Economic Devastation

[rpietila]

Well I am not for 0% debasement, never have been.

My previous idea was something like the gold's. Now I am actually in favor of a larger percentage.

But the percentage is not the issue, the issue is the structure. I believe a system can be founded on anything that works (and fairness & security are the key determinants), and they can compete over time, and maybe a universal one emerges, maybe not.

It's clear that gold's mechanism of debasement (mining with increasing difficulty, though also with better hashrate, and variable debasement per year) trumps everything that has existed before crypto. And I am not sure if crypto has found a better way yet.

That still in 2015, there is no major crypto with actual gold's mining characteristics (incl variable emission), behooves me.

[iamback]

Guys that discussion was sloppy and got out-of-hand. And the 3 of us don't have enough free time to do it scholarly and precisely. Our one liners got misinterpreted, e.g. my "cathedrals vs. bazaars" was misinterpreted (by iCEBREAKER) to presume I was asserting there is no organizational structure in the world which wasn't my intended point. Partially my fault because I really shouldn't be doing this discussion at this time.

I just want to add a point I thought of while eating at McDonalds (no other choice at 4am).

Most Libertarian readers probably dislike debasement because they want private property rights respected (in addition to not wanting the debasement to end up in the hands of the fiat masters).

However, there is no private property that doesn't have depreciation and maintenance costs (exception for precious metals but you still have to expend resources to guard them?). So why should a monetary claim on real capital be the only thing in the world that never depreciates? Even if you held the real capital as private property instead of the monetary claim, you would not avoid depreciation and maintenance so why should the monetary claim offer frictionless holding that the claimed asset can't?

An unanswered question is how to calculate the optimum debasement rate?

rpietila, what goal could variable emission of new coins solve or optimize? I've seen some mention smoothing the price volatility, but I am skeptical of that.

I don't want to get into another long discussion, but if anyone has an ideas, I am interested to read them.

[rpietila]

rpietila, what goal could variable emission of new coins solve or optimize? I've seen some mention smoothing the price volatility, but I am skeptical of that.

Gold does not come into existence fixed percentage per year. Actually over millenia, gold's depreciation has been only 0.2-0.3%.

That during the largest economic expansion period the rate has been over 2%, its value has kept in bay and it has not degenerated to a collectible. That during economic stagnation, war, and famine, gold mining has all but stopped, the supply has not increased when the real economy has decreased. (That it has not decreased, which would be impossible, is also important.)

Labeling Bitcoin "gold 2.0" is a clever ploy, but the emission mechanism is not equal to gold. God was wiser than Satoshi. Or had a longer perspective.

[iamback]

So supply increases when economic production increases; because I presume debt is driving the expansion thus uneconomic mining becomes ephemerally plausible due to debt misallocation.

One way that could be emulated with crypto-currency would be to adjust the emission rate of new coins relative to the proportion of the total coin supply transacted per unit time, and the transaction fee would need to be higher than what could be gained by miners from sending transactions to themselves to inflate the metric.

I think investors might accept increased debasement when (the real, not faked) proportional transaction rate is higher, because this should correlate with increased adoption and value per the Metcalf Law correlation between market cap and usage that Peter R charted (verified) for Bitcoin. That is actually an interesting idea but needs more thought and study.

[iamback]

Actually over millenia, gold's depreciation has been only 0.2-0.3%.

Don't forget Dr. Antal Fekete's point which is that gold has the highest above ground stocks to velocity ratio of any commodity on earth — money is more complicated than just debasement, e.g. the "supply" of money is multivariate at least depending on both the rate of emission and exchange. His point being that the marginal-utility-to-hoard of gold was nearly constant. By now, I've come to realize that is a negative property of a unit-of-exchange and a positive property of a store-of-value, thus congruent with how gold is employed by society.

See I don't think governments enforce interest rates nor currencies on us[1]. We the People get the government we economically ask for.

Dr. Fekete is another whom I debated extensively in email.

