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Author Topic: The real problem behind inflation  (Read 10025 times)
Steve
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March 02, 2011, 01:25:18 AM
 #101

I'd argue that the returns you could expect from such deflation would fall far short of other investment opportunities that would be available to you.
The amount of currency will be the same, but the amount of available goods will increase with (increase in productivity) * (increase in population). This will most likely make the value of currency increase more than you could expect in return from an average investment in production.

Holding bitcoin actually is an investment in production, and that's where I believe your thinking betrays you...you view it simply as an unproductive medium, but that is grossly discounts the value that the platform is creating...you are investing in a community (rather than a company)...you are providing that community with liquidity to expand and improve the platform.  It is an interesting question...in a sense you are gaining as society as a whole is gaining...you are investing in something that better unlocks the potential of a community.

(gasteve on IRC) Does your website accept cash? https://bitpay.com
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March 02, 2011, 01:26:52 AM
 #102

I'd argue that the returns you could expect from such deflation would fall far short of other investment opportunities that would be available to you.
The amount of currency will be the same, but the amount of available goods will increase with (increase in productivity) * (increase in population). This will most likely make the value of currency increase more than you could expect in return from an average investment in production.

Holding bitcoin actually is an investment in production, and that's where I believe your thinking betrays you...you view it simply as an unproductive medium, but that is grossly discounts the value that the platform is creating...you are investing in a community (rather than a company)...you are providing that community with liquidity to expand and improve the platform.  It is an interesting question...in a sense you are gaining as society as a whole is gaining...you are investing in something that better unlocks the potential of a community.
Respectful profit always benefits society.
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March 02, 2011, 08:43:51 AM
 #103

[Holding bitcoin actually is an investment in production, and that's where I believe your thinking betrays you...you view it simply as an unproductive medium, but that is grossly discounts the value that the platform is creating...you are investing in a community (rather than a company)...you are providing that community with liquidity to expand and improve the platform.
If I'm keeping the currency to myself then I'm doing the exact opposite of providing liquidity.
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March 02, 2011, 08:48:31 AM
 #104

[Holding bitcoin actually is an investment in production, and that's where I believe your thinking betrays you...you view it simply as an unproductive medium, but that is grossly discounts the value that the platform is creating...you are investing in a community (rather than a company)...you are providing that community with liquidity to expand and improve the platform.
If I'm keeping the currency to myself then I'm doing the exact opposite of providing liquidity.

Providing liquidity is neither saving nor investing.

"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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March 02, 2011, 09:30:30 AM
 #105

Providing liquidity is neither saving nor investing.
But then I didn't say so, and since this is a smartass reply to another smartass reply I'm not going to elaborate either.
ribuck
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March 02, 2011, 10:19:26 AM
 #106

If I'm keeping the currency to myself then I'm doing the exact opposite of providing liquidity.
If you're keeping the currency, you must have the intention to use it eventually.

In the meantime, there is some amount of economic activity around Bitcoin. If you are keeping some coins, it doesn't affect the level of economic activity of others, but it does raise the value of those coins that are economically active, this increasing the size of the Bitcoin economy that can be supported when you and the other savers do eventually start spending.
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March 02, 2011, 10:54:28 AM
 #107

In the meantime, there is some amount of economic activity around Bitcoin. If you are keeping some coins, it doesn't affect the level of economic activity of others, but it does raise the value of those coins that are economically active, this increasing the size of the Bitcoin economy that can be supported when you and the other savers do eventually start spending.
The size of the economy does not increase because the value of bitcoins gets higher, it increases if there is more trade. People who hold on to their bitcoins do not contribute to trade. The value of the bitcoin compared to other things is just a reflection of how much competition there is for the coins that are available for trade, it does not say anything about how large the total economy is.
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March 02, 2011, 11:37:50 AM
 #108

If you're keeping the currency, you must have the intention to use it eventually.

In the meantime, there is some amount of economic activity around Bitcoin. If you are keeping some coins, it doesn't affect the level of economic activity of others, but it does raise the value of those coins that are economically active, this increasing the size of the Bitcoin economy that can be supported when you and the other savers do eventually start spending. [emphasis added]
The size of the economy does not increase because the value of bitcoins gets higher, it increases if there is more trade. People who hold on to their bitcoins do not contribute to trade. The value of the bitcoin compared to other things is just a reflection of how much competition there is for the coins that are available for trade, it does not say anything about how large the total economy is.

That's absolutely true, and I don't see anything that conflicts with my previous post when read carefully. But you need to consider the whole cycle. Not just "people who hold on to their bitcoins do not contribute to trade" but "people who hold on to their bitcoins do not contribute to trade yet".
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