Economic Devastation

[thaaanos]

Thus the solution is to remove from government the power of currency creation (via the development of superior competitors) and force it to eventually live only through taxation? Without this power banks would be forced to raise capital through legitimate means (investors and depositors) rather then just borrow newly created fiat from the FED. Governments would be likewise be unable to realistically backstop banks. When there is limited free wealth to go around the share that can go to "friends" would plummet.

Thats the million dollar question.. Inflation targetting is the best we had before bitcoin, and if bitcoin classifies closer to what nash termed ideal money then yea it will win themarket over due to increases in efficiency by moving out the middlemen who tend to be dishonest

Can you expand on the nash concept of ideal money. I am unfamiliar with his theory.

The wikipedia page is not helpful.
https://en.wikipedia.org/wiki/Ideal_money

It says only
"In John Nash’s lecture he mentioned "Good money’,is money that is expected to maintain its value over time. ‘Bad money’ is expected to lose value over time, as under conditions of inflation"
and
"John Nash mentioned in his lecture that Euro might become an ideal money in the future, because Euro is used in a large range of places and has a good stability"

Stating that ideal money is money that maintains value over time forces you to define "value" and address why money that maintains "value" is superior to money that increases or declines over time.

http://sites.stat.psu.edu/~babu/nash/money.pdf

asymptotically ideal is what I believe he refers to as something like bitcoin. Note we will never have perfect money, where inflation is tied to a real economic indicator that is easily auditable and one that cant be tampered with, but bitcoins falls under the curve closer to infinity than inflation targetted currencies today.

Notable quote which would make sense to most here :
"money should have the function of a standard of measurement and thus that it should become comparable to the watt"
Btw i believe nash was satoshi.

actually by cryptos we can have access to more information on the economy as all transactions are visible, and we could just as well add more info ie product ids etc, and get near perfect measures.
however hard coding money supply bitcoinlike is a very bad idea imho as it creates moral hazard. The decision on expanding or contracting money supply could be decentralized, ie a pool could decide if their mined blocks will get reward or not, and miners could in decentralized way control money supply, It looks counter intuitive why a miner would forfeit the bonus but its a choice he could make, could still collect fees though.
john nash is dead wrong on creating the labels bad/good money. money is a tool not a god. It is good or bad based on its effect on economy not by some intrinsic quality. he is wrong about euro too, euro will end in tears.

[sidhujag]

Thus the solution is to remove from government the power of currency creation (via the development of superior competitors) and force it to eventually live only through taxation? Without this power banks would be forced to raise capital through legitimate means (investors and depositors) rather then just borrow newly created fiat from the FED. Governments would be likewise be unable to realistically backstop banks. When there is limited free wealth to go around the share that can go to "friends" would plummet.

Thats the million dollar question.. Inflation targetting is the best we had before bitcoin, and if bitcoin classifies closer to what nash termed ideal money then yea it will win themarket over due to increases in efficiency by moving out the middlemen who tend to be dishonest

Can you expand on the nash concept of ideal money. I am unfamiliar with his theory.

The wikipedia page is not helpful.
https://en.wikipedia.org/wiki/Ideal_money

It says only
"In John Nash’s lecture he mentioned "Good money’,is money that is expected to maintain its value over time. ‘Bad money’ is expected to lose value over time, as under conditions of inflation"
and
"John Nash mentioned in his lecture that Euro might become an ideal money in the future, because Euro is used in a large range of places and has a good stability"

Stating that ideal money is money that maintains value over time forces you to define "value" and address why money that maintains "value" is superior to money that increases or declines over time.

http://sites.stat.psu.edu/~babu/nash/money.pdf

asymptotically ideal is what I believe he refers to as something like bitcoin. Note we will never have perfect money, where inflation is tied to a real economic indicator that is easily auditable and one that cant be tampered with, but bitcoins falls under the curve closer to infinity than inflation targetted currencies today.

