Inflation and Deflation of Price and Money Supply

[mayureeana]

Inflation is just a normal in developing countries, but if this inflation is already uncontrollable, it's not just an infalation, it's now called hyper inflation, just like what happened in venezuela, but thanks in cryptocurrency to save their collapsing economy. anyway, venezuela is not totally recovered yet

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[Stakeey]

That being said, isn't bitcoin essentially a short on the inflationary nature of fiat ?

[Polo7]

We have around the World Economic regression.
So but btc price is 10k.

If the Government and banks Will start printing money Again the btc price Will Go high.







Just Think about that Economic regression times the assets are cheap so the btc is cheap Now... Once the European USA uk Will cut rates and printing money the btc price Will be at least 30k.




Just Think about the fact that in a Economic  correction times we have assets all ready expensive but not as expensive as They could be

[Scheede]

There was a nice and easy understandable read by Peculium-team covering the inflation-issue (more or less global):

In our first part we explain how inflation is melting away your savings where the inflation rate is higher than the interest rate you receive on your savings.

Now that you know about the problem, we are also here to provide you with the solution!
____

How to beat inflation with AIEVE – Your Artificial Intelligence companion for a brighter future:

https://peculium.io/blog/how-to-beat-inflation-with-aieve-your-artificial-intelligence-companion-for-a-brighter-future
____

As a reminder, here you may find the article explaining inflation vs. interest-rates:  https://peculium.io/blog/does-it-still-make-sense-to-put-money-into-a-savings-account

Source: https://t.me/peculiumANN/340

Definitely a topic, that A) near to nobody learns about in school and B) is an quite important factor when speaking about savings/values in future etc., thus B) that everybody should (at least superficial) should be aware of.

[SamantaDark]

Man, thank you! It was super useful. I just found out this topic from Google Search and didn't expect that this will be so useful.

[BUK2016]

If youre living in the developing nation, Inflation is just a normal thing 

Which part of the developing country are leaving that do take inflation as a normal thing to them? Inflation has a both positive and negative effect on the economy and the people leaving in a country that are unable to control there inflation pressure in there economy, and I don't believe any developing countries will take inflation as a normal thing to them.

[Polo7]

Inflation is When economy is Up!

When economy is bad and we have regression zone then we have low inflation rate.



Its Constant Economic Circle, economy Up and down Up and down....


Everytime When we want to boost economy Again and Again we print More money economy is going better inflation rate are going higher prices are going Up... And debt is growing bigger and bigger.



BUT NOONE SEEMS TO BE paying back the debt..

[STT]

That being said, isn't bitcoin essentially a short on the inflationary nature of fiat ?

Its an interesting idea but we have a opposing possibilities here.   First Bitcoin is expanding in price because the rate of change in FIAT is greater then BTC which has a reducing amount available each year.    Presuming both have at least equal demand for payment usage, etc.
     However there is also the idea that Bitcoin as an emerging technology and not yet established by its own revenue and regular business quite yet, like many internet type startups its actually benefiting from the loose monetary outcome which allows cheap financing to occur and encourages risk based investment.    The base rate being so low right now, establishes the safest money with little returns and especially if we consider personal inflation experienced might be far higher then measured or stated by government for GDP purposes.  
  This low base rate encourages risk taking, what could happen is as dollar falls it actually becomes more difficult to gain interest in risky projects.   The flow of excess easy money from base rates that do not match or surpass inflation could reduce, this brings us back from inflation to a currency standard in decline.   Many people presume well Dollar will pass its business onto BTC but thats not a given, its not even likely imo.  

What I think is most likely is that if we are talking about Dollar being replaced, is that another FIAT standard takes over.   This could be another nation with alot of trade done or it might be an agreed standard similar to EURO.   EURO is weak but it is at least backed by Germany in part, so I don't see that as failing so much but it might be challenged and not seen as worthy as taking over from dollar.    The point being if BTC loses its source of excess dollar funding it could be more challenged in price, not directly inversely proportional to Dollar decline.   I don't believe it will be that simple, alot of money will likely go into gold and many different standards.
   The ultimate result of inflation, loose standards and debt which fails to repay its principal value is a deflationary effect, this could be a harsh winter for BTC.

I don't think that scenario is any time soon but inflation means instability and its hard to predict the outcomes, there's not a certain winner.  Likely all of society will suffer some losses, inflation especially when its out of control is not a positive.

[mogster1594]

With regards to BTC replacing FIAT, it will likely need to be used in a large amount of trade invoicing.  I'm not 100% sold on whether or not that will actually be a good thing for the price of BTC in the long-run.  Typically, you don't want to use something that has high appreciation in order to pay for goods and services, so if BTC does become a replacement for FIAT in terms of invoicing trade, that means that people likely aren't expecting any additional returns. 

