How do I answer: why spend an appreciating asset?

[BitcoinMatt]

For the past few months, I've been trying to convince everyone I know to start using bitcoin, either as an investment or a currency for daily use. I see benefits in both fronts, though I tend to lean towards an investor mindset (comes naturally with my profession and my "savings-first" mentality.).   But I also see bitcoin as a solid currency in terms of ubiquity, speed, fees and control.

One question I keep getting stumped on, though, is: why would I ever spend bitcoin when I know it'll be worth more in the future?

I usually respond by saying: "by spending, the value of your other bitcoins will go up, so you should have a solid savings of BTC, but also spend some in order to help drive the market, much like any other currency."

Unfortunately, that argument doesn't always work. Do you guys have any other points I can make to convince people to use BTC in their daily transaction?

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[DiamondCardz]

If USD starts to gain value (disclaimer: unlikely), would you stop spending your paycheck on food and shelter?

[DannyHamilton]

One question I keep getting stumped on, though, is: why would I ever spend bitcoin when I know it'll be worth more in the future?

If you don't spend it, how will you acquire products and services?

[Gator-hex]

This is the point of Bitcoin, to stop the value of your wealth being stolen through inflation.

It is a deflationary currency, you don't need risky investments to retire. It is a better solution for a world with limited resources.

Inflationary currencies rely on growth, be it populations or resources, but this cannot go on forever, we live in a finite world.

Fiat money is a debt note, it keeps you in slavery (working) until you die to pay back debts (be they yours or your governments).

Money as Debt - http://www.youtube.com/watch?v=jqvKjsIxT_8

We are at peak oil (peak energy) so a currency based on energy makes sense.

[Birdy]

Ask if they ever bought any computer products (e.g. a laptop), if they did ask why they did when they can just wait a year and buy those for less (or better ones for the same price).

[sidhujag]

This is the point of Bitcoin, to stop the value of your wealth being stolen through inflation.

It is a deflationary currency, you don't need risky investments to retire. It is a better solution for a world with limited resources.

Inflationary currencies rely on growth, be it populations or resources, but this cannot go on forever, we live in a finite world.

We are at peak oil (peak energy) so a currency based on energy makes sense.

The catch 22 is that the incentive to create business to acquire more bitcoins would be severed as a result. Why do "risky" investments by creating services for people when you don't need to? YOu will retire of the deflationary cycles? I do think it is a problem and I haven't seen a convincing argument yet that supports the deflation only scheme. Its like saying your only allowed to have one demand or supply you cant have both lol

This is why I like coins with unlimited cap but have some kind of metric build in to gauge how many coins to make based on demand, this can't change based on some fed policy and remains static, nothing happens in the dark. PPC/DVC are some to name a few. I like merged mined coins aswell as you leverage the hashing power to create secure networks, you win as a team.

[sidhujag]

Ask if they ever bought any computer products (e.g. a laptop), if they did ask why they did when they can just wait a year and buy those for less (or better ones for the same price).

I know that consumer electronics are based on a deflationary economy but I don't think this argument applies because the deflationary economy is a subset of the encompassing economy outside of it which is inflationary. Thus consumer electronic producers love the fact that they can make a  new product every year with small tweaks and sell it for full price + a little bit more because its new. How much innovation have you actually seen compared to some of the other markets? I've worked in this market, I worked on the software side for the LED backlight display technology before Samsung bought our company out and took it mainstream. From what I saw, Samsung would put this new technology and it costed 1.5x more than the next best model, and then the year after they tweaked the algorithm by putting in a bit better LED's because LED's became dirt cheap (Moore's law) and thus improved the light:dark ratio, improved the halo's caused by the LED's as a result and then set the price to the full 1.5x next best model again.

Alot of people end up buying it because of the way its marketed and not necessarily because of the value it brings year over year, they are all on the same page and why would you try to create value when it doesn't pay to? The economic incentive is that you release something tangibly a bit better and demand full price.

Ever go talk to the salesman of a consumer electronics store? Why do they always try to sell you on the new device and not the one that's a year old? Does the new device really justify paying the extra money based on quality or features?

[Birdy]

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Even with those marketing tricks there is still a gain of value, when I go and buy a laptop, usb-stick or whatever today that certainly is better than the one I could get for the same price 5 years ago.
It works better for stuff that is easier to compare though, like the amount of data you can save on the USB-sticks.

[sidhujag]

snip

Even with those marketing tricks there is still a gain of value, when I go and buy a laptop, usb-stick or whatever today that certainly is better than the one I could get for the same price 5 years ago.

