Isn't deflation theft, too?

[bcearl]

Just think of this simple example:

Maybe you start with 100 units of currency (e.g. bitcoins) and 100 units of goods (e.g. pizzas). Then you get one pizza for one bitcoin.

Now, these 100 bitcoins are owned by 10 users with the following distribution:

user 1: 20
user 2: 20
user 3: 20
user 4: 20
user 5: 5
user 6: 5
user 7: 5
user 8: 2
user 9: 2
user 10: 1

Now user number 10 makes a pizza. this means we have 100 bitcoins and 101 pizzas. This means, for one bitcoin you now get 1.01 pizzas.

What does this mean? This means, that every user gets extra pizza. And the users with more coins get more extra pizza, although it was only user 10 who made the pizza.

And even when he wants to sell the pizza: He will not get 1 bitcoin for it. He will get about 0.99, because that's the pizza price when there are 100 bitcoins and 101 pizzas on the market.

[1715639946]

1715639946

[hugolp]

Let me answer with a question:

I decide to store some type of computer cable, and suddenly the manufacturers stop making it. Now there is a lot of people that want that cable replacement and a very reduced supply, therefore the price goes up. Am I stealing from someone?

[bcearl]

Let me answer with a question:

I decide to store some type of computer cable, and suddenly the manufacturers stop making it. Now there is a lot of people that want that cable replacement and a very reduced supply, therefore the price goes up. Am I stealing from someone?

This is a special case, while my example is true for any kind of produced goods at any time.

[hugolp]

Let me answer with a question:

I decide to store some type of computer cable, and suddenly the manufacturers stop making it. Now there is a lot of people that want that cable replacement and a very reduced supply, therefore the price goes up. Am I stealing from someone?

This is a special case, while my example is true for any kind of produced goods at any time.

Why is money a special product?

[bcearl]

Let me answer with a question:

I decide to store some type of computer cable, and suddenly the manufacturers stop making it. Now there is a lot of people that want that cable replacement and a very reduced supply, therefore the price goes up. Am I stealing from someone?

This is a special case, while my example is true for any kind of produced goods at any time.

Why is money a special product?

I haven't said that.

[Basiley]

no, isn't.
isn't war is murder ?
isn't censorship is crime ?
isn't oppression is right ? to be left?

[billyjoeallen]

Let me answer with a question:

I decide to store some type of computer cable, and suddenly the manufacturers stop making it. Now there is a lot of people that want that cable replacement and a very reduced supply, therefore the price goes up. Am I stealing from someone?

This is a special case, while my example is true for any kind of produced goods at any time.

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

[Anonymous]

Choosing to spend currency that always goes up in value is not theft in the same sense of saving money and have it DECREASE in value while it sits on your person. I can see how one could argue this is theft but the change of value lies in other people's goods. Not your own. A Macbook Pro might be $2500 when you bought it but you aren't going to be able to resell it for full price. Is that really theft? Heh, it's really an interesting argument though. I'll give you that.

[bitcredit]

Let me answer with a question:

I decide to store some type of computer cable, and suddenly the manufacturers stop making it. Now there is a lot of people that want that cable replacement and a very reduced supply, therefore the price goes up. Am I stealing from someone?

So inflation isn't theft either, right? After all, if people choose to use an expensive cable my company makes that's their choice. If my company is able to dramatically decrease production costs and therefore reduce the price that ought to be a good thing.

[Anonymous]

Let me answer with a question:

I decide to store some type of computer cable, and suddenly the manufacturers stop making it. Now there is a lot of people that want that cable replacement and a very reduced supply, therefore the price goes up. Am I stealing from someone?

So inflation isn't theft either, right? After all, if people choose to use an expensive cable my company makes that's their choice. If my company is able to dramatically decrease production costs and therefore reduce the price that ought to be a good thing.

I don't even know this could even be remotely considered a good analogy.

[realnowhereman]

If I stole minus five dollars from you would that be theft?

Deflation isn't theft in the same way that surgeons taking a knife out of you isn't murder.

[digdugg67]

I think that the real answer lies in how much are people willing to pay for the pizza.

BTW there is only one pizza around when #10 makes his pizza. All the other pizzas have been consumed unless the owners of said pizzas are gluten intolerant.

Pizzas are Consumables
BitCoins are not.

Just saying

[Anonymous]

People aren't entitled to pay you for goods you want to sell. It's as simple as that. If you can't get the value you want, you don't. As with inflation, you have property in your hands and the gentlemen in the Federal Reserve are degrading it directly with more printing. You are being denied of your own property in one case and being denied others property in the other. It isn't the same.

[SgtSpike]

Deflationary currency is theft from holders of assets, the same way inflationary currency is theft from holders of money.

This is one reason why I'm not 100% onboard with the deflationary currency thing.  In my mind, a currency that is neither deflationary or inflationary would be ideal, and could easily be accomplished with a fixed-rate output of coins.

For example, say we used a similar strategy as bitcoins, but based it off of world population.  We have the software release 1 coin per 100 million people of world population per block.  For 7B people, that would be 70 coins per block.

Also assume that 0.02% of coins, on average, are lost every day.

We can then come up with an equation (based on current world population) of 10,080 = 0.0002X, where X is the number of coins that the currency would eventually reach as a stabilized, permanent number.  Which would be just over 50M coins, interestingly enough.  And that number would slowly grow along with world population, leaving us with a currency that neither inflates or deflates.

[Anonymous]

Deflationary currency is theft from holders of assets.

No it's not. People are not entitled to other people's money.

[realnowhereman]

Deflationary currency is theft from holders of assets, the same way inflationary currency is theft from holders of money.

That's nonsense.  Assets are unchanged under inflation or deflation of currency.  One loaf of bread is still one loaf of bread.

