Bitcoin. In no way deflationary.

[Spendulus]

Atm Bitcoin is inflationary due to the new coins mined.
But in the long run Bitcoin is deflationary by the amount of coins lost.

The article uses, as do you, a meaning of inflationary based on percent new coins added, but that isn't correct.  Inflation could also occur with fewer coins, with higher monetary velocity, or it could NOT OCCUR, with more coins, but with usage increasing at a similar rate as new coins.

There is also the "latent inflation", which is existent but yet to be realized in price levels on the street, and this is typically seen when governments start printing money like crazy.  I suppose there could be some similar thing with bitcoins.

This is a sizable quantity of words which do not seem to carry any sort of meaning. If you'd be kind enough to proceed systematically from some sort of commonly known point it'd probably help.

Well, the commonly known points consist of the thousands of year old abstractions understood from observations ....  here's a first cut.

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

Secondly, we can observe these phenomena and comment on them vis a vis Weiner Republic, US 1970s inflation, Spain 1950s, more recently, Argentina.

The simple generalizations I noted are all reasonable.

Oh, regarding "good analogy"...I guess what I was trying to say is that a "good analogy" might be one that was understandable by a stupid person, or something like that...not something highly refined and subtle.  There's an opposite argument, of the following type (which I sort of like):

"Did you hear the joke about the airplane?"

"Nope."

"Oh...I guess it flew right over your head."

And going down this road, we can in fact generate entire strata of dialects full of innuendo, jokes and insults which people right in the conversation do not understand, Cockney slang for example.

[1715072351]

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[MPOE-PR]

Yes, something like that, except that GOLD 2.0 would probably continue to be the focus of the larger bitcoin community for many years to come... Until the community finally succeeds at creating yet another MMORPG economy, which will eventually become a ghost town when someone invents a much better MMORPG economy, offering bitcoin miners the opportunity to explore new technological advances in a GOLD 3.0 era.

That Bitcoin is the functional equivalent of WoW gold is a long established point of fact.

[myrkul]

Yes, something like that, except that GOLD 2.0 would probably continue to be the focus of the larger bitcoin community for many years to come... Until the community finally succeeds at creating yet another MMORPG economy, which will eventually become a ghost town when someone invents a much better MMORPG economy, offering bitcoin miners the opportunity to explore new technological advances in a GOLD 3.0 era.

That Bitcoin is the functional equivalent of WoW gold is a long established point of fact.

I've often wondered what an MMO with a non-inflationary currency would look like.

Now I know?

[MPOE-PR]

And going down this road, we can in fact generate entire strata of dialects full of innuendo, jokes and insults which people right in the conversation do not understand, Cockney slang for example.

While the subtleties, complexities and general mystique of the forum quotation syntax being apparently outside your zone of comfort might suggest this isn't exactly your cup of tea, it's nevertheless what Bitcoin is all about: entire strata of dialects etc.

That aside, your "thousands of years" and other references are both weak and the hallmark of ignorance. I don't think we can be friends, and I don't think you have any sort of future here.

[BTConomist]

I've often wondered what an MMO with a non-inflationary currency would look like.

Now I know?

That's exactly my point!!! Now, how long before we go back to an inflationary MMO currency?

[myrkul]

I've often wondered what an MMO with a non-inflationary currency would look like.

Now I know?

That's exactly my point!!! Now, how long before we go back to an inflationary MMO currency?

Why would we? Have you seen the prices of a mechano-hog on the WoW market?

Compare that to the motorcycle that was recently purchased with BTC.

I'll take BTC, thanks.

[drhobomanxxiii]

And how exactly do you see this happening when hoarding seems to be everyone's favorite pastime? As you can see, lost coins don't drive BTC's deflation... No spending = no deflation.

No spending doesn't mean no deflation. Besides, if the only thing that's being traded is USD for BTC, that's still spending.

But here's why you're wrong on the no spending = no deflation idea...

If people horde the currency rather than spend it (rather, their demand for the currency increases,) then there is less of that currency actually being circulated to service the function of exchange. This will naturally create higher equilibrium prices as defined in that currency than would come about if people were to spend all that they had been hording.

As for deflation in the money supply sense, that one is dependent upon how you measure the money supply. If you measure only what is being circulated, then reducing the number of coins being spent necessarily reduces the money supply.

[MPOE-PR]

No spending doesn't mean no deflation. Besides, if the only thing that's being traded is USD for BTC, that's still spending.

But here's why you're wrong on the no spending = no deflation idea...

If people horde the currency rather than spend it (rather, their demand for the currency increases,) then there is less of that currency actually being circulated to service the function of exchange. This will naturally create higher equilibrium prices as defined in that currency than would come about if people were to spend all that they had been hording.