[1]

http://armstrongeconomics.com/2013/03/07/interesting-questions-for-gold/ Whatever you call money will always fluctuate in purchasing power because there is a business cycle. Any attempt to flat-line that will be futile for that is precisely what Marx tried to do – stop the cycle. Gold will always rise and fall if it is a free market or money fixed by weight or value. By the way, Florence had a two-tier monetary system using gold internationally and silver domestically. The two moved opposite, the workers felt cheated, they rioted and burned down the banker’s homes in Florence. It was a huge riot and that was a system based upon weight. The value still rose and fell.

[OROBTC]

...

Antal Fekete is an interesting guy with interesting views on gold.  Roger that on gold having a huge stock:flow, biggest of them all.

Should we wind up in a hard gold backwardation (oversimplifying: negative GOFO), we would then soon see if his major theory on the Gold Basis is correct.  Should the arbitrageurs decline to get a "decent guaranteed rate-of-return" by loaning off their phyzz for a promise of getting it back in two months, well............

No way my phyzz goes out for some nickels in front of the steamroller.

*  *  *

But, perhaps the most apropos direction of conversation re "Economic Devastation" might be:

--  the huge moves in the US$ (the Index is at approx. 91.5, last I looked)
--  crude oil (approx. $48 / bl)
--  not to mention stocks down hard all three days so far in 2015

These hint of deflation.  Deflations often come before BIG inflations.

[iamback]

Should we wind up in a hard gold backwardation...

And now for the real story:

http://armstrongeconomics.com/2013/03/06/gold-backwardation-the-real-story/

It was writings of this significance that cemented my respect for Armstrong.

Btw, in debate in private email, I found flaws in Antal's logic. He like Hommel had some interesting ideas, but seems to not be as grounded as Armstrong.

Then gold vanishes in the 7th century and does not appear again until the 13th century. The Spanish discovery of America brought back so much gold and silver, Europe went into a major inflationary period and the two metals declined with inflation insofar as purchasing power was concerned. Hence, comments that claim the price of gold does not decline, no matter how much of the stuff is produced, is just not true.

...

Now let’s talk reality. The Gold backwardation is simply nothing more than the collapse in interest rates as capital lost faith in banks and then the Sovereign Debt Crisis began with Greece in 2010. Much of the liquidity that came to gold in the early years was OPEC money. It had absolutely nothing to do with gold. The problem was OPEC was getting all this cash, but religiously they could not earn interest. Thus, I took clients and showed them if we bought gold and sold it forward we were earning the effective interest rate but it was called the “carrying cost”. Backwardation in this case is not indicative of any shortage whatsoever or a collapse in “trust” of the dollar. The dollar has been rising! Just look at German interest rates on short-term paper went negative by 0.6%. This has NOTHING to do with fiat and people losing faith in paper money –yada, yada, yada. If that were true, interest rates would not COLLAPSE, they would SOAR because people would not trust government bonds and they would have to pay up. The flight to quality would reverse into PRIVATE assets as it did even during the German Hyperinflation.

Backwardation in gold is a money issue and it is simply the yield curve – nothing more. It has gone negative just as US government T-Bills went negative. If the “carrying cost” of gold was 500% higher than the 90 day paper interest rates, then you have a guaranteed trade by selling the forward and collecting that premium over the 90 day rate. Professionals arbitraged that and thus the “carrying cost” must collapse to be even with interest rates or there would be a endless guaranteed trade.

This has absolutely nothing to do with anything. The stories posted are astonishing. If they were remotely true, then you would see the same trend emerge everywhere and interest rates would rise if people did not “trust” paper dollars and government debt. There are many people pontificating nonsense that is just gibberish. This sophistry is getting people to buy gold for the wrong reason and risks only their sale when they figure out the story is just bullshit.