You're also mixing up inflation and deflation of monetary supply with inflation and deflation of prices.  Bitcoin "deflation" is not comparable with central bank inflation of the money supply.  Inflation we experience today happens when the government prints money -- that is theft, they are removing a little percentage of the money in your pocket and putting it in their own.  The so-called Bitcoin deflation is not the converse were money is burned by a central authority, or by anyone else (ignoring the negligible coins lost deflation).  No, the deflation from bitcoin is price deflation, which comes about because the economy has grown and so the same number of coins is divided over a larger economy.

If we had price inflation without money supply inflation with our fiat currencies, that wouldn't be theft.  It wouldn't make us happy, but no one would be getting the benefit any more than any one else.  Therefore Bitcoin's (eventual) price deflation is not stealing from anyone.

[Anonymous]

Deflationary currency is theft from holders of assets, the same way inflationary currency is theft from holders of money.

One loaf of bread is still one loaf of bread.

Well said. Kudos.

[SgtSpike]

I am not confusing price deflation with supply deflation.  I fully expect bitcoins to continue to be deflationary with regards to supply per user if it continues to grow, and eventually becomes widely adopted.

Ok, one loaf of bread is still one loaf of bread.  Isn't one dollar still one dollar?

The difference is in how much currency can a loaf of bread buy, or how many loaves of bread can a currency buy.  With a deflationary currency (i.e., a currency that inflates in price or value), it is theft from the holder of loaves of bread.  It moves value from the holder of loaves of bread to the holder of currency.  With an inflationary currency, (i.e., a currency that deflates in price or value), it is theft from the holder of currency.  It moves value from the holder of currency to the holder of loaves of bread.

[cointrepreneur]

How about this example

Person A and person B both have 100 bitcoins.

Person A just holds theirs and does nothing with them.

Person B goes into business. Person B buys a widget at wholesale prices, in order to be a widget retailer.
So say B buys a widget for 100 bitcoins in order to sell it to someone else. By the time B sells his widget the bitcoin has deflated and it takes less bitcoins to buy a widget. So he sells it for 99 bitcoins.

On the one hand, B has the same (or greater) amount of WEALTH but compared to A (who did nothing) he has fewer bitcoins.

A is the winner for doing nothing. Isn't this a problem for an economy when people who do nothing fair better than people who go into business?

(note: I am a huge supporter of bitcoins and their future, I'm just posting this as a philosophical question out of curiosity for good answers).

[Anonymous]

Eh, I think B just failed to make a viable business plan. You can make a business that turns more profit than 100 Bitcoins sitting incubated.

[cointrepreneur]

Eh, I think B just failed to make a viable business plan. You can make a business that turns more profit than 100 Bitcoins sitting incubated.

Well yes this is a simplified thought experiment. If the answer is that it just can't ever happen then I suppose that is an answer.

But this is basically the way retail business work.  (1) buy from a wholesaler at whole sale prices. (2) sell to the public at retail prices.

A widget is some generic thing and the bitcoin prices are intentionally made up.  Depending on what it is and how fast you can sell the widget it is not implausible that the value of a bitcoin rises faster than the profit margin.  That means you are always paying more in bitcoins for the widgets than you are able to get anyone to pay you for them later. (because now a bitcoin gets you more widgets than it used to).

Of course this means that a rational person just doesn't go into business, but that is the point - a viable currency shouldn't punish people who go into business with it.

I am playing devils advocate here. I am pro-bitcoin. I do think this is some kind of problem that deserves a serious solution though. Maybe it means some kinds of businesses can't be done with deflationary currencies but others can. It's not clear.

Also, to be sure, person A who did nothing did not make any money. It's just that they still have 100 bitcoins.  They have more wealth because now you can get more stuff with one bitcoin.  The person who went into business has the same exact wealth as before, even though they lost a bitcoin.  So the paradox (apparent (but possibly not actual) contradiction) is that someone who does nothing increases their wealth relative to someone who goes into business.

[SgtSpike]

Eh, I think B just failed to make a viable business plan. You can make a business that turns more profit than 100 Bitcoins sitting incubated.

Certainly right now, you cannot.  What has the last three months averaged as far as increase in value in bitcoins?  Something like a 1000% increase every month?  I'd love to see a business do the same.  Hopefully, values/prices will stabilize, but in the meantime, it behooves a business owner to have as little as possible in inventory, and as much as possible in bitcoins.  And as long as bitcoins are deflationary and continue to increase in value, it will continue to have this problem.

Now if bitcoins do become widely adopted, but continue to raise in value quickly, businesses will find their way around it in the form of higher margins.  We could see margins in the neighborhood of 100 to 200%, because that is the only way the business can assure their own profitability.  These higher margins of course result in higher prices, which devalues the bitcoin.  It'll be a circular fight, and there's no telling how things will really turn out.  But I agree - bitcoins are bad for business.  Inflation encourages business, asset holding, and investment.  Deflation discourages these things.  That's why most economists say that a small amount of inflation is absolutely necessary for a healthy economy.

[Anonymous]

These higher margins of course result in higher prices, which devalues the bitcoin.  It'll be a circular fight...

I'm glad we can see the same way. I have faith the market will sort this out.

[MoonShadow]

I am not confusing price deflation with supply deflation.  I fully expect bitcoins to continue to be deflationary with regards to supply per user if it continues to grow, and eventually becomes widely adopted.

Ok, one loaf of bread is still one loaf of bread.  Isn't one dollar still one dollar?

The difference is in how much currency can a loaf of bread buy, or how many loaves of bread can a currency buy.  With a deflationary currency (i.e., a currency that inflates in price or value), it is theft from the holder of loaves of bread.  It moves value from the holder of loaves of bread to the holder of currency.  With an inflationary currency, (i.e., a currency that deflates in price or value), it is theft from the holder of currency.  It moves value from the holder of currency to the holder of loaves of bread.

