.

[vansy1]

An area dedicated to discussing the differences of these two terms and the theories supporting them.

I'm looking forward to an in-depth discussion on the subject! I've noticed that confusion between the two seems to come up quite a bit on the forum, and thought it may be reasonable to dedicate a thread on the matter.

Pulled from a discussion in Wall Observer


Price-Deflation is what you are used to hearing about in Bitcoin. That term is used to describe the prices of goods/services as they decrease, because the value of Bitcoin goes up.

Price-Inflation is the opposite. When prices of goods/services increase because the value of Bitcoin goes down.

So, when dealing with Price-Inflation or Deflation, there is an inverse relationship of price and value, in regard to goods/services and Bitcoin.

Example: As the Bitcoin price goes from $10 to $20, the prices of goods/services goes down from 20BTC to 10BTC. As the Bitcoin price goes from $20 to $10, the prices of goods/services goes from 10BTC to 20BTC!

Why does the price of Bitcoin go up and down? The price of BTC goes up and down based on the exchange rate, or market price, which is set by buyers and sellers, or traders. They directly trade the Bitcoin currency with all sorts of other currency, and even some with gold; the most popular being the USD (US dollar). They set the price when executing orders to buy or sell. I will get into the actual reason of why the price fluctuates in the last section.


Now that we've gone over PRICE Inflation and Deflation (which honestly, to me, is a term made popular by Keynesian's to hide the real facts, as price inflation/deflation is simply the market exchange rate, reflective of the money supply into a currency from itself and other currencies), let's go over the REAL inflation/deflation of a currency (otherwise known by many as Monetary Inflation).

MoneySupply-Inflation is when the value of Bitcoin decreases when the total supply of Bitcoin increases. In our current state, this is at a generation rate of 25 BTC every 10 minutes.

MoneySupply-Deflation will essentially never occur. It is when the value of Bitcoin increases when the total supply of Bitcoin decreases. This may happen, say, when someone loses their private key and all the BTC associated with it are lost. This effectively "makes the rest of us richer". That being said, there is a SET DECREASE in the generation rate of BTC, so you have sort of a "deflationary effect" in the value, as long as more exchange occurs for BTC at a rate which is faster than that set generation rate.

When all 21 million coins are produced, the MoneySupply will be neutral, and the value will continue to increase (prices will decrease, consequently), as long as people continue to exchange in BTC.

This leads me to the last section.


What determines the PRICE of Bitcoin? The VALUE of Bitcoin at a particular moment.

What determines the VALUE of Bitcoin? The SUPPLY and DEMAND of Bitcoin in the economy.

What determines the SUPPLY of Bitcoin? Currently, the MoneySupply-Inflation rate of 25 BTC every 10 minutes, and traders willing to SELL Bitcoin to BUYERS in exchange for other supplies of money (currencies).

What determines the DEMAND of Bitcoin? Traders willing to BUY Bitcoin from SELLERS in exchange for other currencies.


Therefore: BUYERS, SELLERS, and MONEYSUPPLY-INFLATION (miners) determine the VALUE of Bitcoin, which determines the PRICE of BTC as BUYERS and SELLERS trade based on that VALUE (or supply and demand) of Bitcoin.


We don't exactly know the totality of the supply and demand. Sure, we could try and aggregate data from all the exchanges, but we will never be accurate as there are exchanges which can not be accounted for (OTC). The cool thing is that we DO know the MoneySupply rate, and we DO know the exchange rate. From this, we can determine a real value of Bitcoin when simply multiplying the two factors; a sort of inflation-adjusted view of the currency.

Effectively, the quantitative analysis of supply and demand is really what the currency exchange traders attempt to accurately determine which is conveyed through buying and selling of Bitcoin, setting a VALUE via the PRICED exchange rate of the currency. On a side note, most of the big Market Makers (FX Traders) use this price movement as a way to make a profitable living, as well. Especially when price fluctuations are a consequence of hype or fear (bubbles, cliffs), not factual supply/demand data, and are wildly out of the real price range.

Thus, if you analyze the proper macroeconomic data in an attempt to forecast future DEMAND for more Bitcoin (price increase), you will realize some very interesting things, and have a more accurate picture of where the price is going...

Happy trading!

Thank you so much for the informations that you've given to us man.

[numismatist]

The drawback on these "deflation to da moon" believs is that there is exactly no shortage on crypto coins supply. There are more Altcoins in existance than currencies on earth do exist.

Hence the Hopium on scarity is flawed.

[maganda1]

Microeconomic theory guys where money supply increase at a certain level it will to inflation, while on the other hand when money supply in the market drops it creates deflation (e.g: Japan)

[loreykyutt05]

If you are earning a .5 btc per month, you are earning so fast. It is just like you have a occupation. It needs a lot of time to earn .5 btc per month. You have to strategize your own ideas and plans to earn fast

[warwar]

If you are earning a .5 btc per month, you are earning so fast. It is just like you have a occupation. It needs a lot of time to earn .5 btc per month. You have to strategize your own ideas and plans to earn fast

Thats big and we all know that some of here earns that big amount of money! But it is very difficult to earn that here only in forum you cant earn that big i think. You should have sort of business in real life in term of bitcoin or sort of you are a online developer  and paid with bitcoin then you can earn a ton . .5 is big mine is only 0.09

[bitcoinvest]

Since this post is about money supply i would like to make one question.