Buy gold because it is an INSURANCE policy against the transition. It is distinguished because it is MOVABLE, from classes such as real estate that are IMMOVABLE. The problem emerging with gold is government is out to track every ounce and tax any sale. They are trying to eradicate the underground economy. That does not mean they will succeed. It also means they will try.

http://armstrongeconomics.com/2013/10/24/gold-perpetual-propaganda/

Gold is not in permanent backwardation. You obviously never heard of carrying costs that are related to the interest rate. Nothing is EVER permanent. Stop the idiotic explanations. You cannot point to a single relationship in history that is ever permanent except stupidity. Just like the propaganda that silver is suppress and it will soar to 16:1 because that is where it use to be. Good one.

“Isn’t the Comex just a price suppression scheme as the volume is usually 50% to 100% of open interest?” That is up there with communism. We just answered that in the Swiss press that published the Socialists who claim that commodities are higher than they should be because of speculation and therefore all futures markets should be closed to eliminate speculation. This is the pinnacle of pure stupidity. Every study shows that markets reduce volatility and the price of a commodity is stabilized by creating a market. If there was no COMEX, the price of gold would be far less because you could not sell it without a market. I was a market-maker. All the stores buying gold would not have existed if they could not have sold what the bought from the public, someone refined that jewelry, and then resold it into COMEX.  If you want no markets, I will be be glad to send you a Karl Marx TShirt I suggest you wear.

Isn’t the Comex Gold inventory likely make believe? The COMEX is not the only warehouse. Inventories are routinely manipulated to get people to buy or sell. They shipped silver to London for the Buffet Rally. Everyone rushed out to buy saying there was a shortage because it was moved to London where it was not reported. Again, if you are so desperate to cling to things like this to say you are right and the entire free markets are wrong, good luck. Governments cannot even manipulate what you claim can be done.

Are you trying to survive and make money? Or are you just spreading propaganda that is created by gold promoters to get people into a zealot state that they will continue to buy even when they lose money? Gold is a market and it rises and falls like everything else. It is trading NO DIFFERENT from the rest of the commodity sector. Everything is linked and everything has its cycle and time. Why should gold rally when the MAJORITY of people see nothing wrong? Until the majority of people question government, which is coming, then and only then will gold rally on a sustainable basis. It did not even exceed the 1980 high adjusted with the bogus CPI numbers that stand at $2300 today. When gold exceeds that number – THEN AND ONLY THEN is real bull market underway.

[iamback]

Armstrong's myopia is that he wants to blame everything on government and not look at the holistic synergies between for example the centralized control over the debasement of money and the Iron Law of Political Economics. Thus Armstrong is blinded to the breakthrough in the relationship between the people and the State provided by the solution to the Byzantine's Generals Dilemma that Satoshi's Proof-of-Work provides!

That is why I emphasize that the key improvement in money (as a unit-of-exchange) provided by crypto-currency is the not the elimination of debasement, but rather that the debasement can't be centrally captured! What Bitcoin's marketing and design as a better gold did was to take what is most innovative about the invention (i.e. the decentralization of control) and direct it away from unit-of-exchange towards a store-of-value, thus potentially obviating its breakthrough in terms of benefits for the people versus the State.

We all know something is wrong. It has nothing to do with what is money. It is all about fiscal mismanagement.

(1) Gold declined from 1980 into 1999 and all these fundamental stories were still there. (2) Gold rose into 1980 without backwardation.(3) We had a Gold Standard under Bretton Woods in 1945 and it collapsed in 1971 precisely in 26 years as always! It was the fiscal mismanagement and the fact money was backed by gold then meant absolutely nothing.

Also I am doubting Armstrong's claim that gold doesn't track inflation.

http://armstrongeconomics.com/2013/11/06/commodities-trade-differently-always-have/

Gold is the worst investment from a inflationary standpoint if you expect it to track inflation for it does not and will not. From this perspective compare it to the Dow that rose from 1,000 to nearly 17,000 since 1980. You would have made far more money in stocks than gold. Nonetheless, Gold will rally sharply in a burst and catch up to some extent. It is a matter of time – not if. That is true of all commodities.

http://armstrongeconomics.com/2013/11/06/gold-the-real-breakout/

Gold indeed is not linear so it will not track inflation because it is a commodity. This results in bursts of price movement that amounts to catch-ups that get everyone excited assuming it will last forever and it never does as is the case with any commodity. We ran these charts to demonstrate that gold was in a bear market and that it was really declining in a basket of currencies in the 1980s and early 1990s.

