2013-05-08 Engadget Primed: The rise (and rise?) of Bitcoin

[nevafuse]

http://www.engadget.com/2013/05/08/engadget-primed-bitcoin/

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[Zangelbert Bingledack]

Bitcoin uses a historically discredited economic principle [deflation]

Oh yawn. Keynesianism never dies.

[2_Thumbs_Up]

Whenever someon mentions the deal with deflation, people should just start linking this study from the Minneapolis Fed:

http://www.minneapolisfed.org/research/sr/sr331.pdf

Here we examine the empirical relationship between deflation and depression in a broad
historical context, including but not limited to the Great Depression. We use a panel data set on
inflation and real output growth for 17 countries and more than 100 years. To focus on mediumterm
fluctuations, we break the time series on inflation and real output growth for each country
into five-year episodes, and for each episode, we compute the average annual inflation rate and the
average annual real output growth rate. For any episode, we define a deflation as a negative average
inflation rate and a depression as a negative average real output growth rate. Throughout, we
restrict attention to moderate inflations, those with average annual inflation below 20 percent.

Our main finding is that the only episode in which we find evidence of a link between de-
flation and depression is the Great Depression (1929—34). We find virtually no evidence of such
a link in any other period.

The inflation argument is dead, both logically and empirically.

[Gabi]

"historically discredited economic principle" 

Yeah well gold is deflationary. Is gold an "historically discredited economic principle"? NO.

[nevafuse]

Krugman's babysitting analogy is a joke.  If those babysitting bills were more divisible & their value was able to fluctuate...there wouldn't have been an issue.  The proof that deflation is bad is ridiculous.

[davidgdg]

Whenever someon mentions the deal with deflation, people should just start linking this study from the Minneapolis Fed:

http://www.minneapolisfed.org/research/sr/sr331.pdf

Here we examine the empirical relationship between deflation and depression in a broad
historical context, including but not limited to the Great Depression. We use a panel data set on
inflation and real output growth for 17 countries and more than 100 years. To focus on mediumterm
fluctuations, we break the time series on inflation and real output growth for each country
into five-year episodes, and for each episode, we compute the average annual inflation rate and the
average annual real output growth rate. For any episode, we define a deflation as a negative average
inflation rate and a depression as a negative average real output growth rate. Throughout, we
restrict attention to moderate inflations, those with average annual inflation below 20 percent.

Our main finding is that the only episode in which we find evidence of a link between de-
flation and depression is the Great Depression (1929—34). We find virtually no evidence of such
a link in any other period.

The inflation argument is dead, both logically and empirically.

Thanks. Interesting piece. No surprises there of course.

[kiba]

Whenever someon mentions the deal with deflation, people should just start linking this study from the Minneapolis Fed:

* kiba puts on his devil's advocate hat.

Confirmation bias?

[BitshireHashaway]

Not a very factual article. I quite angered by the large amount of articles about bitcoins which aren't correct or do not contain much factually correct evidence about bitcoins, in fact I find it quite annoying.