Notable quote which would make sense to most here :
"money should have the function of a standard of measurement and thus that it should become comparable to the watt"
Btw i believe nash was satoshi.

actually by cryptos we can have access to more information on the economy as all transactions are visible, and we could just as well add more info ie product ids etc, and get near perfect measures.
however hard coding money supply bitcoinlike is a very bad idea imho as it creates moral hazard. The decision on expanding or contracting money supply could be decentralized, ie a pool could decide if their mined blocks will get reward or not, and miners could in decentralized way control money supply, It looks counter intuitive why a miner would forfeit the bonus but its a choice he could make, could still collect fees though.
john nash is dead wrong on creating the labels bad/good money. money is a tool not a god. It is good or bad based on its effect on economy not by some intrinsic quality. he is wrong about euro too, euro will end in tears.

Where did he say euro will last? We all know that..

Actually i agree with you and am designing it into my coin such that it will inflate when it is in use amd deflate when not based on blocks getting filled up or not.. Ofcourse rate of inf def will be very small to not have a short term affect. This way you tie supply to real world usage somewhat and it scales with the usage of the currency.

With bitcoin it may have an issue with scaling if everyone was to own satoshis we may not habe enough of them in 21 million to go around, leaving poor ppl hanging out to dry.

[CoinCube]

Can you expand on the nash concept of ideal money. I am unfamiliar with his theory.

The wikipedia page is not helpful.
https://en.wikipedia.org/wiki/Ideal_money

It says only
"In John Nash’s lecture he mentioned "Good money’,is money that is expected to maintain its value over time. ‘Bad money’ is expected to lose value over time, as under conditions of inflation"
and
"John Nash mentioned in his lecture that Euro might become an ideal money in the future, because Euro is used in a large range of places and has a good stability"

Stating that ideal money is money that maintains value over time forces you to define "value" and address why money that maintains "value" is superior to money that increases or declines over time.

http://sites.stat.psu.edu/~babu/nash/money.pdf

asymptotically ideal is what I believe he refers to as something like bitcoin. Note we will never have perfect money, where inflation is tied to a real economic indicator that is easily auditable and one that cant be tampered with, but bitcoins falls under the curve closer to infinity than inflation targetted currencies today.

Notable quote which would make sense to most here :
"money should have the function of a standard of measurement and thus that it should become comparable to the watt"
Btw i believe nash was satoshi.

Interesting read thanks.

The critical postulates from the the Nash lecture above are the following:

1) Money should ideally have the function of a standard of measurement and this should ideally be comparable to the watt or the hour or a degree of temperature.
2) Ideal money should be free of "inflationary decadence" and the ideal rate of inflation over the long term is a zero rate of inflation
3) Currencies are in competition with each other and over time and individuals are increasingly able to "vote with their feet" leaving inflationary currencies for those that are more stable.
4) Over time competitive pressure will result in natural selection and lead us ever closer to ideal money. This process is referred to as asymptotically ideal money    

Unfortunately, these ideas are essentially left as unsupported posits in the lecture linked above with little in the way of supporting framework.
I would have liked to read the actual publication referenced in the lecture to see if Nash has developed deeper justifications supporting these ideas. The referenced paper in the lecture does not seem to be be available online. Its abstract is here.
http://econpapers.repec.org/article/sejancoec/v_3a69_3a1_3ay_3a2002_3ap_3a4-11.htm

However, if we assume Nash is correct on all of his posits it does lead to some interesting conclusions. Namely if Nash posits 1-4 are assumed to all be true then we can infer the following:

A) Ideal money has both zero inflation and zero deflation over time. Only a currency that neither gained or lost purchasing power would meet the criteria of a standard of measurement comparable to a watt, the hour, or a degree of temperature. Deflationary currencies would fail this test just as inflationary currencies do.
B) Money that is not ideal, but better then the existing system would be expected to thrive and supplant that system until a superior solution even closer to the ideal is discovered
C) For Bitcoin to meet the criteria of a true ideal currency the the human population would need to stabilize at a fixed number and technological progress would have to plateau or the bitcoin protocol would need to be modified to modify the supply of coins in existence in response to technological improvements and or population changes.

[sidhujag]

Can you expand on the nash concept of ideal money. I am unfamiliar with his theory.