It depends how we define the term "inflation", because the definition Armstrong is using is ambiguous:

http://www.marketoracle.co.uk/Article16212.html

Note that a reduction in purchasing power is the same effect as holding a negative real interest rate asset during price inflation. Thus, we can conclude mathematically that prices do not have to rise, to get the effect of price inflation on the private sector. And thus we know the reason why gold is a hedge against negative real interest rates (click to see very compelling chart!), and not a hedge against inflation or deflation (which this article proves are ambiguous)...

[OROBTC]

...

urback

You have a message on a different topic.

[iamback]

This is really narscistic, but Eric S. Raymond has an interesting blog going and since I was describing my background upthread and we were also contrasting other goldbug analysts, I will post this here, for lack of a better place to post it, in case Eric doesn't approve my comment.

This is relevant to the thread topic, because nerd-like skills may be what is in demand in the new economy.

How do we explain the nonstandard nerd?

http://esr.ibiblio.org/?p=6617&cpage=1#comment-1386145

My mother says I was the only child she knew of that disassembled my toys. I had this photo of me in diapers with a hammer in one hand, and the "put the shapes in the matching shaped hole" toy in the other. I remember alternating playing with arithmetic in my head (i.e. analytical) and doing telepathy with UFOs (i.e. imagination and creativity) while laying down in bed for the evening. Yet I was also getting bloody noses daily from playing tackle football from age 5. I was so dexterous I could rarely be tackled. I remember entertaining random adults in conversation in the park or other public venues from this age. I remember a photo me dancing and singing with great enthusiasm and apparently talent. For example, I could emulate the jazz instruments faithfully with my mouth. I remember during Mardi Gras I could sprint through the crowds at full speed dodging everyone and being quicker in scrappling the black kids for doubloons. In high school I was top athlete in Cross Country and Track & Field, winning for example junior varsity league champion in 10th grade with a time of 16:40 for 3 miles, which was only my first year to take up long distance running. I am undersized at 5'7" and 49 years old. I remember at age 5 helping my father design the construction of a wooden platform for the bed he put in the back of his VW bus (which he built to leave us and go live in Belize). Even while I was coding million user software, I would alternate with athletics and extrovert activities. I was also a natural leader in both the work place and athletics.

I found that when I followed my mental curiosity I would get totally consumed in it and lose awareness and concern for the outside world. I spent an entire summer in the basement building an elaborate train world. I lost my high school girl friend in the summer after graduation, because my friend had an Apple II and I discovered programming for the first time. Lately I bathe bimonthly, yet this doesn't seem to affect the attraction women have for me.

I think people maximize the talents they have. Some nerds may be deficient in either sociably appreciated talents and or lacking the confidence that they have such talents, and thus they may become consumed by the mental talents which they have. For example I am not nearly as comfortable with written expression as I am with verbal or physical activity. Yet my reading comprehension is very high, and my programming is accurate and debugged. I briefly flirted with spelling bees in early elementary and did well afair, but I seemed to lose interest in it as I prioritized my analytical, abstractions, and athletics talents. Also I loathe memorizing pedantic details, thus I am less erudite than others. I prefer to load up the details for something that is interesting to me at the moment and analyze it. Then I tend to forget all but the most generative essence.

Oh and I recognized early on that other kids in the neighborhood were better at Rubik's cube, board games, and even memorizing sequenced tones (sequential patterns) than I am. It seems I want to parallelize my thought processes, even my patience or attention to detail in writing suffers because I tend to write the end of the sentence at the same time as I write the start. I prefer verbal because I can hear what I am thinking instantly versus this slow process of typing out what I am thinking. I think this is why I like programming, because most of the effort is thinking out the relationships then the coding is very succinct.