On a separate topic, while BTC could be a hedge against inflation, I'm a little worried about the other side of the coin.  I'm talking about deflation.  I haven't looked into it as much, but my understanding of the inflation and deflation are along the lines of:

Inflation: Becuase it eats away at your cash, you are essentially incentivized to spend your money as it will be worth more now than in the future.  This spending will presumably lead to growth, job creation, etc., but can also have negative impacts such as borrowing, since the money your returning in the future could be worth less.  Maybe this ultimately is why we have boom and bust cycles, where people borrow too much and this eventually leads to a recession or economic collapse

Deflation: I guess if you think about it as the opposite of inflation.  People believe their money will be worth more in the future, or that goods and services will be cheaper if they hold off on their purchases until next year.  Could this lead to a situation where people hold off spending, which decreases growth, and leads to an economic death spiral? 

I don't know which is worse, the possibility of hyper-inflation or depression

[socialsant]

Or perhaps its market makers taking profits?

Think about it - I own a shop and buy a tomato for $1.00, now I need to sell for $1.35

In the case of market makers its a bit on the reverse side - I sold a tomato for $1.35 now I need to repurchase it for $1.00


Also read the top post - something about supply and demand and all that jazz.... uhm If someone is buying a BTC does that warrant demand > supply because to actually demand and buy 1 BTC there has to be an equal supply of 1 BTC sold... so demand always equals supply??

[gaston castano]

If youre living in the developing nation, Inflation is just a normal thing 

Which part of the developing country are leaving that do take inflation as a normal thing to them? Inflation has a both positive and negative effect on the economy and the people leaving in a country that are unable to control there inflation pressure in there economy, and I don't believe any developing countries will take inflation as a normal thing to them.

if they think it's not normal of course they will complain, but what we have seen up to now seems to have become a normal thing, inflation does occur from year to year everyone might know that, and maybe as you say maybe some countries poor, but for developing countries I think that's acceptable, I live in developing countries, and yeah I often hear the news when the price of goods goes up every year, and it only happens a little later then as usual, so I think they can accept it.

[dnprock]

I posted this article in Altcoin Discussion. It's related to this discussion.

Original post: https://bitflate.org/post/2019/10/10/the-next-big-thing-in-crypto-using-inflation-to-create-stablecoin.html

This is my view of the next big thing in crypto. Bitcoin is digital gold. It has a limited supply of 21 million coins. Therefore, its price fluctuates. Stablecoins are cryptocurrencies designed to avoid price volatility. Existing stablecoins are issued by centralized authorities. This mechanism defeats the ethos of cryptocurrency. In order to access decentralized cryptocurrency, we need to rely on centralized authorities to issue digital stablecoins.

A New Look at Inflation

Cryptocurrency has started and become successful by embracing Austrian Economics. Bitcoin’s limited supply means every person on planet Earth can only own a small fraction of a bitcoin. When Bitcoin reward reaches 0 around year 2140, there will be no coin. If there is still demand for Bitcoin, its price will be: buyer demand / supply = infinite.

How do we address this conundrum? There is currently no easy way. For cryptocurrency to gain adoption, we can’t have a money system with limited supply. That is not how the world works. Even our universe inflates. To solve this paradox, we need to explore the role of inflation.

People lament about inflation robbing your purchasing power. But historically, economies tend to grow with currency inflation. It is hard to find past record of economies thriving with deflation. Inflation is bad when it is high and/or when money is printed without people’s knowledge and approval. Otherwise, it can be a force for growth. With cryptocurrency, we can design a currency with a known and deterministic inflation rate.

Deflationary versus Inflationary

Economies always have deflationary and inflationary assets. People often overlook this. Gold, real estate, moat, competitive advantages are some examples of deflationary assets. Inflationary currencies serve as a medium of exchange. They are used for transactions. Bitcoin was created in response to the 2008 economic crisis. It exists and thrives because of quantitative easing, a type of inflating monetary policy.

Existing stablecoins are inflationary digital currencies. They are pegged to fiat currencies. In the future, there will be two kinds of cryptocurrencies: deflationary and inflationary. For cryptocurrency to gain more adoption, we need a better kind of inflationary digital currency.

Bitflate - Digital Native Decentralized Stablecoin

Bitflate is a new kind of cryptocurrency. It is a Bitcoin fork with an inflation rate of 7% per year. In its first four halvings, Bitflate blockchain will create 19.3 million coins. After that, its supply will inflate at 7% per year. Here’s the block reward schedule for the first 10 halvings:

0: 50
1: 25
2: 12.5
3: 6.25 (end of halving)
4: 6.65 (start of inflation 7%)
5: 7.02
6: 7.51
7: 8.04
8: 8.60
9: 9.20
10: 9.85

With inflation, there will not be a pressure to push price up too high. Bitflate blockchain uses Proof of Work. It issues a deterministic and limited number of new coins. Therefore, price will not drop too low. The goal of Bitflate is to create a digital token that people can use for transactions.