You are forgetting a very important factor in the  real economy.  That is, A needed that widget when he needed it.  If he could wait for it, and thus pay less bitcoin for it, then he would.  For the sake of argument, let's say that the widget in question was a refrigerator, a water heater, a washing machine; whatever.  If you refrigerator dies, do you say to your spouse "we can get it for less by doing without a refrigerator for another month"?  Do you think that works out?  Now, if the widget is something that A actually can do without, why would he buy it anyway?  The only possible answer is that it's something that he wants rather than needs.  And wants tend to be even less likely to be rationally delayed.  This is called the 'time preference' of money, and inflation certainly does increase the likelyhood that the holder is going to decide to spend sooner rather than later, but that is not necessarily a good thing.

[SgtSpike]

I am not confusing price deflation with supply deflation.  I fully expect bitcoins to continue to be deflationary with regards to supply per user if it continues to grow, and eventually becomes widely adopted.

Ok, one loaf of bread is still one loaf of bread.  Isn't one dollar still one dollar?

The difference is in how much currency can a loaf of bread buy, or how many loaves of bread can a currency buy.  With a deflationary currency (i.e., a currency that inflates in price or value), it is theft from the holder of loaves of bread.  It moves value from the holder of loaves of bread to the holder of currency.  With an inflationary currency, (i.e., a currency that deflates in price or value), it is theft from the holder of currency.  It moves value from the holder of currency to the holder of loaves of bread.

You are forgetting a very important factor in the  real economy.  That is, A needed that widget when he needed it.  If he could wait for it, and thus pay less bitcoin for it, then he would.  For the sake of argument, let's say that the widget in question was a refrigerator, a water heater, a washing machine; whatever.  If you refrigerator dies, do you say to your spouse "we can get it for less by doing without a refrigerator for another month"?  Do you think that works out?  Now, if the widget is something that A actually can do without, why would he buy it anyway?  The only possible answer is that it's something that he wants rather than needs.  And wants tend to be even less likely to be rationally delayed.  This is called the 'time preference' of money, and inflation certainly does increase the likelyhood that the holder is going to decide to spend sooner rather than later, but that is not necessarily a good thing.

Would we not be reducing the GDP of our economy from needs + wants to needs only then?  And why would that be a good thing?  If we could have more instead of less, why would we choose less?  Do it in the name of a deflationary currency?

[cointrepreneur]

I'm glad we can see the same way. I have faith the market will sort this out.

I see so many people saying things like this.  Where does faith like this come from?  Is it a statement of personal experience or is it confidence in a trusted authority? Or is it that for some of us the 'free market' has become part of our identity and not having faith in it is too much like heresy?

I do not know you so I am not really talking about you here. I just see people having faith in economic ideas a lot. This seems like an especially bad thing to have faith in. It adds to the irony that a lot of people have strong faith in economic ideas even when they make fun of people who have faith in other things.

I bet a lot of Fox News viewers literally have faith in "free markets" and a lot of MSNBC viewers have faith in Keynesianism. I doubt either group really has any good reasons for what they think, but both groups are likely to get angry at people who doubt them. This is the danger of false certainty.

I have been lurking on here long enough to have read several of your posts. I know you are not like the people I described in my last paragraph, and I am also inclined towards a confidence in 'the market'. It's a point of view I favor because it makes sense to me and fits in nicely with my other values. When people challenge the idea it seems a little like they are challenging me and I am likely to defend it with some zeal. That is why I caution myself to remember that 'the market is a benign force that inevitably brings about what's good for people' should not be an article of faith, and is probably, sometimes, wishful thinking.

[MoonShadow]

I am not confusing price deflation with supply deflation.  I fully expect bitcoins to continue to be deflationary with regards to supply per user if it continues to grow, and eventually becomes widely adopted.

Ok, one loaf of bread is still one loaf of bread.  Isn't one dollar still one dollar?

The difference is in how much currency can a loaf of bread buy, or how many loaves of bread can a currency buy.  With a deflationary currency (i.e., a currency that inflates in price or value), it is theft from the holder of loaves of bread.  It moves value from the holder of loaves of bread to the holder of currency.  With an inflationary currency, (i.e., a currency that deflates in price or value), it is theft from the holder of currency.  It moves value from the holder of currency to the holder of loaves of bread.

You are forgetting a very important factor in the  real economy.  That is, A needed that widget when he needed it.  If he could wait for it, and thus pay less bitcoin for it, then he would.  For the sake of argument, let's say that the widget in question was a refrigerator, a water heater, a washing machine; whatever.  If you refrigerator dies, do you say to your spouse "we can get it for less by doing without a refrigerator for another month"?  Do you think that works out?  Now, if the widget is something that A actually can do without, why would he buy it anyway?  The only possible answer is that it's something that he wants rather than needs.  And wants tend to be even less likely to be rationally delayed.  This is called the 'time preference' of money, and inflation certainly does increase the likelyhood that the holder is going to decide to spend sooner rather than later, but that is not necessarily a good thing.

Would we not be reducing the GDP of our economy from needs + wants to needs only then?  And why would that be a good thing?  If we could have more instead of less, why would we choose less?  Do it in the name of a deflationary currency?

No, not really.  Inflation just alters the time preferences of money not of wealth, which is notablely different.  To paraphrase a character in Cryptocrimicon, 'money is not wealth, but the corpse of wealth'.  This is no less true for Bitcoin.

[SgtSpike]

I am not confusing price deflation with supply deflation.  I fully expect bitcoins to continue to be deflationary with regards to supply per user if it continues to grow, and eventually becomes widely adopted.

Ok, one loaf of bread is still one loaf of bread.  Isn't one dollar still one dollar?

