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Author Topic: Bitcoin inflation now is 44% per year  (Read 3322 times)
Andrew Vorobyov
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June 27, 2011, 05:30:43 PM
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Did you know that Bitcoin currently has 43.999281216541% inflation rate..

161 blocks per 24 hour x 365 days x 50 BTC per block / 6,677,950 BTC total mined

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June 27, 2011, 05:35:04 PM
 #2

you mean bitcoin supply increases by 44% a year. It's only 44% inflation if bitcoin economy does not grow, but chances are, bitcoin economy is growing faster than 44%, so it's actually a deflation of a x%.

DamienBlack
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June 27, 2011, 05:35:38 PM
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Did you know that Bitcoin currently has 43.999281216541% inflation rate..

161 blocks per 24 hour x 365 days x 50 BTC per block / 6,677,950 BTC total mined

Yep, but it is temporary, inflation will decrease to about 15% around 2012, and then 5% around 2016. By 2020 it'll be less then most fiat currency, approching 0.  

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relative
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June 27, 2011, 05:35:54 PM
 #4

yep. around 40% for the next 1.5 years.
and around 20% each year (->exponential) if you take the average over the next 5 years.
Andrew Vorobyov
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June 27, 2011, 05:37:58 PM
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I mean if prices can weather such inflation rate than we doing fucking good!

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June 27, 2011, 05:39:44 PM
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you mean bitcoin supply increases by 44% a year. It's only 44% inflation if bitcoin economy does not grow, but chances are, bitcoin economy is growing faster than 44%, so it's actually a deflation of a x%.

you mean the bitcoin economy, which is now maybe at 100 k$ a year, grows by 40% to 140k$ a year and therefore offsets monetary inflation in bitcoins valued at 53 million $ (margin price)?

IF this kind of monetary inflation is offset, it is by speculation. either by new money coming in, or by miners speculating on even higher selling prices.


IF.
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June 27, 2011, 05:44:56 PM
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you mean bitcoin supply increases by 44% a year. It's only 44% inflation if bitcoin economy does not grow, but chances are, bitcoin economy is growing faster than 44%, so it's actually a deflation of a x%.

you mean the bitcoin economy, which is now maybe at 100 k$ a year, grows by 40% to 140k$ a year and therefore offsets monetary inflation in bitcoins valued at 53 million $ (margin price)?

IF this kind of monetary inflation is offset, it is by speculation. either by new money coming in, or by miners speculating on even higher selling prices.


IF.


The bitcoin economy includes the exchanges, you can't pretend that the exchanges are something "outside the economy". Money transfer is one of the services bitcoins provide, and that is facilitated in the exchanges. Considering that mt gox traded about $600,000 yesterday, I'd say that the bitcoin economy it is a little larger than $100K a year.

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cloud9
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June 27, 2011, 05:45:36 PM
 #8

YES entirely true - if there is no bitcoin price appreciation/depreciation.  Bitcoin price appreciation/depreciation will give you an indication of how many new goods/services/other are added/subtracted for trade with bitcoin (if you also account for your calculated inflation by first subtracting that from bitcoin price appreciation/depreciation).

Bitcoin price appreciation/depreciation was not 0% for the past year - so you would need to account for that - unless you expect a 0% appreciation/depreciation in price for the next year.  But then you would have to use the average number of bitcoins that will be in existence for the year to come - and that will be a higher number, bringing your 44% slightly down (again if there is no bitcoin price appreciation/depreciation).

Disclaimer:  Postings of Cloud9 are only individual views of opinion and/or musings and/or hypothesisses.  On a non-authoritative, peer-to-peer public forum, you do not need permission from Cloud9 to derive your own conclusions or opinions, so please do.  Calculations and assumptions to be verified.
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June 27, 2011, 05:53:30 PM
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The bitcoin economy includes the exchanges, you can't pretend that the exchanges are something "outside the economy". Money transfer is one of the services bitcoins provide, and that is facilitated in the exchanges. Considering that mt gox traded about $600,000 yesterday, I'd say that the bitcoin economy it is a little larger than $100K a year.

good point, you might get some demand from there. i.e. 400k BTC are apparently tied up in MtGox for trading purposes.
if that increases, it offsets the inflation a little. how does it increase? by more speculation.

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June 27, 2011, 05:55:56 PM
 #10

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

In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services.

I didn't go through the best K-12 school in the world, but I think in 6th grade I learned what inflation was for the first time.  For there to be a 44% inflation rate, the general cost of goods and services would have to decrease by 44%, relative to the bitcoin.  ....