The wikipedia page is not helpful.
https://en.wikipedia.org/wiki/Ideal_money

It says only
"In John Nash’s lecture he mentioned "Good money’,is money that is expected to maintain its value over time. ‘Bad money’ is expected to lose value over time, as under conditions of inflation"
and
"John Nash mentioned in his lecture that Euro might become an ideal money in the future, because Euro is used in a large range of places and has a good stability"

Stating that ideal money is money that maintains value over time forces you to define "value" and address why money that maintains "value" is superior to money that increases or declines over time.

http://sites.stat.psu.edu/~babu/nash/money.pdf

asymptotically ideal is what I believe he refers to as something like bitcoin. Note we will never have perfect money, where inflation is tied to a real economic indicator that is easily auditable and one that cant be tampered with, but bitcoins falls under the curve closer to infinity than inflation targetted currencies today.

Notable quote which would make sense to most here :
"money should have the function of a standard of measurement and thus that it should become comparable to the watt"
Btw i believe nash was satoshi.

Interesting read thanks.

The critical postulates from the the Nash lecture above are the following:

1) Money should ideally have the function of a standard of measurement and this should ideally be comparable to the watt or the hour or a degree of temperature.
2) Ideal money should be free of "inflationary decadence" and the ideal rate of inflation over the long term is a zero rate of inflation
3) Currencies are in competition with each other and over time and individuals are increasingly able to "vote with their feet" leaving inflationary currencies for those that are more stable.
4) Over time competitive pressure will result in natural selection and lead us ever closer to ideal money. This process is referred to as asymptotically ideal money    

Unfortunately, these ideas are essentially left as unsupported posits in the lecture linked above with little in the way of supporting framework.
I would have liked to read the actual publication referenced in the lecture to see if Nash has developed deeper justifications supporting these ideas. The referenced paper in the lecture does not seem to be be available online. Its abstract is here.
http://econpapers.repec.org/article/sejancoec/v_3a69_3a1_3ay_3a2002_3ap_3a4-11.htm

However, if we assume Nash is correct on all of his posits it does lead to some interesting conclusions. Namely if Nash posits 1-4 are assumed to all be true then we can infer the following:

A) Ideal money has both zero inflation and zero deflation over time. Only a currency that neither gained or lost purchasing power would meet the criteria of a standard of measurement comparable to a watt, the hour, or a degree of temperature. Deflationary currencies would fail this test just as inflationary currencies do.
B) Money that is not ideal, but better then the existing system would be expected to thrive and supplant that system until a superior solution even closer to the ideal is discovered
C) For Bitcoin to meet the criteria of a true ideal currency the the human population would need to stabilize at a fixed number and technological progress would have to plateau or the bitcoin protocol would need to be modified to modify the supply of coins in existence in response to technological improvements and or population changes.

No ideal money would have some sort of inflation.. just tied to growth and fluctuating without central authority in manor that is predictable for averafe peope and auditable.

Where did you get no inflation is ideal? The problem is centeal authority and non interest rate targetting which he says is the best we got right now.

[thaaanos]

Can you expand on the nash concept of ideal money. I am unfamiliar with his theory.

The wikipedia page is not helpful.
https://en.wikipedia.org/wiki/Ideal_money

It says only
"In John Nash’s lecture he mentioned "Good money’,is money that is expected to maintain its value over time. ‘Bad money’ is expected to lose value over time, as under conditions of inflation"
and
"John Nash mentioned in his lecture that Euro might become an ideal money in the future, because Euro is used in a large range of places and has a good stability"

Stating that ideal money is money that maintains value over time forces you to define "value" and address why money that maintains "value" is superior to money that increases or declines over time.

http://sites.stat.psu.edu/~babu/nash/money.pdf

asymptotically ideal is what I believe he refers to as something like bitcoin. Note we will never have perfect money, where inflation is tied to a real economic indicator that is easily auditable and one that cant be tampered with, but bitcoins falls under the curve closer to infinity than inflation targetted currencies today.

Notable quote which would make sense to most here :
"money should have the function of a standard of measurement and thus that it should become comparable to the watt"
Btw i believe nash was satoshi.

Interesting read thanks.