[Morbid]

this idea of knowledge age reminds me of the mid 19th century times when most educated classes came to conclusion that monarchy has completely outdated itself and new system is needed. obviously people predicted best case scenario which formulated itself into ideologies such as marksism etc. us aiming for the 'knowledge age' doesnt mean that we'll ever get there. we can aim towards it as a roadmap but in reality it will most probably not succeed completely.
i was born in ussr. the society was building communism but it was never really complete as it would eventually lead to utopia. we had some sort of socialism which worked until it didnt as times changed and it couldnt compete with consumer demands of capitalist society.
the west had a good run upto building democracy, but as with any ideology its becoming visible that our current world is not democratic at all. i believe we live in the age of bankocracy and wealth worshiping which is a radical form of society - ofcourse it will not last long.
i really hope that we can follow this new ideology of the 'knowledge age' to rebuild our societies, it seems quite inevitable. though as with previous encounters it will not be a smooth transition and it will not work everywhere on our planet - meaning that there will be an antipod to that as always. if china together with modern russia will spearhead this new movement then the west will become opposite of that spreading chaos until completely defeated by force.

[iamback]

this idea of knowledge age reminds me of the mid 19th century times when most educated classes came to conclusion that monarchy has completely outdated itself and new system is needed

It is quite exasperating for me that most readers commit a category error every time they attempt any form of logical analysis. Or at least it appears that way to me since it is extremely rare that a reader posts something that demonstrates they comprehend my writings. I would at least love to see someone argue on point, rather than arguments that don't even address the specific points I've made in my writings.

We have the repeating examples in history of paradigm shifts in technology creating technological shifts in employment and massive unemployment initially, e.g. the Luddites in the First Industrial Revolution and the massive unemployment that lead to World War 1 and 2 caused by Second Industrial Revolution. Those were preceded by the First Agricultural Revolution then the Second.

We've already had the First Computer Revolution which has shifted jobs from the West to the call and BPO centers in the developing world. Next comes the Second Computer Revolution which will automate most existing jobs. Even Oxford University did a research paper predicting 47% of existing jobs will be replaced by automation before 2033.

Even we have the clear analysis in the "Rise of Knowledge" essay (find link in the OP) I wrote in 2010 or 2011, which clearly explains why finance can not finance non-fungible knowledge production, whereas it could finance menial labor and fixed capital infrastructure for factories.

I wrote another essay in 2013 to reinforce the points in the "Rise of Knowledge":

http://unheresy.com/Information Is Alive.html

All of that and you compare it to some idea about changing monarchy      

I can lead a horse to water in the desert, but I can't teach it to drink if it is that discombobulated.

Apologies perhaps I should be more sympathetic. If we had a white board and classroom setting where I could interact with you, we could more efficiently explain all the ideas that are in my writings. I think people have a difficult time with reading comprehension. They respond better in a verbal, interactive setting.

[Morbid]

this idea of knowledge age reminds me of the mid 19th century times when most educated classes came to conclusion that monarchy has completely outdated itself and new system is needed

It is quite exasperating for me that most readers commit a category error every time they attempt any form of logical analysis. Or at least it appears that way to me since it is extremely rare that a reader posts something that demonstrates they comprehend my writings. I would at least love to see someone argue on point, rather than arguments that don't even address the specific points I've made in my writings.

We have the repeating examples in history of paradigm shifts in technology creating technological shifts in employment and massive unemployment initially, e.g. the Luddites in the First Industrial Revolution and the massive unemployment that lead to World War 1 and 2 caused by Second Industrial Revolution. Those were preceded by the First Agricultural Revolution then the Second.

We've already had the First Computer Revolution which has shifted jobs from the West to the call and BPO centers in the developing world. Next comes the Second Computer Revolution which will automate most existing jobs. Even Oxford University did a research paper predicting 47% of existing jobs will be replaced by automation before 2033.

Even we have the clear analysis in the "Rise of Knowledge" essay (find link in the OP) I wrote in 2010 or 2011, which clearly explains why finance can not finance non-fungible knowledge production, whereas it could finance menial labor and fixed capital infrastructure for factories.