The difference is in how much currency can a loaf of bread buy, or how many loaves of bread can a currency buy.  With a deflationary currency (i.e., a currency that inflates in price or value), it is theft from the holder of loaves of bread.  It moves value from the holder of loaves of bread to the holder of currency.  With an inflationary currency, (i.e., a currency that deflates in price or value), it is theft from the holder of currency.  It moves value from the holder of currency to the holder of loaves of bread.

You are forgetting a very important factor in the  real economy.  That is, A needed that widget when he needed it.  If he could wait for it, and thus pay less bitcoin for it, then he would.  For the sake of argument, let's say that the widget in question was a refrigerator, a water heater, a washing machine; whatever.  If you refrigerator dies, do you say to your spouse "we can get it for less by doing without a refrigerator for another month"?  Do you think that works out?  Now, if the widget is something that A actually can do without, why would he buy it anyway?  The only possible answer is that it's something that he wants rather than needs.  And wants tend to be even less likely to be rationally delayed.  This is called the 'time preference' of money, and inflation certainly does increase the likelyhood that the holder is going to decide to spend sooner rather than later, but that is not necessarily a good thing.

Would we not be reducing the GDP of our economy from needs + wants to needs only then?  And why would that be a good thing?  If we could have more instead of less, why would we choose less?  Do it in the name of a deflationary currency?

No, not really.  Inflation just alters the time preferences of money not of wealth, which is notablely different.  To paraphrase a character in Cryptocrimicon, 'money is not wealth, but the corpse of wealth'.  This is no less true for Bitcoin.

But GDP is based on money exchanging hands, which would be based on the time preferences of money, would it not?

[realnowhereman]

I am not confusing price deflation with supply deflation.  I fully expect bitcoins to continue to be deflationary with regards to supply per user if it continues to grow, and eventually becomes widely adopted.

Well no.  You're just wrong.  The supply of bitcoins will reach approx 21 million.  Then there will be no more and no less (ignoring negligible losses).  How do you reconcile that with it being deflationary?

Ok, one loaf of bread is still one loaf of bread.  Isn't one dollar still one dollar?

No.  That's the whole point.  One dollar before the government prints some more is different from one dollar after the government prints some more.  The government can't print bread though.

The difference is in how much currency can a loaf of bread buy, or how many loaves of bread can a currency buy.  With a deflationary currency (i.e., a currency that inflates in price or value), it is theft from the holder of loaves of bread.  It moves value from the holder of loaves of bread to the holder of currency.  With an inflationary currency, (i.e., a currency that deflates in price or value), it is theft from the holder of currency.  It moves value from the holder of currency to the holder of loaves of bread.

No it isn't theft from the holder of bread.  Since the bread is still worth exactly what it was before the "deflation" or "inflation".

You are still confusing price deflation and supply deflation.  Nobody has "deflated" the currency when the supply is static.  The creation of the bread is what grew the economy, which is what caused the price deflation.  Therefore the bread is worth exactly the same as the currency it deflated.  The bread is just as much part of the economy as the Bitcoins.

Where do you think the extra value that goes into the held currency comes from?  It is the value created in the economy; the bread isn't transferred into the currency, it still exists and has value of its own.  It is the creator of the bread that gets the most undiluted benefit of it.  Just like when the government prints money it is they that get the benefit.

[Anonymous]

I'm glad we can see the same way. I have faith the market will sort this out.

I see so many people saying things like this.  Where does faith like this come from?  Is it a statement of personal experience or is it confidence in a trusted authority? Or is it that for some of us the 'free market' has become part of our identity and not having faith in it is too much like heresy?

I do not know you so I am not really talking about you here. I just see people having faith in economic ideas a lot. This seems like an especially bad thing to have faith in. It adds to the irony that a lot of people have strong faith in economic ideas even when they make fun of people who have faith in other things.

I bet a lot of Fox News viewers literally have faith in "free markets" and a lot of MSNBC viewers have faith in Keynesianism. I doubt either group really has any good reasons for what they think, but both groups are likely to get angry at people who doubt them. This is the danger of false certainty.

I have been lurking on here long enough to have read several of your posts. I know you are not like the people I described in my last paragraph, and I am also inclined towards a confidence in 'the market'. It's a point of view I favor because it makes sense to me and fits in nicely with my other values. When people challenge the idea it seems a little like they are challenging me and I am likely to defend it with some zeal. That is why I caution myself to remember that 'the market is a benign force that inevitably brings about what's good for people' should not be an article of faith, and is probably, sometimes, wishful thinking.

It's not merely faith in a market idea or theory. It's faith that people can and will act in their best interest and will inevitably have their desires met through their own labor and virtue. Tools do not work against the man if a rational man has complete control over them. Man is not going to let himself die of sticking himself with his own screwdriver -- in this case Bitcoin. If we cannot even believe in man and his potential, how can we believe in anything?

Bitcoin is left completely in the hands of individuals. This political experiment will show if man is capable of anything at all and if he is rational in his own right. I like to believe man is a capable being as I believe I know what is best for myself and that I can sustain myself. Can man not sustain without a pervasive system of violence and control?

This will be answered all in good time with Bitcoin. Bitcoin is pure and is truly the people's currency. If people cannot sustain through the synchronous voluntary motion of their whims, man is doomed. That's how I see it. We are just cattle at the slaughter if the people cannot handle responsibility over themselves.

[MoonShadow]

I am not confusing price deflation with supply deflation.  I fully expect bitcoins to continue to be deflationary with regards to supply per user if it continues to grow, and eventually becomes widely adopted.

Ok, one loaf of bread is still one loaf of bread.  Isn't one dollar still one dollar?

The difference is in how much currency can a loaf of bread buy, or how many loaves of bread can a currency buy.  With a deflationary currency (i.e., a currency that inflates in price or value), it is theft from the holder of loaves of bread.  It moves value from the holder of loaves of bread to the holder of currency.  With an inflationary currency, (i.e., a currency that deflates in price or value), it is theft from the holder of currency.  It moves value from the holder of currency to the holder of loaves of bread.

