Bitcoin is a Bug Fix to the Fiat System

[deisik]

It depends on what's considered value. A billion dollar bills backed by 100 tons of gold is simple enough, print 200k more bills and the amount of gold each bill represents is easily calculated just as its easy to calculate the increase in the amount each bill represents if another 20 tons of gold are added.

What depends? Please be more specific

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[deisik]

This bit, it depends on what your money should represent. If it represents underlying value then redenomination and creation are the same thing, if it doesn't represent underlying value then you have an unbacked currency.

Thanks for clarification, now I got your idea. Even if we take money with "intrinsic" underlying value (say gold backed dollar) redenomination and creation are surely not the same thing. In the case of redenomination there is no redistribution of wealth - every man will still have the same share of total gold reserve backing up the dollar (despite the number of zeroes added or subtracted from a money token). So redenomination doesn't change anything even in this case (in fact it just doesn't make sense either)

Regarding creation (printing) of new gold backed dollars, the answer is obvious too - people become less wealthy (in gold), their gold share is decreased per holder (and this is one of the faults of hard asset backed currencies, which fiats are free from)

[deisik]

Yes but if a currency has any real backing then creation reduces the unit value regardless of what the currency is backed by. The only one to get the full benefit is the creator who's creating value by reducing the value of the existing currency, it would save a lot of complication to simply use scrip and vary the rate of devaluation to match the countries needs :/

Not quite so. If money supply corresponds with the supply of a backing asset, this unit value stays the same. And this is where, in my opinion, fiat currencies are far superior or even fairer beside hard currencies

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This is a completely noob theory for ridiculously obvious reasons.

Consider a scenario in which everybody receives a proportionally equal amount of an inflating money supply. What should be fairly obvious is that this doesn't matter, since you could achieve the same thing by just representing money first in Bitcoins, then in mBTC, then in satoshis, etc...
...

Well no, it certainly *does* matter.

1. If the currency inflates by 10% yearly, you will be 10% poorer in a year's time by keeping it in your mattress.

2. If the currency DEflates by 10% yearly, you will be 10% richer in a year's time by keeping it in your mattress.

See the difference?
Spoiler:  (1) motivates you to invest your money, while (2) motivates you to keep it in your mattress.

*Bitcoin is currently an inflationary currency -- it inflates by the number of coins "mined" by the "miners."
Understanding the basics is important.

[crumbs]

Yes but if a currency has any real backing then creation reduces the unit value regardless of what the currency is backed by. The only one to get the full benefit is the creator who's creating value by reducing the value of the existing currency, it would save a lot of complication to simply use scrip and vary the rate of devaluation to match the countries needs :/

If a currency is backed by economy (widgets), printing more moneyz as the economy grows (more widgets are made) keeps the currency value exactly the same (more moneys = more widgets to buy with it)

[deisik]

If a currency is backed by economy (widgets), printing more moneyz as the economy grows (more widgets are made) keeps the currency value exactly the same (more moneys = more widgets to buy with it)

That is why fiat currencies have superiority against hard currencies. They are backed by the whole economy, total national wealth, and if the economy grows, so does money supply. There is no need even to print new money by the central bank. Money is created/destroyed automatically inside the system as required. In relative terms everyone's share of national wealth becomes less as the economy and money supply grows but in absolute terms it stays the same. I think this is a fair state of things from public welfare's point of view

[deisik]

That's the theory but interest rates eventually force the currency to continually reduce in value. The backing could increase in value faster than the interest making everyone's money worth more but that has diminishing returns, eventually it reaches saturation point where everyone has everything they need leaving no room for expand further. Either way the creator still creates wealth by taking value away from the existing currency and the backing has to increase in value to maintain it, effectively we have to run just to stay in the same place.

Once again you fail to see the whole picture (first of all regarding interest rates and making everyone happy). There is no singular creator being a malevolent entity taking away wealth. The money printed by CB makes only a small fraction of all the money in the economy

[crumbs]

That's the theory but interest rates eventually force the currency to continually reduce in value. The backing could increase in value faster than the interest making everyone's money worth more but that has diminishing returns, eventually it reaches saturation point where everyone has everything they need leaving no room for expand further. Either way the creator still creates wealth by taking value away from the existing currency and the backing has to increase in value to maintain it, effectively we have to run just to stay in the same place.

It's both theory and practice -- the standard of living throughout the world is better today than it was when currencies were backed by shiny metals.  Let's at least keep our facts straight.
And sure, there are plenty of ways to run economy into the ground -- both with inflationary and deflationary currencies, both with fiat and specie-backed money.

