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Author Topic: Inflationary Bitcoin  (Read 2283 times)
FreeMoney
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July 06, 2011, 04:39:34 AM
 #21

So if inflation encourages spending since your saved dollars are worth less over time, isn't that a good thing? And the people that spend it stupidly actually deserve to lose their money anyway? Because there's nothing keeping anyone from spending their dollars on something that will appreciate in value or otherwise bring them more dollars. That sounds like a positive economic stressor to me.

Deflationary currencies do not encourage spending, and they in every shape and form DISCOURAGE lending with ANY appreciable degree of risk association. This seems like a wholly negative economic stressor to me.

In a lot of situations spending now instead of latter is stupid and inflation incentives that stupidity. People ought be taking resources for themselves at the latest convenient time, not asap and inefficiently holding.

If there is a fixed monetary base and deflation that is a signal that there will be more stuff in the future. If there will be more stuff in the future and you can wait you ought be rewarded for not preventing others from using what is available now.

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Synaptic
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July 06, 2011, 04:45:28 AM
 #22

So if inflation encourages spending since your saved dollars are worth less over time, isn't that a good thing? And the people that spend it stupidly actually deserve to lose their money anyway? Because there's nothing keeping anyone from spending their dollars on something that will appreciate in value or otherwise bring them more dollars. That sounds like a positive economic stressor to me.

Deflationary currencies do not encourage spending, and they in every shape and form DISCOURAGE lending with ANY appreciable degree of risk association. This seems like a wholly negative economic stressor to me.

In a lot of situations spending now instead of latter is stupid and inflation incentives that stupidity. People ought be taking resources for themselves at the latest convenient time, not asap and inefficiently holding.

If there is a fixed monetary base and deflation that is a signal that there will be more stuff in the future. If there will be more stuff in the future and you can wait you ought be rewarded for not preventing others from using what is available now.

Let's just talk dollars here, but this applies to any centrally managed currency of course:


Dollars are an instrument of debt, not valuation.  The converse is (supposedly) true of Bitcoin. Bitcoin aims to be an instrument of valuation.

It makes sense to offload your dollars in a way that generates "interest on a debt."

But it doesn't make sense to shed Bitcoin except for essentials only. Big expenditures on luxury goods make no sense with Bitcoin. Investment makes no sense with Bitcoin, except in very narrow circumstances.
FreeMoney
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July 06, 2011, 04:46:35 AM
 #23

The economy itself was already collapsing. Increasing the denomination of the currency is a symptom of a failing economy, not a cause.

I absolutely agree.

With a 'normal' rate of increase in stuff produced the money printing class can siphon off a lot of wealth. If the rate falters and the printers don't slow down then it is revealed in the death of the currency.

I think what is happening now is not that our productivity or rate of production is slowing down, but that we are producing a higher ratio of things they can't get. I am vastly richer than people in my relative position were in the recent past generations, but you can't squeeze nearly as much out of me because more of my wealth is leisure time and free information and access to you guys 24/7.

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Synaptic
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July 06, 2011, 04:55:16 AM
 #24

The economy itself was already collapsing. Increasing the denomination of the currency is a symptom of a failing economy, not a cause.

I absolutely agree.

With a 'normal' rate of increase in stuff produced the money printing class can siphon off a lot of wealth. If the rate falters and the printers don't slow down then it is revealed in the death of the currency.

I think what is happening now is not that our productivity or rate of production is slowing down, but that we are producing a higher ratio of things they can't get. I am vastly richer than people in my relative position were in the recent past generations, but you can't squeeze nearly as much out of me because more of my wealth is leisure time and free information and access to you guys 24/7.

So, are you one of the privileged bitcoin money printing class or just one of the privileged bitcoin aristocr----I mean "early adopters?" 
FreeMoney
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July 06, 2011, 04:57:34 AM
 #25


But it doesn't make sense to shed Bitcoin except for essentials only. Big expenditures on luxury goods make no sense with Bitcoin. Investment makes no sense with Bitcoin, except in very narrow circumstances.

It does once you have all of your essentials met and still have some savings left over. What are you going to do with them otherwise? Look at them?

Supposing Bitcoin does become the main world money what it 'needs' is people to acknowledge that as quickly as possible. That is what will get us where we are headed with the least wasted time. So, if you are right about Bitcoin becoming dominant the biggest reward now is for converting your savings to Bitcoin.

Once you have that vantage point it might be easier to understand why people will buy luxuries with coins - it's the only way for them to get luxuries because they only have bitcoins left. And if they were right they'l have lots to spend.

Once we are in 'Bitcoin world' the deflation will match the increase in the rate of production and you will only get paid for waiting to consume to the extent that there is more to go around in the future.

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FreeMoney
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July 06, 2011, 04:58:56 AM
 #26


So, are you one of the privileged bitcoin money printing class or just one of the privileged bitcoin aristocr----I mean "early adopters?" 

I have a lot of coins. Do you think I'm taking value from someone?

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July 06, 2011, 05:02:20 AM
 #27


So, are you one of the privileged bitcoin money printing class or just one of the privileged bitcoin aristocr----I mean "early adopters?" 

I have a lot of coins. Do you think I'm taking value from someone?

When you cash out during the final probable bitcoin crash sometime in the future, yes.
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July 06, 2011, 05:08:07 AM
 #28


So, are you one of the privileged bitcoin money printing class or just one of the privileged bitcoin aristocr----I mean "early adopters?" 

I have a lot of coins. Do you think I'm taking value from someone?

When you cash out during the final probable bitcoin crash sometime in the future, yes.