You are forgetting a very important factor in the  real economy.  That is, A needed that widget when he needed it.  If he could wait for it, and thus pay less bitcoin for it, then he would.  For the sake of argument, let's say that the widget in question was a refrigerator, a water heater, a washing machine; whatever.  If you refrigerator dies, do you say to your spouse "we can get it for less by doing without a refrigerator for another month"?  Do you think that works out?  Now, if the widget is something that A actually can do without, why would he buy it anyway?  The only possible answer is that it's something that he wants rather than needs.  And wants tend to be even less likely to be rationally delayed.  This is called the 'time preference' of money, and inflation certainly does increase the likelyhood that the holder is going to decide to spend sooner rather than later, but that is not necessarily a good thing.

Would we not be reducing the GDP of our economy from needs + wants to needs only then?  And why would that be a good thing?  If we could have more instead of less, why would we choose less?  Do it in the name of a deflationary currency?

No, not really.  Inflation just alters the time preferences of money not of wealth, which is notablely different.  To paraphrase a character in Cryptocrimicon, 'money is not wealth, but the corpse of wealth'.  This is no less true for Bitcoin.

But GDP is based on money exchanging hands, which would be based on the time preferences of money, would it not?

GDP is a terrible metric to depend upon.  The only reason that economists even use it is because they don't have any better metrics.

[MoonShadow]

There is a post over at Mish's Global Economic Trend Analysis blog that touches this subject nicely...

http://globaleconomicanalysis.blogspot.com/2010/11/miracle-of-survival-and-falling.html

[Anonymous]

We can't even form absolutely correct asumptions about our environment and if it will rain tomorrow. It's arrogant to think we can accurately measure, predict and manage interactions between human beings. Economics is not a science to be just looked at in numbers. We are not machines nor slaves to one.

[SgtSpike]

I am not confusing price deflation with supply deflation.  I fully expect bitcoins to continue to be deflationary with regards to supply per user if it continues to grow, and eventually becomes widely adopted.

Well no.  You're just wrong.  The supply of bitcoins will reach approx 21 million.  Then there will be no more and no less (ignoring negligible losses).  How do you reconcile that with it being deflationary?

Ok, one loaf of bread is still one loaf of bread.  Isn't one dollar still one dollar?

No.  That's the whole point.  One dollar before the government prints some more is different from one dollar after the government prints some more.  The government can't print bread though.

The difference is in how much currency can a loaf of bread buy, or how many loaves of bread can a currency buy.  With a deflationary currency (i.e., a currency that inflates in price or value), it is theft from the holder of loaves of bread.  It moves value from the holder of loaves of bread to the holder of currency.  With an inflationary currency, (i.e., a currency that deflates in price or value), it is theft from the holder of currency.  It moves value from the holder of currency to the holder of loaves of bread.

No it isn't theft from the holder of bread.  Since the bread is still worth exactly what it was before the "deflation" or "inflation".

You are still confusing price deflation and supply deflation.  Nobody has "deflated" the currency when the supply is static.  The creation of the bread is what grew the economy, which is what caused the price deflation.  Therefore the bread is worth exactly the same as the currency it deflated.  The bread is just as much part of the economy as the Bitcoins.

Where do you think the extra value that goes into the held currency comes from?  It is the value created in the economy; the bread isn't transferred into the currency, it still exists and has value of its own.  It is the creator of the bread that gets the most undiluted benefit of it.  Just like when the government prints money it is they that get the benefit.

Deflationary on a per-user basis, because once we reach 21 million (or probably before that), the growth in world population will outpace the growth in bitcoins less the deflation due to forever lost bitcoins.  It's deflationary on a per-user basis right now, because the growth in bitcoin acceptance is outpacing the growth in the currency itself.  It may be inflationary for a brief period of time, say, if the userbase isn't growing as quickly as new bitcoins are being minted, but I see that as an unlikely scenario if bitcoins are eventually adopted worldwide.

Ok, I think I finally see your point of view.  If currency inflates, then currency holders have less value in the marketplace - they may only be able to buy 5 loaves of bread instead of 10.  If currency deflates, then bread holders still have the same amount of value in their bread.  They may only be able to get 5 coins for their loaves of bread after deflation, versus 10 coins before deflation, but those 5 coins would still buy the same number of apples as 10 coins did before the deflation hit.

:facepalm:  Thanks for being patient with me.

So if deflation, on average, gives people more spending power in the marketplace, would that not drive prices up due to more demand?  And if that is the case, would it drive up prices enough to give a large enough margin for businesses to have an equal amount of capital investment as they would have with an inflationary currency?  It's interesting to think about...

[GideonGono]

No. You've got it all wrong. Inflation and deflation are just economic phenomena and neither are inherently theft. They become a tool of theft when combined with governmental power that monopolizes creation of currency and enforces legal tender laws. Without this anyone can trade freely to whatever they want to increase/preserve wealth. I think fiat currencies have skewed peoples minds. That stuff is not anything. It's just an IDEA used to facilitate trade and measure wealth. I.e. so that I can know how many chickens = how many cows.

If there is massive inflation or deflation that means the particular currency you are using is not a good money (anymore). Think of it as a physical product that makes trade easier just like a pc is for a store that sells online and in-person. What is happening with coinage and legal tender laws is that the govt declares that it has a sole monopoly on producing trade facilitators, then they proceed to lower quality and increase prices. It's the force that makes it theft, not the fact that someone else is benefiting.

As was said earlier, you still have 1 loaf of bread and you still have 1 dollar. You can still eat the bread and the dollar is still paper, so they still have their inherent use value. What has changed is their exchangability, which, is a highly subjective concept and depends on others' opinion of your dollar. You cannot own others' opinion on property which you may or may not own.

[andes]

Deflationary currency is theft from holders of assets, the same way inflationary currency is theft from holders of money.

