- Reaction with deflation, making all money more valuable => The Blacksmith succeeded to absorption the purchasing power of the other participators.
If the money is more valuable, the other participants have the same purchasing power even though they have less money. The economy continues just as before, but with lower prices and less money. No problem.
And you are also wrong about bitcoins being deflationary.
The average Keynesian is equally wrong but usually makes a much better argument.
Nope the economy doesnt continue as before. The Blacksmith has gained purchasing power while the volume of goods hasnt grown. This makes him able to get a bigger portion of goods then before while the rest of the community end up with less good.
Bitcoins are deflationary, you should learn more about BTC.
also you make it sound as if anyone who wishes to save money for a rainy day is a terrible person. it used to be (way back in that crazy time when people used to provide for themselves or rely on their family **shudder** how crazy, right?) that saving was viewed as a necessity to make sure that you could make it through rough times.
a deflationary currency, outside of the grasp of politicians and bankers, is the greatest thing to happen since water. why? because it is a huge deterrent to a debt-fueled growth economy which we are currently suffering from across the world. when you open up the faucets and let politicians spend as much money on whatever they want for years and years, facilitated by debt that a federal reserve banking system profligates, many bad things result. eventually that faucet runs dry and an economic shitstorm ensues (think the world 3 years ago or europe currently and about to bleed back over to the us), everyone comes to rely on the government to provide basic necessities so that when that faucet runs dry times truly get bleak, and because of the profligate spending- currency debasement becomes the norm and inflation begins to spiral upwards leaving those few people who did manage to save screwed as well because they now find their savings worthless. not to mention the people who live in poverty their entire life because they take on too much of a debt burden in their youth and never can quite rise up high enough to shed it.
saving is not bad! saving is good! when i was little i was told i could go and play AFTER i did my homework, why now is it that we should get all of our rewards without first saving up the work to pay for them. if rather than encouraging everyone to spend every dime they had, and borrow more to spend more to encourage prosperity in the moment, everyone saved money for that rainy day that will always come, that rainy day wouldn't be nearly so rainy.
You make the same mistake, that many people do when they discuss economics. They mix a bunch of metaphors with a subjective impression of recent history into some kind of context and think that is a valuable argument. Its not. A true economic argument can only be formed by causality chains.
YOu could have searched for demurrage on the forums. There are many who have suggested demurrage as a part of the money design, but due to factors like bitcoin mixers and pseudo-anonymity, it's not possible to implement the same in the bitcoin protocol.
If you can imagine and code a way of implementing this, you can use the bitcoin code and create a new demurrage based digital currency.
btw. the blacksmith in your story starves to death as he cannot eat coins. The only one who can do what is described is a farmer. And try telling a farmer after this harvest that he should hold back and not spend his money. He'll give you a look like you've lost your head. What was the point in him creating all this surplus grain if he cannot sell it for things that he wants.
Well I didnt knew that but it still stays true even if you ignore this problem for 100 more years like it has already been done.
The Blacksmith doesnt starve to death since he only holds 10 BTC of his 100 BTC total capital. Also you need to consider that the other participants dont know that the Blacksmith will hold back 10 BTC this week so they spend all their coins as normal.
1 BTC has to cross X Wallets in Y Time or Z % of that BTC will vanish.
So I use a client that has been patched to send coins to another address in my wallet periodically. There is no way anyone but me can know all the addresses in my possession, they are anonymous.
The way I see it, yes deflationary currency's have failed in the past, but it was a different, slower world. Bitcoin is a great experiment in how such a system would work in a Global Market, with a huge diversity of participants trading in real time.
Yes, there is a chance that the lessons of the past may hold true, but the opportunity to help give Bitcoin a chance to succeed is way too good to pass up. (And we're having some laughs along the way.)
Since I am an economics student and not a coder geek I have to admit that I dont know how to make this practicably in code. But I am pretty sure that it can be done by some coder mastermind.
New market same people.
Which deflationary currency has failed?
Gold has failed as currency. (AS CURRENCY! I DONT SAY THAT GOLD FAILED IN GENERAL!)