I wrote another essay in 2013 to reinforce the points in the "Rise of Knowledge":

http://unheresy.com/Information Is Alive.html

All of that and you compare it to some idea about changing monarchy      

I can lead a horse to water in the desert, but I can't teach it to drink if it is that discombobulated.

Apologies perhaps I should be more sympathetic. If we had a white board and classroom setting where I could interact with you, we could more efficiently explain all the ideas that are in my writings. I think people have a difficult time with reading comprehension. They respond better in a verbal, interactive setting.

youve completely missed the point i was making. all i said is that the times are similar in terms of we are as society hit the fork on the road again. living in capitalist world we feel that it outlived itself, just like monarchy did before. so today seems similar as we are brainstorming of future just like early marksists once did. got it?

[CoinCube]

rpietila, what goal could variable emission of new coins solve or optimize? I've seen some mention smoothing the price volatility, but I am skeptical of that.

Gold does not come into existence fixed percentage per year. Actually over millenia, gold's depreciation has been only 0.2-0.3%.

That during the largest economic expansion period the rate has been over 2%, its value has kept in bay and it has not degenerated to a collectible. That during economic stagnation, war, and famine, gold mining has all but stopped, the supply has not increased when the real economy has decreased. (That it has not decreased, which would be impossible, is also important.)

Labeling Bitcoin "gold 2.0" is a clever ploy, but the emission mechanism is not equal to gold. God was wiser than Satoshi. Or had a longer perspective.

rpietila I agree with your thoughts above.

When examining non intuitive ideas like the pitfalls of excessive monetary debasement or the problems with assigning a 0% cost to time it is oh so easy to get lost in the complexity. I like to simplify such concepts as much as possible so the heart of the matter can be isolated. To evaluate the utility of these competing ideas it is useful to look at some extreme economic hypotheticals.  

Let’s start with a hypothetical world where there is an assumed 0% cost to time? Let’s say that this world is growing briskly at 5% each year and has adopted a fully mined cryptocurrency. What is a wealthy young cryptobarron to do in such a world? Should he invest his coin in productive but potentially risky business or should he simply HODL. If he locks his funds away for 40 years and growth continues unchanged he will increase his purchasing power by a factor of 7. After 60 years when his children inherit the money that original purchasing power will have increased almost 19 fold.

In such a world there is a tremendous incentive not to invest or take risks. Simply by doing nothing one gets a free claim on the future productivity and work of all those who are developing knowledge, and driving productivity growth. The reality in such a world is that it will not continue to grow at 5%. Money will be horded, investments will decline, and growth with drop. Only when the growth is much much lower will it be economically palatable to risk some precious cryptocurrency.

Is massive debasement best then? Excessive debasement has significant problems as well. Lets look at a very different economic extreme and compare how an economy functions under a debased and non debased currency.

Lets look at a Mad Max world  . It is a post apocalyptic world with 0% growth no investment opportunities, and no social safety net. The currency is gold but the technology to mine it has been temporarily lost. A worker in this world may earn a fixed salary his entire life (makes the math easier). If he works for 40 years before becoming disabled but lives an addition 20 years before succumbing it is easy to calculate how much he will need to save to provide for himself in his "golden" years. He needs to save exactly 33% of his salary for 40 years if he wants to maintain the same level of purchasing power for a 20 year “retirement”.

Now lets add debasement to this world and make it worse by adding a despotic government and a forced transition to fiat currency. If the new government debases the money supply by 5% a year but otherwise does nothing productive the economic situation deteriorates markedly for our poor worker. Even if he is one of the lucky ones and manages to captures some of that government spending (say enough keep his income in line with inflation). He will find it quite difficult to maintain his lifestyle once he no longer works. Our worker would need to double his savings rate to 66% each year if he expects to live 20 years post retirement and maintain equal purchasing power throughout his life. Other workers, those unable to capture any government spending do much worse.