I think SgtSpike is almost right, but I would not call it theft, unless you are forced or conned to hold that asset or currency against your interest. But look, if currencies are subjected to free markets as assets are, this whole deflation/inflation paradox dissolves. If currencies are monopolized as now, its impossible to avoid theft.

As someone said, there should be a separation of money-issuing and state, as there is a spearation of church and state. The issuing of money/currency should be a free enterprise thing, subjected to the laws of free markets. The best currencies should survive, and the bad ones perish. Currencies should compete and there should be plenty of choices at a given time in every country. Powerful entities like governments or big conglomerates should be banned with messing with the free market. This should be the ultimate purpouse of governments, protecting the people and the free enterprise.

If money becomes just a specialized comodity useful for transactions and preservation of wealth, the paradox of money vs assets dissolves. All of them are assets in the end, just as buying rent producing real estate is a way to preserve my wealth. Some assets will be more liquid, and some less, the so called "currencies" the most liquid of all, by definition.

Regarding deflation / inflation, please let the markets find a way to solve this problem. If a free market currency (like Bitcoin) appreciates too much, there will come another currency to capture part of this wealth (say Bitcoin Blockchain number 2). So in the end we should reach equilibrium.

I agree a lot with the last poster GideonGono on this thing.

Just my 2 bitcents.

[bytemaster]

To identify theft you must identify someone who got 'something for nothing'.

Increasing your balance at the Fed costs nothing, yet the increase in balance entitles the owner of the account to 'buy' a ton of real goods.  Thus society gets nothing and the money printer gets real goods.

Creating a new pizza increases your assets by 1 pizza, but has real costs that are close to the cost of production (or will be shortly as supply/demand reduce margins).

So the person who creates a pizza does not get something for nothing.  The person who holds the currency still has the same money and its money is only worth more because someone 'inflated' pizzas.  But the process of 'inflating pizzas' consumed other goods and services, 'cheese, wheat, and labor'.  Thus decrease in the price of pizza is offset by an increase in price of other goods.

As people make 'profits' they do so by increasing the total goods available to society.  So deflation lead by production means more goods for the same number of people, thus society is better off.

In reality, classifying fiat money printing as theft is the wrong way to look at it.  You had an option to store your wealth in other assets.  Inflation is closer to 'fraud', which started as issuing fraudulent bank notes promising to pay 'on demand' that which the banker did not have right to 'on demand'.  Fraud usually results in a transfer of wealth which is 'similar' to theft.  

Transfer of wealth is not by itself theft, what matters is who is breaking promises or deceiving, or threatening, in order to a achieve that transfer of wealth.

[qbg]

You are forgetting a very important factor in the  real economy.  That is, A needed that widget when he needed it.  If he could wait for it, and thus pay less bitcoin for it, then he would.  For the sake of argument, let's say that the widget in question was a refrigerator, a water heater, a washing machine; whatever.  If you refrigerator dies, do you say to your spouse "we can get it for less by doing without a refrigerator for another month"?  Do you think that works out?  Now, if the widget is something that A actually can do without, why would he buy it anyway?  The only possible answer is that it's something that he wants rather than needs.  And wants tend to be even less likely to be rationally delayed.  This is called the 'time preference' of money, and inflation certainly does increase the likelyhood that the holder is going to decide to spend sooner rather than later, but that is not necessarily a good thing.

Would we not be reducing the GDP of our economy from needs + wants to needs only then?  And why would that be a good thing?  If we could have more instead of less, why would we choose less?  Do it in the name of a deflationary currency?

This situation has existed in the case of electronics for multiple decades and the world hasn't imploded yet.

[benjamindees]

I'll just point out that the supply of Bitcoins actually inflates.  And it won't begin to deflate until the amount lost is higher than the amount created.  When that happens, obviously it will not be due to theft, but due to idiots who lose their Bitcoins.

[AntiVigilante]

Let me answer with a question:

I decide to store some type of computer cable, and suddenly the manufacturers stop making it. Now there is a lot of people that want that cable replacement and a very reduced supply, therefore the price goes up. Am I stealing from someone?

This is a special case, while my example is true for any kind of produced goods at any time.

No it's not. Yours is the curve of a start up enterprise. And his special case actually goes the same way. After he pays his loans a bit his monthly payment on them falls and every new customer gets a cheaper cable.

People use the label deflationary because they do not know of a word for limited not reduced money supply. Second the very fact that transactions exist reduces risk therefore prices fall again. This whole idea of the next guy paying less than I did being wrong is pure desk jockey fantasy.

Bitcoins and any other item do not have a price. They have a moving pricing window. Just like a slinky toy occupies a variable amount of space. There is a window in which these things exist and because of that window, their prices are more or less entangled with other prices.

The fact that the guy buying a pizza the next day got a better deal is just HOW LIFE IS. Trying to interfere with that is interfering with fundamental reality. It's not even about economics anymore. Reality is inherently chaotic at a small enough scale and trying to force things only results in blowback that everyone has to suffer.

[AntiVigilante]

Deflationary on a per-user basis, because once we reach 21 million (or probably before that), the growth in world population will outpace the growth in bitcoins less the deflation due to forever lost bitcoins.  It's deflationary on a per-user basis right now, because the growth in bitcoin acceptance is outpacing the growth in the currency itself.  It may be inflationary for a brief period of time, say, if the userbase isn't growing as quickly as new bitcoins are being minted, but I see that as an unlikely scenario if bitcoins are eventually adopted worldwide.

Ok, I think I finally see your point of view.  If currency inflates, then currency holders have less value in the marketplace - they may only be able to buy 5 loaves of bread instead of 10.  If currency deflates, then bread holders still have the same amount of value in their bread.  They may only be able to get 5 coins for their loaves of bread after deflation, versus 10 coins before deflation, but those 5 coins would still buy the same number of apples as 10 coins did before the deflation hit.