First of all your not paying the same price even though the sticker was the same... that is because of inflation and the only reason that the company is working... im sure that the bank will only lend money to businesses if there is some sort of inflation.

You can market people to buy today sure, convince them to spend now... but how can you convince people to do business when they don't have to? If there is no business there is no bank to lend money, and where is the incentive to innovate and actually grow?

Maybe we won't know unless we try because there was a 10 year experience int he early 1900's the we saw as a depression, but maybe thats what we need a good kick in the rear to tell us to be more efficient in using natural resources.

ie: everyone pays now with only necessities and as population grows, these necessities grow on a global scale. The only growth comes out of necessity, thus no more bubbles. I don't know what life would look like but im sure our wive's wouldn't be happy campers

[Ricke]

One question I keep getting stumped on, though, is: why would I ever spend bitcoin when I know it'll be worth more in the future?

The underlined text passage is too optimistic. You can't know if it will be worth more in the future.

[odolvlobo]

Your question applies to any investment, not just bitcoins. What good is investing if you never spend the money? Bitcoins have no value until you spend them. Otherwise, they are just numbers on your computer.

[DeathAndTaxes]

Alot of people end up buying it because of the way its marketed and not necessarily because of the value it brings year over year, they are all on the same page and why would you try to create value when it doesn't pay to? The economic incentive is that you release something tangibly a bit better and demand full price.

I think you are missing the point.  When LCD HDTV came out they were like $5000 for a 42".  Then $2,000 then $1,200 then $8,000 then $500 now what $300? (<$200 for a cheap brand).

The point is why didn't everyone just wait a decade and save a lot of money.  Hell you would "profit" if you delayed consumption even if you just put your money under a matress even WITH inflation reducing the purchasing power of your dollar.  The purchasing power of a dollar (despite being inherently inflationary) rose against HDTVs.  If you bought the first year they were available it would have cost you $5,000.  If you waited just a year you could have saved $3,000 if you waited another couple years you could have saved $4,000.

By your logic the TV industry would have failed.  Nobody would ever have bought a TV, nobody will ever buy a TV because prices will be cheaper next year.

Except people DID buy TVs and they did so (many of them) KNOWING the price would be lower next year.

Why?  Simple the need/want NOW outweighed the cost savings of delaying.  Now some people DID delay consumption especially when the deflation was the steepest.  Waiting a year today might save you $20 but waiting a year in the first year might have saved you $4,000.  So some consumption was delayed.  Ok but people still bought TVs, and cellphones, and ipods, and bluray players, and computers, and gaming consoles, and camcorders, etc.

The electronics industry is healthy and growing depsite every product they make is almost certainly going to be cheaper AND better in the future.

Deflation does have an effect on delaying consumption just like inflation has an effect on accelerating consumption (which has led to a lot of the problems we have today) however nobody delays consumption forever.
Are you going to take your Bitcoins to your grave with you?  Is every Bitcoin holder?  What is the point of a Bitcoin holding value if you never USE that value?  Is it just a video game, the nerd who dies with the highest Bitcoin score gets bragging rights?

People will spend.  People spent gold based currencies despite the fact that gold held its value remarkably well.  People may not buy every piece of garbage at whatever price a company wants if the value their money but they will buy something at some price.

[sidhujag]

Alot of people end up buying it because of the way its marketed and not necessarily because of the value it brings year over year, they are all on the same page and why would you try to create value when it doesn't pay to? The economic incentive is that you release something tangibly a bit better and demand full price.

I think you are missing the point.  When LCD HDTV came out they were like $5000 for a 42".  Then $2,000 then $1,200 then $8,000 then $500 now what $300? (<$200 for a cheap brand).

The point is why didn't everyone just wait a decade and save a lot of money.  Hell you would "profit" if you delayed consumption even if you just put your money under a matress even WITH inflation reducing the purchasing power of your dollar.  The purchasing power of a dollar (despite being inherently inflationary) rose against HDTVs.  If you bought the first year they were available it would have cost you $5,000.  If you waited just a year you could have saved $3,000 if you waited another couple years you could have saved $4,000.

By your logic the TV industry would have failed.  Nobody would ever have bought a TV, nobody will ever buy a TV because prices will be cheaper next year.

Except people DID buy TVs and they did so (many of them) KNOWING the price would be lower next year.