As for deflation in the money supply sense, that one is dependent upon how you measure the money supply. If you measure only what is being circulated, then reducing the number of coins being spent necessarily reduces the money supply.

Actually that entire spending deflation thingie is amply discussed in Let's dig a little deeper into this entire deflation "problem".

[drhobomanxxiii]

Actually that entire spending deflation thingie is amply discussed in Let's dig a little deeper into this entire deflation "problem".

Uhh, I don't think you really got what was being talked about there... That blog post really doesn't hit the issue at hand.

I was referring back up to BTConomist's claim that there isn't deflation without spending -- that hoarding doesn't cause deflation. The article referred some to turkeys and oil (a reference to products/real wealth available to purchase,) but it doesn't talk about how hoarding of a currency changes the money supply or how that changes the way money is valued against products or services.

[MPOE-PR]

Actually that entire spending deflation thingie is amply discussed in Let's dig a little deeper into this entire deflation "problem".

Uhh, I don't think you really got what was being talked about there... That blog post really doesn't hit the issue at hand.

I was referring back up to BTConomist's claim that there isn't deflation without spending -- that hoarding doesn't cause deflation. The article referred some to turkeys and oil (a reference to products/real wealth available to purchase,) but it doesn't talk about how hoarding of a currency changes the money supply or how that changes the way money is valued against products or services.

I like people who spend more time typing than reading. Did you actually read the linked article or did you just ineptly skim it?

[drhobomanxxiii]

I like people who spend more time typing than reading. Did you actually read the linked article or did you just ineptly skim it?

I'm getting the feeling you didn't read the article, even though I surmise that you wrote it?

By all means, there are some good ideas that are presented in the article, but perhaps you were thinking of another one if you're trying to respond to the arguments at hand, because this one just doesn't address the issues being discussed. Essentially, this article is about consumerism and ecology rather than issues surrounding deflation in relation to the money supply.

By the way, I agree with the point about inflation encouraging consumerism, and I agree that we would be in a better world if there wasn't this built in disincentive to save/invest in the future.

And one more thing, the relation of the supply of dollars to turkeys is flawed in that any actual currency will always have more supply than all of what could possibly be bought in the connected (or nearly connected) market than what the current price multiplied by the supply of any good will be... This is because the currency is chasing after more than just that good... Essentially, that portion of the argument does not prove the point that there's an ecological problem, else you would make the claim about any monetary unit.

Did I answer your question? I'm rather certain I actually read the article (as well as that which was linked in the original post.) You should really stop making it a habit of being condescending to people you don't know.

[CanadianGuy]

Atm Bitcoin is inflationary due to the new coins mined.
But in the long run Bitcoin is deflationary by the amount of coins lost.

The article uses, as do you, a meaning of inflationary based on percent new coins added, but that isn't correct.  Inflation could also occur with fewer coins, with higher monetary velocity, or it could NOT OCCUR, with more coins, but with usage increasing at a similar rate as new coins.

There is also the "latent inflation", which is existent but yet to be realized in price levels on the street, and this is typically seen when governments start printing money like crazy.  I suppose there could be some similar thing with bitcoins.

This is a sizable quantity of words which do not seem to carry any sort of meaning. If you'd be kind enough to proceed systematically from some sort of commonly known point it'd probably help.

I also did not see the analogy.

Let's illustrate the illustrative analogy by the help of an illustrative analogous table:

Thesis. In the general discussion of currency (A) at issue is the problem of inflation (B). The fact is that Bitcoin allows creation of new currency (C) through market-controlled mechanisms (D) but not through fiat, or if you prefer political, mechanisms (F).

Analogy. In the general discussion of human life (A') at issue is the problem of procreation (B'). The fact is that marriage allows the creation of new people (C') through intra-marriage mechanisms (D') but not through public, or if you prefer orgiastic, anonymous, polyamorous, loser-gets-some-action-too mechanisms (F').

Therefore bitcoins are the analogue of married women, Bitcoin (as a protocol) the analogue of marriage, politics the analogue of irresponsible, venereal-disease ridden, slovenly, high-risk sexual behaviors. Finally Bitcoin finance is the analogue of wholesome family relations.

A pregnant analogy, perhaps. And a pretty clever one at that.

Are you for real?  The average person does not digest that sort of thing.  An analogy should be a way of describing a complex manner in "lamens terms", not further complicating it. 

[MPOE-PR]

Are you for real?  The average person does not digest that sort of thing.  An analogy should be a way of describing a complex manner in "lamens terms", not further complicating it.  

Yes I'm for real. Not my analogy, and not your place to say what it's for now is it? Not normally spelled "lamens" either.

I'm getting the feeling you didn't read the article, even though I surmise that you wrote it?