:facepalm:  Thanks for being patient with me.

So if deflation, on average, gives people more spending power in the marketplace, would that not drive prices up due to more demand?  And if that is the case, would it drive up prices enough to give a large enough margin for businesses to have an equal amount of capital investment as they would have with an inflationary currency?  It's interesting to think about...

The inpatient is now an outpatient. Next.

[bcearl]

Deflationary currency is theft from holders of assets.

No it's not. People are not entitled to other people's money.

You may believe that, but don't expect this idea to get broad acceptance.

Money is not a natural thing, but artificial. We create it to serve certain purposes. The wished purpose defines how the money is like, not the other way around.

[caveden]

Neither deflation nor inflation are theft. The value of your property is not an intrinsic feature of your property. If the acts of some people increase or decrease the value of your property, without affecting the property itself, this is not a crime at all. It's valid for any kind of property.

The true aggression in modern times inflation is the fact that people are forced to accept the money the government monopolizes as means of payment. And then the government can inflate this money at its own profit. The ethical problem isn't on inflation itself, it is in money monopoly.
And besides the aggression of the money monopoly, there's the aggression of intellectual property too. Nobody owns an image. If you want to print a particular image in a particular piece of paper, nobody has the right to kidnap you for that. And that includes printing dollar bills, or any fiat money bills. Of course, that would change if such image represented a contract. You cannot make a contract in the name of somebody else, that's fraud. So, although counterfeiting dollar bills is perfectly legitimate from an ethical point of view, counterfeiting bills redeemable in bitcoin or whatever else is a contract fraud, since you'd be saying somebody else will pay your debt, without the authorization of this person.

[realnowhereman]

Caveden is correct.

The effects on prices and value of money, debt and credit, of deflation or inflation triggered by changes in the economy all come out as a wash.  It is only outside manipulation that changes that balance.  When a government prints money, even in a growing economy, they get the benefit of the printed notes rather than those who grew the economy.

Consider what happens though in a world with a static money supply (like Bitcoin).  When the economy grows, we get a bigger economy divided over the same number of currency units.  Each unit must therefore be worth more.  That's the standard line, but think about how it happens.  Someone adds value to an economy.  Let's take the standard example: a baker.  The baker takes component parts of bread, adds value to them by turning them into a loaf and sells them.  The difference in price between the price of the ingredients and the price of the final product is economic growth.  Since it is the baker who makes the bread and sells it, it is he who sees the benefit from deflation, his profit is the deflationary pressure.  He can now buy more than he could when he just had ingredients.  If he finds a way of more efficiently using his ingredients, he can sell more bread (by virtue of being able to lower the price, and so bread buyers all benefit as well).

You've got to think of inflation and deflation as being like making a drink of cordial-based drink.  Fill a glass with water.  Now pour a bit of the orange cordial in it.  It starts out unmixed, you can see the streaks of cordial in the water.  That's inflation/deflation.  When the government prints money, they get the use of the newly printed money, and so don't suffer any ill effects; as the money mixes into the rest of the economy, prices go up to compensate.  Not instantly though, only over time as the effects of the printed money work their way in.

The deflationary baker on the other hand is exactly as it should be: the person who added value to the economy gets the most benefit, and that benefit finds its way to others by their own adding of value to the economy -- that's how they get the baker's money.

When the money supply is fixed; inflation and deflation are caused by profit.  Deflation being the profit of the whole economy in aggregate.  Everyone gets the advantage because products become cheaper.

This is why I make such a fuss about distinguishing between money supply inflation and deflation and price inflation and deflation.  Inflating the money supply is theft, it definitely is.  Price deflation from a growing economy with a fixed supply is not -- it is each person receiving the benefit of the effort they put in.

[Capitan]

How is it stealing? His one bitcoin is now worth 1.1 pizzas. His net worth is 1 BTC + 2*.99 (pizzas' value) = 2.98. That's more than he had before.

What you are illustrating is that he devalued pizzas by increasing their supply. But you example is too simplistic because you assume the total currency in circulation determines the price of pizza. Not all the BTC in existence are seeking pizzas. Probably only 9-10 BTC at any given time are in the market for pizza. Even if you swapped pizza for land, the richest people might not want any land at all, or might not want land once they have 1 acre to live on, etc. Price is determined by supply and demand.

[bcearl]

But you example is too simplistic because you assume the total currency in circulation determines the price of pizza. Not all the BTC in existence are seeking pizzas. Probably only 9-10 BTC at any given time are in the market for pizza. Even if you swapped pizza for land, the richest people might not want any land at all, or might not want land once they have 1 acre to live on, etc. Price is determined by supply and demand.

It is simple, but it's not "too simplistic", because it does not matter whether I call the goods pizzas, cars or houses. It works as a model.

[Hunterbunter]

Just think of this simple example:

Maybe you start with 100 units of currency (e.g. bitcoins) and 100 units of goods (e.g. pizzas). Then you get one pizza for one bitcoin.

Now, these 100 bitcoins are owned by 10 users with the following distribution:

user 1: 20
user 2: 20
user 3: 20
user 4: 20
user 5: 5
user 6: 5
user 7: 5
user 8: 2
user 9: 2
user 10: 1

Now user number 10 makes a pizza. this means we have 100 bitcoins and 101 pizzas. This means, for one bitcoin you now get 1.01 pizzas.

What does this mean? This means, that every user gets extra pizza. And the users with more coins get more extra pizza, although it was only user 10 who made the pizza.

And even when he wants to sell the pizza: He will not get 1 bitcoin for it. He will get about 0.99, because that's the pizza price when there are 100 bitcoins and 101 pizzas on the market.

tldr; your example is a bit like bubble and squeak; mixture of ideas that look ugly, taste yummy, have a grain of truth and a whole lot of tomato sauce.

the long version:
There is a flaw in your initial premise: you can't start an economy by jumping straight into the price: 100 pizzas, 100 bitcoins, therefore 1 pizza = 1 btc is an unreliable assumption.

