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Author Topic: Isn't deflation theft, too?  (Read 4626 times)
cointrepreneur
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June 13, 2011, 06:36:30 PM
 #21

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.




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June 13, 2011, 06:51:44 PM
 #22

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.
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June 13, 2011, 06:54:39 PM
 #23

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.
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June 13, 2011, 07:30:00 PM
 #24

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.

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
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June 13, 2011, 07:40:57 PM
 #25

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
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June 13, 2011, 07:41:25 PM
 #26

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.




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June 13, 2011, 07:48:05 PM
 #27

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.

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
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June 13, 2011, 07:58:52 PM
 #28

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?
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June 13, 2011, 08:16:23 PM
 #29

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.

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June 13, 2011, 08:41:31 PM
 #30

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.
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June 13, 2011, 08:59:19 PM
 #31

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.

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
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June 13, 2011, 09:02:33 PM
 #32

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

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
Anonymous
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June 13, 2011, 09:04:18 PM
 #33

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.
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June 13, 2011, 10:32:41 PM
 #34

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...
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June 14, 2011, 02:03:09 AM
 #35

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.

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June 14, 2011, 02:45:48 AM
 #36

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.
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June 14, 2011, 03:19:11 AM
 #37

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.

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June 14, 2011, 03:50:04 AM
 #38

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.
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June 14, 2011, 08:08:50 PM
 #39

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.

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June 15, 2011, 03:33:31 AM
 #40

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.

Proposal: http://forum.bitcoin.org/index.php?topic=11541.msg162881#msg162881
Inception: https://github.com/bitcoin/bitcoin/issues/296
Goal: http://forum.bitcoin.org/index.php?topic=12536.0
Means: Code, donations, and brutal criticism. I've got a thick skin. 1Gc3xCHAzwvTDnyMW3evBBr5qNRDN3DRpq
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