Right, that's why merchants generally won't do that, nor should they. They can just sell the Bitcoins at the present rate and *still* benefit from their future value because they are selling that future value for its full value. When you sell a Bitcoin today, one of the things you are selling is the right to hold that Bitcoin and benefit from its appreciation in value. The price you get will include the value of that.
If a merchant wants to sell his product for $100 and accepts BTC at the spot exchange rage equaling $100 and then immediately liquidates the BTC to that $100 then the merchant would be avoiding all speculation and any risk of loss or potential for profit from the change in exchange rates. Such a merchant would thus gain nothing from the appreciation in value because he dose not hold the BTC for any appreciable amount of time, without holding over time you can't enjoy the benefits of deflation.
That's not true. You don't have to hold over time to enjoy the benefits of deflation. You can simply sell the right to hold the asset as it deflates for the full present value of that deflation. Say we all knew that gold would be worth $5,000 per ounce next year to a certainty. When you sell an ounce of gold, you are selling the right to have $5,000 next year. So the price of gold will be at least the value of $5,000 next year, whatever that is. You can sell the right to the deflation to someone else for its full value, so long as that deflation is predictable.
That's not what I said. I said if the deflation is predictable and reliable, it will be reflected in the current price. If it's not, it won't induce hoarding. You can't have it both ways.
What exactly do you mean by reflected? At first I though you meant something like "an expected future price of X will cause price to rise FULLY to X" but perhaps you just meant it will rise some amount towards X but not entirely to X. Obviously 'predictable and reliable' has a lot to do with how strong that rise is going to be, the less people predict the future increase in the commodities value or if they think it is unreliable for any reason they will be less inclined to buy the commodity for the purpose of selling it later to reap a profit, aka speculating. In an economy of actors endowed with perfect future knowledge their might indeed be price rises all the way up to the future price but in the real world no consensus on the future could be that perfect. This is the point I'm making, that their will always be a gap between present prices and future prices, we can never arrive at a point when the future has been so fully accounted for in the present that prices stop changing.
Right, because future prices are unpredictable. That is, a Bitcoin is worth $300 today because we *don't* know that it will be worth $400 next month. If we knew that, nobody would sell them for $300 today because there would be enough people who want $400 next month that they'd bid up the price.
But that's the beautiful thing, you don't have to. You can get the benefit of the fact that computers get cheaper over time without having to delay your purchase. The price of computers *today* already reflects the fact that they get cheaper over time. The prices would be higher if not for that. The price of oil today reflects the expectation that it will be more expensive in the future. Google "speculators raise price of oil" for a thousand articles explaining how present prices come to reflect expected future changes in value.
I think both your computer and oil examples ignore a major factor, the producers of both commodities are not speculating in them. A computer manufacturer needs to sell it's computers so it can make a revenue in the present and spend that money on making more computers, rinse and repeat and make a small margin each time which adds up to enough to cover over-head costs and then leave a decent profit at the end.
Exactly, and as a result, he has to make his prices low enough that consumers will buy them, even though those consumers know they can buy cheaper computers with more power next year. So a consumer will find the deflation already priced into today's computers. You don't have to wait to next year to benefit from the fact that computers will be better and cheaper next year, you can buy one today and that is already priced in.
Oil producing nations generally need to make money to run their welfare-states which hold Arab-spring like revolutions at bay (temporarily). The fact that computers made today will become obsolete in the future is not really deflation, it is a product perish-ability issue. Just as a Farmer who has grown a bushel of apples needs to sell them before they go bad the modern computer needs to be sold before it becomes obsolete. The Farmer would still need to sell fresh apples urgently (which would keep prices down) even if he knows the price of apples will be high next year, he can't speculate in a perishable commodity. Together the need to turn over inventory and technological obsolescence (or sometimes just fickle consumer tastes) force producers to sell their newly produced goods at the present market price, not at some price that reflects what the good would sell for in the future.
Right, so all these factors are already built into today's price. If apples lasted forever, they'd probably sell for a higher price today.
Obviously BTC isn't perishable and it's ridiculously easy to store so price can go (as people here love to say) TO DA MOON in a speculative bubble. But were talking about how the normal economy works here with computers and oils and such, BTC is a completely different and highly abnormal commodity and your applying it's strange qualities to real things and thinking this is how real things work too.
All the factors that make it hard to price the future for things like apples, computers, and oil don't apply to Bitcoins. They are essentially free to hold, have low transaction costs, and are easy to transfer. There is nothing stopping future expected price changes from being priced into present prices, except that nobody knows what future prices are.
Whatever people expect future prices to be, with Bitcoins, nothing stops them from pricing that into the present. The reason Bitcoin prices aren't higher today is that people are *not* sure they'll be higher in the future. People who want to speculate on the future price of Bitcoins can buy them today at a fiar price. There is no need to "hoard" Bitcoins because the market price is fair to both the buyer and the seller.