The critical postulates from the the Nash lecture above are the following:

1) Money should ideally have the function of a standard of measurement and this should ideally be comparable to the watt or the hour or a degree of temperature.
2) Ideal money should be free of "inflationary decadence" and the ideal rate of inflation over the long term is a zero rate of inflation
3) Currencies are in competition with each other and over time and individuals are increasingly able to "vote with their feet" leaving inflationary currencies for those that are more stable.
4) Over time competitive pressure will result in natural selection and lead us ever closer to ideal money. This process is referred to as asymptotically ideal money    

Unfortunately, these ideas are essentially left as unsupported posits in the lecture linked above with little in the way of supporting framework.
I would have liked to read the actual publication referenced in the lecture to see if Nash has developed deeper justifications supporting these ideas. The referenced paper in the lecture does not seem to be be available online. Its abstract is here.
http://econpapers.repec.org/article/sejancoec/v_3a69_3a1_3ay_3a2002_3ap_3a4-11.htm

However, if we assume Nash is correct on all of his posits it does lead to some interesting conclusions. Namely if Nash posits 1-4 are assumed to all be true then we can infer the following:

A) Ideal money has both zero inflation and zero deflation over time. Only a currency that neither gained or lost purchasing power would meet the criteria of a standard of measurement comparable to a watt, the hour, or a degree of temperature. Deflationary currencies would fail this test just as inflationary currencies do.
B) Money that is not ideal, but better then the existing system would be expected to thrive and supplant that system until a superior solution even closer to the ideal is discovered
C) For Bitcoin to meet the criteria of a true ideal currency the the human population would need to stabilize at a fixed number and technological progress would have to plateau or the bitcoin protocol would need to be modified to modify the supply of coins in existence in response to technological improvements and or population changes.

A can never be because markets are fractals, their size differs with the unit used, What is the ideal measure to measure a coastline?. Also they are unpredictable, ideal money will always be a step or more behind.
B money is not just a thing to discard for something better, money is first and foremost participation in a network, and choice of adoption follows network effect laws.

But i think Nash is wrong on a more basic level, money is not a means of transferring utility, but a means of transfering trust. Money is no longer just a payments system, it is also a credit system and as such it needs a trust generator. Which is also why money cannot be unpolitical, no matter how much neoliberals hide it, to attack democracy.

[CoinCube]

Where did you get no inflation is ideal? The problem is centeal authority and non interest rate targetting which he says is the best we got right now.

From http://sites.stat.psu.edu/~babu/nash/money.pdf

The paper called "Ideal Money" that was recently published in the Southern Economic Journal presented a possible conventional basis for money of the "ideal" type. This variety of money would be intrinsically free of "inflationary decadence" similarly to how money would be free from that on a true "gold standard", bot the proposed basis for that was not the proposal of a linkage to gold

Our observation, based on thinking in terms of "the long term" rather than in terms of "short range expediency", was simply that there is no ideal rate of inflation that should be selected and chosen as the target but rather that the ideal concept would necessarily be that of a zero rate for what is called inflation

...

However, if we assume Nash is correct on all of his posits it does lead to some interesting conclusions. Namely if Nash posits 1-4 are assumed to all be true then we can infer the following:

A) Ideal money has both zero inflation and zero deflation over time. Only a currency that neither gained or lost purchasing power would meet the criteria of a standard of measurement comparable to a watt, the hour, or a degree of temperature. Deflationary currencies would fail this test just as inflationary currencies do.
B) Money that is not ideal, but better then the existing system would be expected to thrive and supplant that system until a superior solution even closer to the ideal is discovered
C) For Bitcoin to meet the criteria of a true ideal currency the the human population would need to stabilize at a fixed number and technological progress would have to plateau or the bitcoin protocol would need to be modified to modify the supply of coins in existence in response to technological improvements and or population changes.

A can never be because markets are fractals, their size differs with the unit used, What is the ideal measure to measure a coastline?. Also they are unpredictable, ideal money will always be a step or more behind.
B money is not just a thing to discard for something better, money is first and foremost participation in a network, and choice of adoption follows network effect laws.
...

Regarding A) I would agree that the best that can be achieved in the foreseeable future is to approximate such an ideal. I believe Nash acknowledged that as well which is why he referred to this concept as asymptotically ideal.

Regarding B) Nash's argument appears to be that when individuals are able to participate in multiple networks simultaneously the network operating with a currency unit that is closer to ideal money will eventually win out as individuals gradually migrate over to the monetary unit that is closer to the ideal.