You surmise wrongly. That's unsurprising.

Let's make a simple mental experiment. We both sit down at a table in your favourite fast-food-joint-masquerading-as-an-eatery. I wouldn't eat there more than I'd eat at the gas station, but you're you. I place in front of you a complete menu of whatever they have on tap and a note, which says "Redeemable tomorrow for two complete menus". You get to pick one, and just one. Either the note or the "food". So what do you do ? Do you eat the shit or wait till tomorrow ? Depends on how hungry you are, right ?

Tomorrow comes, and here we are again : me stuck nine feet under the biofilm, disgustedly mingling with the lower classes and you in your natural element. I place in front of you two complete menus of their crap, and two notes. Each note says, "Redeemable tomorrow for two complete menus". Do you eat the shit or wait another day ?

One thing's for sure : you will not be waiting forever.

How is this not about "the question at hand"? Deflation does not prevent spending. Deflation simply prevents misallocation of resources.

I assure you that in your case my condescension is amply merited. You don't know how to spell "hoard" and "hoarding", for instance. This is not a mistake, this is illiteracy. This is not a problem limited to spelling either; your approach to this discussion comes from a rich vein of ignorance about words and their meanings, and from the clearly entrenched practice of "surmising" superficial relations that are about on the level of what a kid trying to guess the etymology of words might come up with.

[CanadianGuy]

100 bitcoins says MPOE-PR is shorter than 5'7
who's in?

[drhobomanxxiii]

You surmise wrongly. That's unsurprising.

You're at least very closely related to the person who did write it, if any of the connections that your account has with the supposed author are accurate.

Let's make a simple mental experiment. We both sit down at a table in your favourite fast-food-joint-masquerading-as-an-eatery. I wouldn't eat there more than I'd eat at the gas station, but you're you. I place in front of you a complete menu of whatever they have on tap and a note, which says "Redeemable tomorrow for two complete menus". You get to pick one, and just one. Either the note or the "food". So what do you do ? Do you eat the shit or wait till tomorrow ? Depends on how hungry you are, right ?

Tomorrow comes, and here we are again : me stuck nine feet under the biofilm, disgustedly mingling with the lower classes and you in your natural element. I place in front of you two complete menus of their crap, and two notes. Each note says, "Redeemable tomorrow for two complete menus". Do you eat the shit or wait another day ?

One thing's for sure : you will not be waiting forever.

How is this not about "the question at hand"? Deflation does not prevent spending. Deflation simply prevents misallocation of resources.

The issue isn't about deflation preventing spending. You're putting the cart before the horse here. The discussion was on how hoarding affects deflation.

The fact that you've missed this repeatedly is telling me that you're really not worth any more of my time. I've already explained not only that this is a different issue, but that the article you linked includes points that I agree with. I'm rather certain that I've made it clear I understand what those article(s) are attempting to say.

Also, for future reference, it's wise to link to more than a single source time after time. If you wrote it, then fine, but you suggested otherwise already, and even if you wrote it there should be links to outside sources within the articles rather than further linking within the blog.

[Impaler]

Can we just agree that EVERYONE Austrian or Keynesian expects the exchange rate for real goods and services against BTC will rise and BTC's will buy more in the future.  All you Austrians have been arguing that will happen, have been advocating people hoard coins in anticipation of future consumption higher then the consumption deferred to buy and hoard the coins and so far (outside of some crashes) your prediction has been correct, BTC appreciated massively.

Now if a Keynesian when using the term 'deflation' means that price appreciation then by golly they are correctly describing BTC by what that word means to THEM.  If someone else with this weird idea that these words mean only nominal changes in money supply says BTC is inflating then yes they are also right by what that word means to them.  All we have here is a disagreement over what words mean, not the nature of BTC which everyone agrees on undeniable fact, that of growing supply and appreciation in value.

Now I'm going to argue that the so called 'Keynsian' (really everyone excluding a few wackos) definition of inflation/deflation is correct.  Why because it actually MEANS something to an economy and an individual, where as the nominal money supply tells us nothing about an economy or what to do as an individual.  Real inflation is an incentive to spend, real deflation is an incentive to save, BTC clearly falls under that latter kind of incentive structure (the Austrian and Keynsian would now have an actual disagreement over if this is good or bad).  If I make a statement about nominal money supply while ignoring the population of users, the quantity of production and the demand for consumption of those users I've ignored so many CRITICAL factors that I no longer say anything meaningful about the signals being sent, are individuals under an incentive to spend or to save, I haven't said one way or the other unless I make the assumption that ALL the other factors are constant which this narrow definition explicitly excludes if it mean ONLY nominal money supply.