In a world with limited growth excessive debasement decimates the elderly and those on fixed incomes.  The reality of the human condition dictates that we all face a potentially prolonged period at the end of our lives when we are incapable of productive work and must consume previously stored savings to survive. It is this fundamental human condition that limits how much debasement can be tolerated and why we start to fear and oppose debasement as we age.

The equilibrium point between these competing inefficiencies is a debasement rate that equals the rate of economic growth.  

Money is claims on real capital. If claims on real capital are withheld from the market when money is stored rather than invested/spent, then some real capital has been delayed. If that delay was wise, then society benefits, but if it was mistaken then society suffers. But no one can know a priori (in advance) the outcome of decision to delay.

If long term debasement exceeds the rate of economic growth it will introduce inefficiencies into economic decision making. Claims on real capital that optimally should have been delayed will instead be invested/spent. Society as a whole suffers as a result. If long term debasement is less than underlying economic growth it provides an incentive to bury money and in the end reduces economic growth again society as a whole suffers. Equilibrium occurs when debasement matches economic growth.  

[VectorChief]

Very interesting discussion.
I still have some catching up to do, but can post a few points of the top of my head.

I am not against perpetual pre-programmed debasement in general, but taking into consideration the transition from current inflationary fiat system, having a limited supply might be a good selling point to bolster adoption of the new distributed consensus mechanism. Changing this aspect (the debasement) of the money system later might become problematic as it ruins the original promise and might shatter confidence.

The argument that purchasing power of money increases in the case of economic growth and zero debasement cannot be viewed so negatively as it works equally well for all participants. The economic growth in this case simply translates into higher standard of living instead of being eaten by debasement. In fact poor will enjoy the increasing purchasing power of money much more than the rich ever would, because it makes a bigger difference for them.

Also if society stays robust in general, then having a lot of purchasing power won't get you everything you want, because some things might simply be not for sale. If I don't want to sell my house at the beach, there is no amount of money in the world that could take it away from me. That of course implies integrity of the whole system and society in general.

Since use of crypto-currencies is voluntary the natural debasement might occur through addition of new systems and competition between them. However, due to the fact that network effects work very well with money, this kind of debasement is likely to saturate at some acceptable level. This is in fact another aspect of decentralization in crypto-currencies. It will be interesting to see how it plays out.

[iamback]

The argument that purchasing power of money increases in the case of economic growth and zero debasement cannot be viewed so negatively as it works equally well for all participants. The economic growth in this case simply translates into higher standard of living instead of being eaten by debasement. In fact poor will enjoy the increasing purchasing power of money much more than the rich ever would, because it makes a bigger difference for them.

Your analysis is short-sighted. With 0% debasement, the rich can loan money at the rate of growth of the economy and parasite the economic growth from the masses in the form of interest payments. With higher levels of debasement, the banksters can't make a positive real (real = inflation adjusted) return whereas the nimble, smaller-capitalized entrepreneur or investor can generate ROI that exceeds the broad level of economic growth and can thus make real gains.

The point of higher debasement is it rewards hands-on knowledge and penalizes parasitic usury.

[iamback]

If he works for 40 years before becoming disabled but lives an addition 20 years before succumbing it is easy to calculate how much he will need to save to provide for himself in his "golden" years. He needs to save exactly 33% of his salary for 40 years if he wants to maintain the same level of purchasing power for a 20 year “retirement”.

Now lets add debasement to this world and make it worse by adding a despotic government and a forced transition to fiat currency. If the new government debases the money supply by 5% a year but otherwise does nothing productive the economic situation deteriorates markedly for our poor worker. Even if he is one of the lucky ones and manages to captures some of that government spending (say enough keep his income in line with inflation). He will find it quite difficult to maintain his lifestyle once he no longer works. Our worker would need to double his savings rate to 66% each year if he expects to live 20 years post retirement and maintain equal purchasing power throughout his life. Other workers, those unable to capture any government spending do much worse.

  The reality of the human condition dictates that we all face a potentially prolonged period at the end of our lives when we are incapable of productive work and must consume previously stored savings to survive. It is this fundamental human condition that limits how much debasement can be tolerated and why we start to fear and oppose debasement as we age.