I live in Europe, the EUR supply - the EUR money in paper that goes to people is a specific number? Or they can print how much they want like they do in America.

I have a second question but will do after i get an answer to this from somebody who really know this not read etc i heard....

[Atdhe]

Money supply for sure is not (only) supply of paper money. Money is much broader term. Money is usually also the money that are created by commercial banks via fractional banking.

Either way there is no country where central bank has some specific number as a limit for how much money they can create.

[deisik]

Since this post is about money supply i would like to make one question.

I live in Europe, the EUR supply - the EUR money in paper that goes to people is a specific number? Or they can print how much they want like they do in America.

I have a second question but will do after i get an answer to this from somebody who really know this not read etc i heard....

They don't print money as they like even in America either

Since you refer to paper money, the feedback is done through banks since paper money is what people receive from their accounts when they cash out. A central bank (in this case the ECB) sees the requirements of commercial banks in cash, and if there is shortage of paper money, it prints more bills. On the other hand, commercial banks also change old worn-out bills for new ones, and these go to the nearest branch of the ECB (that would be a Federal Reserve Bank in the US) where they are destroyed. Obviously, banks receive new paper money bills instead. Once as a student, I took part in a street fight and had the largest denomination bill back then torn in halves (which was higher than my monthly scholarship)



When the dust settled, I went to the nearest bank office and exchanged it for a brand new bill without any questions

[Larvas]

I think what bitcoinvest meant is the Federal Reserve bank and all the problems around it ( https://www.youtube.com/watch?v=tGk5ioEXlIM )

So far as I know there is nothing like that in Europe, but I didn't do a proper research on it so can't write more...

[bitcoinvest]

thanks for your answers i appreciate.

Well what is happening when people come to work in Europe Countries and they getting paid in Euro and after go back to their countries (not Europe ones) and put the euro under bed for a couple of years etc.. i mean not going around to the market because not need etc...

Now in Greece for example i know there are not many Euro paper around the country. But many of those paper money have been traveling to Ukraine to Russia etc....

If you had a plan for do bad to this economy and somehow you could take the paper little by little over the years and keep it, they would need to print new but without recycling the old ones...

Is this the reason maybe the Europe is trying to fix when stopped the 500 euro paper? and also changing the 50 euro paper also the 20 euro? Maybe they try fix their problem??

[Larvas]

Ugh... No mate, that's not how money works It's not about how much money is in the sock/under the bed, it's about how much money is in the market. I would suggest you to watch this video, it's quite a good one, explains a lot of stuff: https://www.youtube.com/watch?v=PHe0bXAIuk0

The reason why the 500 euro bill will be removed is because it's mainly used as black money for fraud and similar stuff.

And since we're talking about cash, here is also a good interview from the CEO of Master Card:
https://www.youtube.com/watch?v=9-tjY-DG5-0

[bitcoinvest]

Don't blame me for not watching and not believing for example the CEO of Master Card... Those are the big players and part of an economy that made thousands of millions around the world pure... Also taking profit from transactions doing absolutely nothing...

It's not that i not agree with you maybe you are right... i not agree with the system and when you ask simple questions you have simple answers with difficult words and there is a reason they do that...

Anyway i not agree with how the system work with you but there is no problem, we can both live with different opinions.

The problem is that we tend to believe what is being served to us from CEO and owners of big companies Banks etc... We know that the relation of gold and money is broken and we still have
 (not me) trust to the banks and the current economy model... at least is what they tell us on the media.. and they do so to manipulate the easy people...

I do believe the EUR is a model of German working money to give more power to who already have and failed miserably in any other aspect to all the other Countries.

Anyway i can' understand how the 500 EURO is used for black money and the 200 EURO or 100 EURO or even more the 50 EURO not....

[t3ChNo]

Bitcoin is very volatile and the market movements are faster compared to fiats.

[dontworry]

Money and money supply (quantity of money) change prices (inflation/deflation) but does not change anything in real life.

Real inflation is not a money based price change. Real inflation is based on changes in real supply-demand movements in a barter economy where there is no means of exchange (money, credit card, gold, bitcoin, bank account, check, etc.)

Money based price is imaginary and usually misleading to measure value movements. Because money itself is imaginary and is not a reliable indicator of value.  Value is the key not "price" and "money". With money I mean everything including bitcoin that has same functionality of money (means of exchange, store of value, etc.)  

Real value of a good/service is different than its price label. Assume, you work for $1 per hour and a beer is sold for $1. You work 1 hour to buy a beer. Assume you moved to a different city/country and your new job pays $10 per hour but beer is $10, not only beer everything you want to buy is 10 times expensive in your new place. After receiving couple of paychecks, you won't be happy much about the extra 1 zero in your paychecks if you are unable to buy 10 times of everything.  

Real value, real inflation and real interest are related thing. For instance real interest  (interest minus inflation) is the real value of money. When it comes to interest, money is no longer money, money itself is a traded, ordinary commercial good.

Do we need price? Yes, just to make life easy. Money based pricing is needed to measure value easily. But price is just virtual numbers. In the real life we exchange real goods and services, not money (except lending-borrowing activities) In the real life, if you work 1 hr you buy 1 beer, you have to work for 2 hrs to buy 2 beers. Beer price and hourly rate of a labor don't change anything. This sounds so simple but it's actually simple as that. We give something real to buy something real. Money and price are imaginary.