And you know who else agrees with Mr. Keynes on this definition, VON MISES, quoted directly from Theory of Money and Credit, at http://archive.mises.org/19306/inflation-and-deflation-austrian-definitions/

an increase in the quantity of money (in the broader sense of the term, so as to include fiduciary media as well), that is not offset by a corresponding increase in the need for money (again in the broader sense of the term), so that a fall in the objective exchange-value of money must occur.

[drhobomanxxiii]

And you know who else agrees with Mr. Keynes on this definition, VON MISES, quoted directly from Theory of Money and Credit, at http://archive.mises.org/19306/inflation-and-deflation-austrian-definitions/

an increase in the quantity of money (in the broader sense of the term, so as to include fiduciary media as well), that is not offset by a corresponding increase in the need for money (again in the broader sense of the term), so that a fall in the objective exchange-value of money must occur.

That's a quote taken well out of context. Mises would acknowledge the semantics of price inflation/deflation, but he would stick to the supply issue of it.

But as you said, that's all semantics.

I'm responding to you to mention that there is in fact reason to look at the supply of money, and more importantly, changes in that supply. This is because money is a non-neutral good, and prices take time to change through an economy.

If you are to expand the supply of money exactly with the population, it isn't as simple as just saying that prices will adjust accordingly. You must know the qualitative issues that surround the means by which the supply of money was increased. If that money goes first to X individual, then that individual benefits most from the newly created money regardless of the aggregate data surrounding the change involved. Likewise, person Y who receives the new money (as in, who is last to adjust to the change in supply,) is actually made worse off because of the lower purchasing power of their money in the time until prices adjusted.

This is why the issue of "price stability" is really impossible to answer for the "best" outcome. There is no such thing as price stability when the market of millions of goods have independently changing prices. You may be able to make aggregates of the prices (CPI, PPI, etc,) but those aggregates hide the meaningful information that prices give to an economy.

[drhobomanxxiii]

A way to better think about the issue of qualitative analysis in the change of the money supply is to see how someone feels when they lose their Bitcoin wallet. This is the exact opposite of the inflationary mechanism described above.

[Impaler]

I'm responding to you to mention that there is in fact reason to look at the supply of money, and more importantly, changes in that supply. This is because money is a non-neutral good, and prices take time to change through an economy.

If you are to expand the supply of money exactly with the population, it isn't as simple as just saying that prices will adjust accordingly. You must know the qualitative issues that surround the means by which the supply of money was increased. If that money goes first to X individual, then that individual benefits most from the newly created money regardless of the aggregate data surrounding the change involved. Likewise, person Y who receives the new money (as in, who is last to adjust to the change in supply,) is actually made worse off because of the lower purchasing power of their money in the time until prices adjusted.

This is why the issue of "price stability" is really impossible to answer for the "best" outcome. There is no such thing as price stability when the market of millions of goods have independently changing prices. You may be able to make aggregates of the prices (CPI, PPI, etc,) but those aggregates hide the meaningful information that prices give to an economy.

No one denies that the supply of money is a FACTOR that can contribute to inflation/deflation, and yes how new money is added (or old money removed) has massive effects and has to go through a messy process of rippling through the economy to rediscover new equilibrium points (and some people get screwed in this process).  None of that is even remotely in dispute, you seem to be assuming I support inflation simply because I don't spit on Keynes grave every time I mention him as is the normal etiquette here on the forums.

I am simply arguing that deflation/inflation as terms describing the change in the purchasing power of money are useful and meaningful and the orthodox meaning of these words amongst ALL economists.  The deeper ramifications, goodness badness, supply vs demand side mumbo-jumbo is irreverent here because I'm just trying to point out that semantically their is no disagreement.

And I have no idea what your lost wallet statement is supposed to mean as that's not inflationary by anyone's book, losing a crytpo coin wallet decreases money supply and all things being equal will cause deflation if it is not being offset by an equivalent decline in demand for money.  Mises and Keynes agree on this simple point.

[Spendulus]

And going down this road, we can in fact generate entire strata of dialects full of innuendo, jokes and insults which people right in the conversation do not understand, Cockney slang for example.

While the subtleties, complexities and general mystique of the forum quotation syntax being apparently outside your zone of comfort might suggest this isn't exactly your cup of tea, it's nevertheless what Bitcoin is all about: entire strata of dialects etc.

That aside, your "thousands of years" and other references are both weak and the hallmark of ignorance. I don't think we can be friends, and I don't think you have any sort of future here.

Not sure what you are getting at here.  But you are conversing in the realm of logic, and our understanding of history, and it's relation, if any, to current events.

So don't get mad at me.  In the realm of discussions of logic, nothing is true because you or I say it is, and everything is open to be verified or refuted.  And of course there's nothing I've said that I can't back up....or I wouldn't have said it...