That is why he needs to plant some children (if he can't earn enough to be wealthy enough). Sorry but math and government planning can't replace a strong family.

http://armstrongeconomics.com/2013/10/01/what-socialism-destroyed-govt-shutdown/

The equilibrium point between these competing inefficiencies is a debasement rate that equals the rate of economic growth.

"The rate of economic growth" does not exist. There is no way to calculate it. It is a relative thing that varies for each person and each weighting basket.

Money is claims on real capital. If claims on real capital are withheld from the market when money is stored rather than invested/spent, then some real capital has been delayed. If that delay was wise, then society benefits, but if it was mistaken then society suffers. But no one can know a priori (in advance) the outcome of decision to delay.

If long term isthe debasement exceeds the rate of economic growth it will introduce inefficiencies into economic decision making. Claims on real capital that optimally should have been delayed will instead be invested/spent.

There is no one level where that happens in all cases. It is ladder. The higher you climb, the more higher ROI activities get prioritized and lower ROI get discouraged, but indiscriminate spending also has some effects which are not all positive. I would need to think about how to model this mathematically.

[VectorChief]

The argument that purchasing power of money increases in the case of economic growth and zero debasement cannot be viewed so negatively as it works equally well for all participants. The economic growth in this case simply translates into higher standard of living instead of being eaten by debasement. In fact poor will enjoy the increasing purchasing power of money much more than the rich ever would, because it makes a bigger difference for them.

Your analysis is very short-sighted. With 0% debasement, the rich can loan money at the rate of growth of the economy and parasite the economic growth from the masses in the form of interest payments. With higher levels of debasement, the banksters can't make a positive real (real = inflation adjusted) return whereas the nimble smaller entrepreneur or investor can generate ROI that exceeds the broad level of economic growth and can thus make real gains.

The point of higher debasement is it rewards hands-on knowledge and penalizes parasitic usury.

But in the case of zero debasement, economic growth does not translate into increasing monetary base, that in turn prevents getting interest on the loans. It simply means that everyone will be getting the products of the economy as an additional benefit, not via monetary means, but as an increasing quality of services.

Also as technological unemployment increases, should machines begin to provide food and shelter (3D printed) for humans free of charge or should humans still pay for it?

[iamback]

youve completely missed the point i was making. all i said is that the times are similar in terms of we are as society hit the fork on the road again. living in capitalist world we feel that it outlived itself, just like monarchy did before. so today seems similar as we are brainstorming of future just like early marksists once did. got it?

I apologize. I don't know how I so utterly failed to read your post. I must very exhausted.

[iamback]

The argument that purchasing power of money increases in the case of economic growth and zero debasement cannot be viewed so negatively as it works equally well for all participants. The economic growth in this case simply translates into higher standard of living instead of being eaten by debasement. In fact poor will enjoy the increasing purchasing power of money much more than the rich ever would, because it makes a bigger difference for them.

Your analysis is short-sighted. With 0% debasement, the rich can loan money at the rate of growth of the economy and parasite the economic growth from the masses in the form of interest payments. With higher levels of debasement, the banksters can't make a positive real (real = inflation adjusted) return whereas the nimble smaller entrepreneur or investor can generate ROI that exceeds the broad level of economic growth and can thus make real gains.

The point of higher debasement is it rewards hands-on knowledge and penalizes parasitic usury.

But in the case of zero debasement, economic grows does not translate into increasing monetary base, that in turn prevents getting interest on the loans.

  There is no real economic growth now for example in Europe, yet the banks and bond holders still collect interest payments.

Perhaps your point is that in a debt-based economy where all activity is debt-financed then to pay compounded interest, the supply of money must also have compounded growth. While that is true, then lender makes no inflation-adjusted gains.

And if the debasement is decentralized in crypto-currency, then the banksters in theory can't capture it as they do now.

Whereas if you try to limit the debasement to 0, then the banksters will still make their loans and when the economy collapses because the interest payment can't be paid, then they get bailed out by the government, because otherwise no loans means the economy dies.