The point is Invisible Hand is always at work.  Even when it creates crippling regulations -- that's Invisible Hand too

[deisik]

Central banks aren't state owned, they're private entities that provide a service and charge for it, they own and run monetary systems. Ireland's charged 5% last time I checked, that's the entire economy every 20 years.

And so what? Are they saboteurs, I don't get?

[theonewhowaskazu]

Consider a scenario in which everybody receives a proportionally equal amount of an inflating money supply. What should be fairly obvious is that this doesn't matter, since you could achieve the same thing by just representing money first in Bitcoins, then in mBTC, then in satoshis, etc...

I didn't understand what you had meant to say by this snippet (haven't yet read further). What do you mean by "What should be fairly obvious is that this doesn't matter" - what doesn't matter and why should we consider this scenario if you say it (?) doesn't matter? What same thing could we achieve? I don't get your point

Please explain, then we proceed

Look, say that instead of halving the block reward, Satoshi kept the block reward the same but doubled the amount of BTC in existence. in other words, everybody who used to have 1 BTC now would have 2, and everybody who used to have 4 now has 8, and so on.

This would be functionally equivalent to the system we have right now. There is literally no difference, because it would still be "fair", if a bit more confusing. Sure, its an increase in money supply, so the price will naturally halve. Except its a predictable increase, and a fair increase. Gox & other exchanges would likely just halve the price of Bitcoins on that day as well, because the system is fair, and open: Everybody knows.

Knowledge is one of the requirements for effective capitalism. What you're arguing for, is a system that is fundamentally unfair because it is unpredictable. You're saying that simply due to the lack of information people have about WHEN the money supply is increasing - not to mention who is getting the new money supply and what they intend to do with it - the system somehow becomes more efficient, when in reality it just adds uncertainty.

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Central banks aren't state owned, they're private entities that provide a service and charge for it, they own and run monetary systems. Ireland's charged 5% last time I checked, that's the entire economy every 20 years.

EDIT: Please correct me if I'm wrong on the 5% part, it could be just on lent funds but I've no doubt on them being privately owned.

Central banks aren't privately owned, though this isn't relevant to my point -- merits of inflationary & deflationary currencies.
If you'd like to branch off & talk about inflation not matching economic growth, fine.  As i said, it's possible to run economy into the ground no matter what money is used.

Ability to increase the money supply is simply another tool available to Keynesians -- a tool simply absent from the Austrian toolbox.  Inflation is also not intrinsic to fiat currencies, and runaway inflation is simply an example of economy done wrong.

Done right, it encourages investment & discourages hoarding.
Hoarding is a bad thing, a sign that you got more than you need, that you forgot to share -- even kindergarten kids know that.

[theonewhowaskazu]

Central banks aren't state owned, they're private entities that provide a service and charge for it, they own and run monetary systems. Ireland's charged 5% last time I checked, that's the entire economy every 20 years.

And so what? Are they saboteurs, I don't get?

And so what? They are leeches. They suck up the lifeblood of the economy (real, resources) by printing money in return for public debt,  in return for just getting the right to use currency. Then, they take that interest (or the collateral they get in case of a default) and use it to take our real resources, not printed resources, away from real people, and place them into the hands of the elite.

It's a partnership between bank and state, just as corrupt as the partnership between church and state used to be. The state gets to steal the wealth of the people in the form of inflation, while the banks get to steal the wealth of the people in the form of eternal interest.

[crumbs]

Central banks aren't state owned, they're private entities that provide a service and charge for it, they own and run monetary systems. Ireland's charged 5% last time I checked, that's the entire economy every 20 years.

And so what? Are they saboteurs, I don't get?

And so what? They are leeches. They suck up the lifeblood of the economy (real, resources) by printing money in return for public debt,  in return for just getting the right to use currency. Then, they take that interest (or the collateral they get in case of a default) and use it to take our real resources, not printed resources, away from real people, and place them into the hands of the elite.

It's a partnership between bank and state, just as corrupt as the partnership between church and state used to be. The state gets to steal the wealth of the people in the form of inflation, while the banks get to steal the wealth of the people in the form of eternal interest.

Central banks are not "privately owned," you obviously know this [see red text].  
No, there is nothing fair about the banking system, just like there is absolutely nothing fair about money itself, or about nature (why is one baby born rich, while another starves?)

To see the million ways that bitcoin economy *could* go wrong, please visit the lending section of this forum, where thieves are pitted against misers charging usurious rates, or the securities subforum where scammers continuously  fleece gullible noobs.

[theonewhowaskazu]

Central banks aren't state owned, they're private entities that provide a service and charge for it, they own and run monetary systems. Ireland's charged 5% last time I checked, that's the entire economy every 20 years.