Why?  Simple the need/want NOW outweighed the cost savings of delaying.  Now some people DID delay consumption especially when the deflation was the steepest.  Waiting a year today might save you $20 but waiting a year in the first year might have saved you $4,000.  So some consumption was delayed.  Ok but people still bought TVs, and cellphones, and ipods, and bluray players, and computers, and gaming consoles, and camcorders, etc.

The electronics industry is healthy and growing depsite every product they make is almost certainly going to be cheaper AND better in the future.

Deflation does have an effect on delaying consumption just like inflation has an effect on accelerating consumption (which has led to a lot of the problems we have today) however nobody delays consumption forever.
Are you going to take your Bitcoins to your grave with you?  Is every Bitcoin holder?  What is the point of a Bitcoin holding value if you never USE that value?  Is it just a video game, the nerd who dies with the highest Bitcoin score gets bragging rights?

People will spend.  People spent gold based currencies despite the fact that gold held its value remarkably well.  People may not buy every piece of garbage at whatever price a company wants if the value their money but they will buy something at some price.
[/quote]

I get what your saying, but how come the gold backed currency idea failed? Why did we move into the "wants" more than the "needs" based economy? I agree that the "needs" based economy is what we need to preserve life on a finite supply based Earth but we were already faced with this decision and decided the "wants" overcame the "needs"? What makes you think we will go back and revert to a system based on a finite money supply?

[RodeoX]

I just look at what I paid for the bitcoin vs. what the value is when I spend. As long as I get a discount on the price I'm fine spending an appreciating asset.

[DeathAndTaxes]

What makes you think people only bought needs under gold based currencies?  Gold (and other commodities) and gold back paper currency has existed for thousands of years.   Hint: people bought wants and needs.

Bitcoin is experiencing a high rate of price deflation right now, probably more than any commodity currency has in the history of mankind.  However law of large numbers and all that, eventually adoption will slow.  It will slow if for no other reason then everyone on the planet is using it.

Right now global GDP is about 1.8% annually.  Lets bump that up and say 0.2% per month.  If everyone on the planet was using Bitcoins, and the supply was fixed the purchashing power of a Bitcoin would rise by the same rate the underlying (global) economy rises.  That means your Bitcoins would gain a staggering 0.2% more purchasing power each month.  Would you not buy a video game say $50 (equivalent) just because it will be $49.90 next month due to inflation.  At some point your desire for a good or service will outweigh the gain by not spending and .... YOU WILL SPEND.  If you don't well you will have a miserably (and likely short life) and die with a lot of Bitcoins which do absolutely nothing for you.

As for investment do you really think nobody on the planet would say "hey I don't want my purchashing power to only rise by 2.4% annually, Bob says his widget company can produce gains of 30% per year.  30% is more than 2.4% so maybe I should invest my Bitcoins with Bob"?

[sidhujag]

What makes you think people only bought needs under gold based currencies?  Gold (and other commodities) and gold back paper currency has existed for thousands of years.   Hint: people bought wants and needs.

Bitcoin is experiencing a high rate of price deflation right now, probably more than any commodity currency has in the history of mankind.  However law of large numbers and all that, eventually adoption will slow.  It will slow if for no other reason then everyone on the planet is using it.

Right now global GDP is about 1.8% annually.  Lets bump that up and say 0.2% per month.  If everyone on the planet was using Bitcoins, and the supply was fixed the purchashing power of a Bitcoin would rise by the same rate the underlying (global) economy rises.  That means your Bitcoins would gain a staggering 0.2% more purchasing power each month.  Would you not buy a video game say $50 (equivalent) just because it will be $49.90 next month due to inflation.  At some point your desire for a good or service will outweigh the gain by not spending and .... YOU WILL SPEND.  If you don't well you will have a miserably (and likely short life) and die with a lot of Bitcoins which do absolutely nothing for you.

As for investment do you really think nobody on the planet would say "hey I don't want my purchashing power to only rise by 2.4% annually, Bob says his widget company can produce gains of 30% per year.  30% is more than 2.4% so maybe I should invest my Bitcoins with Bob"?

Well all I'm saying is we had this choice before we went off the gold standard because we needed more money supply to accomodate our growth... something went wrong there either through hidden agenda or we made a decision that you're saying we probably take back.

We switch over and we live miserably for atleast a decade, but life will be way better after... I saw we as society in general, us early adopters would be ok just because we got in early enough to spend based on some "wants"

[mindfulmojo]

I have only start reading about this, but check this out....

http://freico.in/

It's a cryptocurrency based on demurrage,

the cost associated with owning or holding currency over a given period.