Move this thread to the econ. section or delete it pls
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June 27, 2011, 05:57:45 PM
 #11

Inflation rate is measured by change in the price level over time.

The '44%' you are measuring is the growth rate of the money supply.

Trends since Jan 1st are extremely rapid deflation coupled with rapid growth in the money supply.

Deflation since Jan 1st is due to growth in demand for Bitcoin as a store of value (speculators) and to a much lesser extent as an exchange medium (consumers purchasing from BTC stores).

To avoid future embarrassments, look up definitions of economic terms on wikipedia or in an introductory economics text.

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ben-abuya
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June 27, 2011, 06:08:38 PM
 #12

The OP's definition is consistent with the Austrian view:

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

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June 27, 2011, 06:11:33 PM
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Inflation rate is measured by change in the price level over time.


That's actually price inflation.  The economic definition of "inflation" in this context is the expansion of the monetary base.

Quote

To avoid future embarrassments, look up definitions of economic terms on wikipedia or in an introductory economics text.

You should take your own advice before playing among the adults.

"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 27, 2011, 06:15:24 PM
 #14

Inflation rate is measured by change in the price level over time.

The '44%' you are measuring is the growth rate of the money supply.

......

To avoid future embarrassments, look up definitions of economic terms on wikipedia or in an introductory economics text.

Inflation, properly defined, is not a "change in the price level." Rather, it is an increase in the money supply. The fact that government schools have taught generations of people differently does not change the proper definition of the term.

People get these things confused because inflation (ie - an increase in the money supply) tends to cause prices to increase. But the price increases themselves are not "inflation." One is the disease, the other the symptom. Changing the term "inflation" to refer to the symptom instead of the disease has led to widespread misunderstandings regarding why prices increase in an economy.  

So to you, I would say, to avoid future embarrassments, DON'T look up definitions of economic terms on wikipedia.

And yes, Bitcoin's inflation is 44% this year, but it will fall as we know to zero percent over time. Comparatively, USD inflation will continue without end - and no, it should not be measured by the price changes in the economy, for the reasons mentioned above. When the government says "inflation is only 1%," they are deceiving people because they're measuring price changes, not money supply changes.
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June 27, 2011, 06:26:05 PM
 #15

One thing I have (painfully) learned about bitcoin is that everything happens on an accelerated time scale. I don't know where the price of bitcoin will be 12 months from now, but I'm almost certain it wont be within a measly +40% , -40% range of the current price.

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June 27, 2011, 06:31:51 PM
 #16

people are again painfully mixing up 'price inflation/deflation' and 'monetary inflation/deflation'

Bitcoin is in strong price deflation (things are getting cheaper in relative terms to bitcoin).
Bitcoin is also in strong monetary inflation (bitcoins are getting less rare, or the monetary supply is getting diluted by the issuing of new currency).

One off NP-Hard.
relative
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June 27, 2011, 06:35:02 PM
 #17

stop argueing about the definition of inflation.
a hundred years of economic theory hasnt settled on one definition. you wont either. it's obvious what kind OP meant.
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June 27, 2011, 06:39:51 PM
 #18

stop argueing about the definition of inflation.
a hundred years of economic theory hasnt settled on one definition. you wont either. it's obvious what kind OP meant.

How can one have a rational discussion with out defining what they are talking about?

One off NP-Hard.
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June 27, 2011, 06:42:05 PM
 #19

You can lookup a history of the word inflation here:
http://www.clevelandfed.org/research/Commentary/1997/1015.pdf

Currently, economics textbooks and the academic economics literature defines inflation in terms of the price level.

Homework for you. Look up the definition of inflation in contemporary undergraduate texts

These are probably the two most popular intro texts at the moment:
1) Krugman and Wells. Marcoeconomics
2) Mankiw Principles of Economics

If you are aware of contemporary textbooks which define "inflation" in terms of the money supply, I'm interested, please list/quote them in this thread.

Please don't tell me about how the word was used by Ron Paul or in 1920, however. Not interested.

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June 27, 2011, 06:43:39 PM
 #20

Lets not argue over silly semantics. The issue is that "inflation" has two widely accepted definitions - a generic one - it means growth in general, and has a specific one for economics. The OP was correct - the supply of bitcoins is inflating. The demand is also inflating, but more rapidly. Then the price goes up which means that bitcoin is undergoing deflation.

My point: that the value of Bitcoins would have to scale massively for bitcoins to be widely accepted globally.

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