EDIT: Please correct me if I'm wrong on the 5% part, it could be just on lent funds but I've no doubt on them being privately owned.

Central banks aren't privately owned, though this isn't relevant to my point -- merits of inflationary & deflationary currencies.
If you'd like to branch off & talk about inflation not matching economic growth, fine.  As i said, it's possible to run economy into the ground no matter what money is used.

Ability to increase the money supply is simply another tool available to Keynesians -- a tool simply absent from the Austrian toolbox.  Inflation is also not intrinsic to fiat currencies, and runaway inflation is simply an example of economy done wrong.

Done right, it encourages investment & discourages hoarding.
Hoarding is a bad thing, a sign that you got more than you need, that you forgot to share -- even kindergarten kids know that.

Sharing isn't sharing when it is forced. Moreover, sharing paper money that can be printed whenever, isn't sharing at all either, since it's worthless. You seem to be forgetting the whole entire point of currency, to represent a share of resources. When you inflate currency, you incentivise consumption of such resources faster than a free market would have you consume them. That's why its ridiculous that the same government imposing all these regulations to supposedly protect the environmental resources is systematically rewarding over-consumption - i.e, wasting - of such resources.

True prosperity isn't how much fake money you have, or even how fast such fake money is changing hands. Its about how many real resources are being produced. Everything else is just a mirage. Money is supposed to be a model for that, but when you intentionally distort your model to reflect "growth", even when no such growth exists, then you have to scrap that model, and restore a real model, else you're effectively just ignoring the truth.

[crumbs]

Central banks aren't state owned, they're private entities that provide a service and charge for it, they own and run monetary systems. Ireland's charged 5% last time I checked, that's the entire economy every 20 years.

EDIT: Please correct me if I'm wrong on the 5% part, it could be just on lent funds but I've no doubt on them being privately owned.

Central banks aren't privately owned, though this isn't relevant to my point -- merits of inflationary & deflationary currencies.
If you'd like to branch off & talk about inflation not matching economic growth, fine.  As i said, it's possible to run economy into the ground no matter what money is used.

Ability to increase the money supply is simply another tool available to Keynesians -- a tool simply absent from the Austrian toolbox.  Inflation is also not intrinsic to fiat currencies, and runaway inflation is simply an example of economy done wrong.

Done right, it encourages investment & discourages hoarding.
Hoarding is a bad thing, a sign that you got more than you need, that you forgot to share -- even kindergarten kids know that.

Sharing isn't sharing when it is forced. Moreover, sharing paper money that can be printed whenever, isn't sharing at all either, since it's worthless.

Sharing is sharing if it's forced, e.g. "Johnny, share your cookies with Jane or get my boot up your ass."
Regarding worthlessness of paper money, please send me all of your fiat if you actually believe what you say.

You seem to be forgetting the whole entire point of currency, to represent a share of resources.

You seem to be making up rules as you go along.  The point of currency is whatever it is.  You're thinking of IOUs.

When you inflate currency, you incentivise consumption of such resources faster than a free market would have you consume them. That's why its ridiculous that the same government imposing all these regulations to supposedly protect the environmental resources is systematically rewarding over-consumption - i.e, wasting - of such resources.

You do no such thing.  If i give you more money & forbid you to buy candy, will you inevitably try to buy moar candyz, or might you buy a car instead?  Spending != wasting resources.  It could mean starting a company which invents new, treehugging fuels.

True prosperity isn't how much fake money you have, or even how fast such fake money is changing hands. Its about how many real resources are being produced.  Everything else is just a mirage. Money is supposed to be a model for that, but when you intentionally distort your model to reflect "growth", even when no such growth exists, then you have to scrap that model, and restore a real model, else you're effectively just ignoring the truth.

Stop postulating what money is supposed to be.  That's what *you* want money to be.  The guy without money may want an entirely different thing, see?

[justusranvier]

Sharing isn't sharing when it is forced. Moreover, sharing paper money that can be printed whenever, isn't sharing at all either, since it's worthless.

Sharing is sharing if it's forced, e.g. "Johnny, share your cookies with Jane or get my boot up your ass."

Sharing is voluntary. Theft is forced.

Sex is voluntary. Rape is forced.

[deisik]

Look, say that instead of halving the block reward, Satoshi kept the block reward the same but doubled the amount of BTC in existence. in other words, everybody who used to have 1 BTC now would have 2, and everybody who used to have 4 now has 8, and so on.

This would be functionally equivalent to the system we have right now. There is literally no difference, because it would still be "fair", if a bit more confusing. Sure, its an increase in money supply, so the price will naturally halve. Except its a predictable increase, and a fair increase. Gox & other exchanges would likely just halve the price of Bitcoins on that day as well, because the system is fair, and open: Everybody knows.