Bitflate price will not be as stable as pegged stablecoins. It has significant advantages: digital native and decentralized. Bitflate will be more suitable for transactions than deflationary cryptocurrencies. It opens a new gateway to financial possibilities. In this future, we, the people, are in control.

PS: Bitflate is now trading on Unnamed Exchange (https://bitflate.org/exchange/). Join our discord community (https://discord.gg/utnEyp8) for update.

[EdvinZ]

Inflation is just a normal in developing countries, but if this inflation is already uncontrollable, it's not just an infalation, it's now called hyper inflation, just like what happened in venezuela, but thanks in cryptocurrency to save their collapsing economy. anyway, venezuela is not totally recovered yet

This is the whole problem that inflation turns from necessary to destructive for the economy. It is clear that with a developing economy, the amount of money from citizens increases, and they can afford to buy more. That is, demand increases, so there are more goods and services to meet it. Enterprises produce more products, the list of services provided to citizens is growing. Hyperinflation, which occurs when the state budget deficit and with a huge external debt, is a factor that destroys the economy of any country. A competent domestic and foreign policy is needed to keep inflation in balance and not get out of control. In our world, this is difficult to achieve because of corruption and destructive economic models between countries, which include sanctions, etc.

[Chaintrader_1]

Which effects and human behaviour reflecting the markets in a recession : https://youtu.be/SV2wvInWDPA
Very interesting!

[kannikaamudee]

Inflation is when prices rise, and deflation is when prices fall. You can have both inflation and deflation at the same time in various asset classes. When taken to their extremes, both are bad for economic growth, but for different reasons. That's why the Federal Reserve, the nation's central bank, tries to control them.

[Crypto_Man1212]

Who else believes that we'll still have inflation after all Bitcoins have been mined? It doesn't look as if the ecosystem will be able to sustain itself from fees alone, even if the technology would be two times more efficient each year...

[dnprock]

Who else believes that we'll still have inflation after all Bitcoins have been mined? It doesn't look as if the ecosystem will be able to sustain itself from fees alone, even if the technology would be two times more efficient each year...

I think there's a chance that Bitcoin will fork into a low inflation rate (0.5% to 1%) and a zero inflation (current). Both Bitcoin chains remain Store of Value. In the low inflation chain, some portion of fees gets shifted to mining.

[Majormax]

Inflation is when prices rise, and deflation is when prices fall. You can have both inflation and deflation at the same time in various asset classes. When taken to their extremes, both are bad for economic growth, but for different reasons. That's why the Federal Reserve, the nation's central bank, tries to control them.

Price changes are merely a symptom of inflation. The original, first definition is an increase in supply of money ( claims on assets and GDP) relative to the supply of assets and GDP. Thus inflation in most economies has already happened to an enormous degree in the past 10 years. Price changes have mostly yet to happen, but could still be forestalled by a balancing deflation.

All goods, assets and incomes will always experience their own rates of price change, depending on their individual relationship with the changing base money.

Central banks have no power to control price changes, but they use various tools (interest rates, repos, QE etc..) as a means to supposedly target a certain price outcome.

These are the reasons there is so much confusion in the measure and definition of the word 'inflation'.

[Ejanend]

Inflation is when prices rise, and deflation is when prices fall. You can have both inflation and deflation at the same time in various asset classes. When taken to their extremes, both are bad for economic growth, but for different reasons. That's why the Federal Reserve, the nation's central bank, tries to control them.

Price changes are merely a symptom of inflation. The original, first definition is an increase in supply of money ( claims on assets and GDP) relative to the supply of assets and GDP. Thus inflation in most economies has already happened to an enormous degree in the past 10 years. Price changes have mostly yet to happen, but could still be forestalled by a balancing deflation.

All goods, assets and incomes will always experience their own rates of price change, depending on their individual relationship with the changing base money.

Central banks have no power to control price changes, but they use various tools (interest rates, repos, QE etc..) as a means to supposedly target a certain price outcome.

These are the reasons there is so much confusion in the measure and definition of the word 'inflation'.

Yes. Inflation and deflation of the prices is controlled by the governmental bodies. This is not dependent only on the cryptocurrencies. Various financial activities that are taking place at the national and the international level determine the prices in a specific country. Moreover the economic growth is much relatable to the development in different spheres.

[Linkkoin]

Yes. Inflation and deflation of the prices is controlled by the governmental bodies. This is not dependent only on the cryptocurrencies. Various financial activities that are taking place at the national and the international level determine the prices in a specific country. Moreover the economic growth is much relatable to the development in different spheres.

Not to mention that manipulating national currencies (eg. by printing money) is often done by purpose, to make own companies with their products cheaper than of its foreign competition. This is how China for years had been working as a factory for the world.