My offer to sell will hurt the person who wants to accept it? Is this different to you then if I offer to sell grapes?

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Synaptic
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July 06, 2011, 05:11:01 AM
 #29


So, are you one of the privileged bitcoin money printing class or just one of the privileged bitcoin aristocr----I mean "early adopters?" 

I have a lot of coins. Do you think I'm taking value from someone?

When you cash out during the final probable bitcoin crash sometime in the future, yes.

My offer to sell will hurt the person who wants to accept it? Is this different to you then if I offer to sell grapes?

If your sole reason for selling the grapes is because they're going rotten, sure.

The fact that some fool might think he can make wine out of sour grapes doesn't belay the fact that you're consciously peddling something of little or no real value.
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July 06, 2011, 05:16:46 AM
 #30


If your sole reason for selling the grapes is because they're going rotten, sure.

The fact that some fool might think he can make wine out of sour grapes doesn't belay the fact that you're consciously peddling something of little or no real value.

A broken bitcoin won't send. If you need help there are people willing in Technical Discussion.

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FreeMoney
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July 06, 2011, 05:17:57 AM
 #31

I'm a little insulted that you would suggest that I'd be willing to misrepresent something I was selling.

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July 06, 2011, 05:20:32 AM
 #32

Quote from: Synaptic
When Bitcoins become so valuable that you have to start decimating them into ever smaller units, it seems like the entire psychology of the exchange medium becomes difficult to adhere to.

That has absolutely nothing to do with bitcoin's fixed supply. The reason why it's experiencing rapid deflation is because it's seeing a massive increase in demand. It would see a similar rise in value if it was a currency that inflated at 2% a year for eternity, because demand is growing by over 100% some months.

Once bitcoin reaches its natural rate of adoption, whatever that is, it will only see a price deflation of 2-3% a year, and thus will only need to be re-denominated once every few decades and be a largely stable exchange medium and standard of account.
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July 06, 2011, 05:22:07 AM
 #33

I'm a little insulted that you would suggest that I'd be willing to misrepresent something I was selling.

Representation has nothing to do with it.

If the bitcoin economy crashes, you will do everything you can to sell off what BTC you have to mitigate your loss.

You're not going to be the White Knight of Bitcoin and just a full loss on your "lots of coins."

You're going to try to sell them to the highest bidder on your way out.

In effect, the "money printing class" of your fantasies is doing the same thing as they devalue the currency, siphoning off as much worth as they can before it collapses entirely.
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July 06, 2011, 05:31:53 AM
 #34

I guess you know me. <shrug>

When are you going to stop sodomizing kittens?

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Synaptic
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July 06, 2011, 05:34:39 AM
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I guess you know me. <shrug>

When are you going to stop sodomizing kittens?

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July 06, 2011, 11:01:00 AM
 #36

I'm a little insulted that you would suggest that I'd be willing to misrepresent something I was selling.

Representation has nothing to do with it.
If the bitcoin economy crashes, you will do everything you can to sell off what BTC you have to mitigate your loss.
You're not going to be the White Knight of Bitcoin and just a full loss on your "lots of coins."

You're going to try to sell them to the highest bidder on your way out.

In effect, the "money printing class" of your fantasies is doing the same thing as they devalue the currency, siphoning off as much worth as they can before it collapses entirely.

Synaptic, the scenario where all early adopters get extremely rich requires bitcoins to become very valuable, the default international trade currency of the world, which means that the early adopters who disposed of their coins are infact selling something valuable.

The scenario where some early adopters get extremely rich and some remain poor, requires them to sell at a time of bitcoin mania and bitcoin crashing after that, with the faithful suffering.

We honestly don't know what will happen. So, the jury is still out on whether the bitcoin sellers are conning people or giving them the best deal of thier lives. 

nvmind
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July 06, 2011, 12:16:03 PM
 #37

A real problem with inflationary money systems is it distorts free markets. The newly created money is irrationally and inefficiently distributed this leads to behaviour such as what caused the GFC.

While new comers to bitcoin (such as myself) are envious of early adopters (just as we are of the historically rich families or of the early gold miners) the fact is that they are an efficient free market.

Its not really in their general interest to grab and hold all the coin they can. If everyone simply holds the coin it will never have any value at all.

The only value in bitcoin is when its used to enable exchange. At the moment most of that exchange is in the US$ <--> Bitcoin. But as mining becomes harder people should begin to look for other ways to transfer value.

After all its more efficient to exchange items I can get at wholesale, for Bitcoins at retail, than it is to exchange currency for bitcoins which is what happens on the exchanges as all exchanges are retail.
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July 06, 2011, 01:43:53 PM
 #38

Strangely; early adopters are in an interesting position:

  • Do they horde their new found wealth in the hope that the bitcoin economy grows on its own.
  • Spend some of it in the bitcoin economy in the hopes that what they keep will be worth more because the economy grows more than it would have done if they just watched it rot

I'm not saying I know what the answer is; but I suspect that many early adopters will choose self-interested option 2.  The more merchants that are encouraged, the more likely bitcoin is to become huge and the more likely they are to end up richer.  The invisible hand at work; Adam Smith was a fecking genius.

That person who paid 10,000 BTC for a pizza shouldn't be kicking himself that he lost a fortune.  There is a distinct possibility that that initial act of faith in bitcoin as a currency began this whole thing.  That 10,000 BTC might have been worth nothing today had he simply kept it.

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July 07, 2011, 01:59:49 AM
 #39

Moving the decimal place doesnt let a government print the money they need to buy missiles.
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