I'm not very familiar (mildly speaking) with BTC interiors but I think I got your idea. I just can't agree with your assumption that price would halve. We don't know how many BTCs are actually traded and how many are kept secretly in wallets, so it is a mute point. Surely, it is not total BTC supply that determines the price of coins

And I still don't see what are your arguments against my initial post you branded as "a completely noob theory for ridiculously obvious reasons". What are those obvious reasons really?

Knowledge is one of the requirements for effective capitalism. What you're arguing for, is a system that is fundamentally unfair because it is unpredictable. You're saying that simply due to the lack of information people have about WHEN the money supply is increasing - not to mention who is getting the new money supply and what they intend to do with it - the system somehow becomes more efficient, when in reality it just adds uncertainty.

These are no more but vague phrases. First of all, I didn't say the words you are attributing to me. Secondly, why something which is unpredictable is so inevitably unfair? Why do you think that the predictable money supply would in the long run make the economy any good, which has an inherent and significant uncertainty in it?

In short, you have to say something more substantial to sound convincing

[theonewhowaskazu]

Central banks aren't state owned, they're private entities that provide a service and charge for it, they own and run monetary systems. Ireland's charged 5% last time I checked, that's the entire economy every 20 years.

EDIT: Please correct me if I'm wrong on the 5% part, it could be just on lent funds but I've no doubt on them being privately owned.

Central banks aren't privately owned, though this isn't relevant to my point -- merits of inflationary & deflationary currencies.
If you'd like to branch off & talk about inflation not matching economic growth, fine.  As i said, it's possible to run economy into the ground no matter what money is used.

Ability to increase the money supply is simply another tool available to Keynesians -- a tool simply absent from the Austrian toolbox.  Inflation is also not intrinsic to fiat currencies, and runaway inflation is simply an example of economy done wrong.

Done right, it encourages investment & discourages hoarding.
Hoarding is a bad thing, a sign that you got more than you need, that you forgot to share -- even kindergarten kids know that.

Sharing isn't sharing when it is forced. Moreover, sharing paper money that can be printed whenever, isn't sharing at all either, since it's worthless.

Sharing is sharing if it's forced, e.g. "Johnny, share your cookies with Jane or get my boot up your ass."
Regarding worthlessness of paper money, please send me all of your fiat if you actually believe what you say.

You seem to be forgetting the whole entire point of currency, to represent a share of resources.

You seem to be making up rules as you go along.  The point of currency is whatever it is.  You're thinking of IOUs.

When you inflate currency, you incentivise consumption of such resources faster than a free market would have you consume them. That's why its ridiculous that the same government imposing all these regulations to supposedly protect the environmental resources is systematically rewarding over-consumption - i.e, wasting - of such resources.

You do no such thing.  If i give you more money & forbid you to buy candy, will you inevitably try to buy moar candyz, or might you buy a car instead?  Spending != wasting resources.  It could mean starting a company which invents new, treehugging fuels.

True prosperity isn't how much fake money you have, or even how fast such fake money is changing hands. Its about how many real resources are being produced.  Everything else is just a mirage. Money is supposed to be a model for that, but when you intentionally distort your model to reflect "growth", even when no such growth exists, then you have to scrap that model, and restore a real model, else you're effectively just ignoring the truth.

Stop postulating what money is supposed to be.  That's what *you* want money to be.  The guy without money may want an entirely different thing, see?

Omg, you're objectively trolling.

IOUs are meant to represent the worth of someone's credit. The point of currency is to represent value. Value is real resources. Thus, currency is meant to represent a share of real resources. I don't even know what your're on about. Seriously, I don't even know what you're talking about any more. If you can't agree that money is supposed to represent value I don't even see the point of posting here.

[deisik]

So economies have to grow to match the interest rates of central banks just to maintain their value, if they can grow faster they can increase in value but growth isn't unlimited, it diminishes due to the laws of supply and demand.

You are confusing cause and effect. Interest rates reflect growth rate, not the other way round. Otherwise they make no sense, you can't take 5% if economy can only give 4%. Yes, central banks can use them to regulate the economy but this doesn't change the whole thing

[crumbs]

Sharing isn't sharing when it is forced. Moreover, sharing paper money that can be printed whenever, isn't sharing at all either, since it's worthless.

Sharing is sharing if it's forced, e.g. "Johnny, share your cookies with Jane or get my boot up your ass."

Sharing is voluntary. Theft is forced.

Sex is voluntary. Rape is forced.

I give you an example of forced sharing, and you nonsensically repeat yourself.

Not sure what sex or rape have to do with money, unless you're talking about hookers.