That means that if all pizzas are sold in one day (they can be stored and eaten later, or are the only thing that you can buy with BTC), the pizza maker has 100 btc, and everyone else has zero BTC and a varying number of pizzas. How do the others then trade their own goods when they produce them? the only person that can buy is the pizza maker, and so the economy has already died. What also of the flour? wheat? cheese? who made all these things? What did they get for their work?

What actually happens is that someone farms or mines some raw materials, and the economic chain begins, finishing either as sewerage or at the tip. A better description of a simple economy might be: user 1 farms lots of wheat, and user 2 reckons there's value to making flour, since user 3 is complaining that he can't find any flour and needs it to make pizza. User 4 is busy milking and maintaining cows to make cheese, next to 5 who is growing vegies, while 6 is making tools that you could, if you want to, make a pizza with. 7 is making ovens to cook things in, waving to 8 walking by to chop wood to build houses and shops, and 9 is mining coal to burn, and 10...is a lazy bum doing nothing. That's a very simple economy. As long as someone is producing something that cannot be immediately repaid (ie an oven is worth 10 days work, a pizza is worth 1 day's work, so the oven maker accepts a pizza plus 9 days worth of future pizzas for his oven, in the form of pizza tokens or BTCs).

From your example, I'm not quite sure you understand how currencies work; btc's, like every other currency, are a placeholder for work already done, that isn't paid for immediately. Not paid for? Whaaaaat? I gave him BTC! I paid for it! Kinda did, but its only half the transaction.

If you make a pizza for someone, you can either trade it directly for, say, a bunch of apples and vegies, or for currency while you wait for someone to come along with something you actually want. You give them your "you did some work for the group" note, the btc. In the modern world, we're used to thinking of money as the payment itself, but it's not. Your boss gave you that money, because he had nothing else of value you wanted for the work you did for him. You know you can use that money elsewhere, but this is what's happening:

1. You are given money for doing work, because whoever commissioned that work didn't produce something that you actually wanted for the time you put in. 10 hours of painting = painted house...you don't want that, so are given money the boss had in his pocket.
2. You take your money out and about with you, and find a pizza, and you're hungry, and it's win in every sense of the word.
3. You give your money to the pizza maker, because you have nothing else of value that the pizza maker wanted "paintbrush? no? sigh k...btc?", and he knows he can trade it later.
4. From your perspective, the reward for your work for painting the house was the pizza. NOT THE MONEY. The money just allowed the painting commissioner to buy you a pizza for the work you did. He also earned that money for doing work for someone that couldn't pay him directly, so gave him money instead. You could save a portion of this money for retirement, to pay for things when you can no longer work for them but aren't dead yet.

5. The pizza maker wants a painted house, so gives money to the guy who gave you money for painting it. Everyone did work for someone else, and everyone got what they wanted (except the paint commissioner, he still only has money )

In your example, the people with BTC have done work for the other people and haven't received their rewards yet. User 10 should definitely be making pizza, or better yet, something else that even the pizza maker would want....cos then he could guarantee pizzas for life! Spending his last BTC on the ingredients to make maybe 5-10 pizzas would be a waste of time unless he wanted to drive the existing pizza maker out of business by making a better quality product in less time. In which case, him and the pizza maker would swap roles, and the pizza maker would then go on to invent the calzone and change everything.

There is also a lag between addition of money to the pool, and change in prices. So making that extra pizza (or forging 100 extra BTC) is stealing from the existing pizza maker (10 people paying old pizza maker down to 9 people paying old pizza maker and 1 new pizza maker, also known as competition), but that has nothing to do with deflation, and the price would only go down if the new pizza maker wanted to attract business away from old pizza maker, or if money was destroyed and there just wasn't enough to go around so prices were forced down.

Generally:
Inflation benefits those who create it and spend first, hence why debt is normal with current world currencies.
Deflation benefits those who destroy it and spend last, hoarders can slowly grind an inflexible currency to an economic standstill.
Both of these apply to $, BTCs, pizzas, shovels, masks and umbrellas.

In terms of stealing:

Inflation: if you inflate the supply of money out of the group's control - you have to use the currency that I print at whim - you are stealing purchasing power from others.

Deflation: If you try to deflate the currency, all you can destroy is your own - that is, everyone owes you stuff which you've worked for, but haven't been paid in goods/services for, only in money - so if you destroy your own currency, everyone else with BTC is "stealing" from you by taking the work you did for them for free, and you could never buy stuff to replace the work you did. This would only be a problem if say a government said "k everyone destroy half their money. Go on, I said so!" while they don't destroy theirs...essentially this is a reverse inflation, and weird...taking control of supplied inflation is an easier pill to swallow.

BTCs are a fixed currency. There is around 0.1-0.2% inflation built in per day reducing over time to 21M shares then ending, and slow accidental deflation after that. People losing "track" of the work they did for others and haven't claimed yet, and can now never claim, isn't exactly stealing is it?

[Capitan]

But you example is too simplistic because you assume the total currency in circulation determines the price of pizza. Not all the BTC in existence are seeking pizzas. Probably only 9-10 BTC at any given time are in the market for pizza. Even if you swapped pizza for land, the richest people might not want any land at all, or might not want land once they have 1 acre to live on, etc. Price is determined by supply and demand.

It is simple, but it's not "too simplistic", because it does not matter whether I call the goods pizzas, cars or houses. It works as a model.

Yes, it is too simplistic because of your assumptions about how the value/price of a pizza is determined. See my notes about supply and demand. Or take a basic econ class. The only reason I mentioned property instead is that it's a good that isn't consumable, so that was to make the example even more simple.