That is my gross impression anyway from the lecture summary posted above. Having not read his actual paper my understanding of his argument may be flawed.

But i think Nash is wrong on a more basic level

To better assess this it would be helpful to see the arguments he uses to make his case.
If anyone has access to the Southern Economic Journal I would be interested in getting a copy of this article

http://econpapers.repec.org/article/sejancoec/v_3a69_3a1_3ay_3a2002_3ap_3a4-11.htm

[PakistanHockeyfan]

Bitcoin would normally not create economic devastation if it's logistics were more ambitious.

[sidhujag]

Actually i agree with you and am designing it into my coin such that it will inflate when it is in use amd deflate when not based on blocks getting filled up or not.. Ofcourse rate of inf def will be very small to not have a short term affect. This way you tie supply to real world usage somewhat and it scales with the usage of the currency.

not sure your dynamics will be stable, miners can choose to fill up transactions with spam, or not at all. Imho best to let miners decide on monetary supply, which will actually do it anyway.

It will cost more to fill up the blocks then any benefit of inflating or deflating.. currently im only inflating if services are used and 2x the amount of service fee which is the dust output threshold (very low)... thus you'd need to create spam the block with services which will cost a service fee aswell as the normal relay tx fee... it will cost more to spam then the amount it will inflate.

[thaaanos]

Regarding A) I would agree that the best that can be achieved in the foreseeable future is to approximate such an ideal. I believe Nash acknowledged that as well which is why he referred to this concept as asymptotically ideal.

Regarding B) Nash's argument appears to be that when individuals are able to participate in multiple networks simultaneously the network operating with a currency unit that is closer to ideal money will eventually win out as individuals gradually migrate over to the monetary unit that is closer to the ideal.

A but he still expects that ideal money is a single point to converge to, Not sure that is true as diffrent markets will have different "ideals", No one size fits all.
B multiple participation will not neccesary be an evolutionary game, gresham law doesn apply on free floating currencies, So multiple currencies may be used for access to diffrent markets without one dominating over the other. The most prominent factor for adoption in a network is availability. Ie if I can borrow in euros, i will choose euros over dollars, regardless of other metrics. Digital moneys however may break geospatial barriers and overcome supply issues, but can they be flexible enough to support variant markets? not so sure. Cause money is a political choice, and not all markets thrive under the same policy

[sidhujag]

Actually i agree with you and am designing it into my coin such that it will inflate when it is in use amd deflate when not based on blocks getting filled up or not.. Ofcourse rate of inf def will be very small to not have a short term affect. This way you tie supply to real world usage somewhat and it scales with the usage of the currency.

not sure your dynamics will be stable, miners can choose to fill up transactions with spam, or not at all. Imho best to let miners decide on monetary supply, which will actually do it anyway.

It will cost more to fill up the blocks then any benefit of inflating or deflating.. currently im only inflating if services are used and 2x the amount of service fee which is the dust output threshold (very low)... thus you'd need to create spam the block with services which will cost a service fee aswell as the normal relay tx fee... it will cost more to spam then the amount it will inflate.

but deflating will be easier and double awarded. empty blocks will generate coins and increase their value. Grinding transaction processing to a halt and thus lowering money velocity too. Its a wild goose chase imho the rulebased control of money supply. Standards based approach is better, but that will require "interpretation" ie decision making and politics, as fed CBs do.

Deflating is not easier because it costs money. Empty blocks will not deflate nor inflate.. Only if services are used and under some limit of block size will it deflate. It incentisivesizes userbase to push others to use the service to fill up blocks and miners are happy from the extra supply given to them. As a society it will benefit as supply would not throttle growth over long term. Currently bitcoin may have a fungability issue due to not enough satoshis to go around if everyone in the workd were to convert to it (high demand)
Inflation rate or deflation rate ive set to dust amounts to start off, because if we come up with a p2p breakthrough so we can easily imcrease blocksizes above 1MB every 10 mins (note im doing 100k every 1 min to give better consumer level options of settlement)... Then dust amounts may be optimal for supply adjustments over the long term. They are not double block rewrds but like a millionth of them or somethung.

[OROBTC]

...

Actually, IMO, allowing competing currencies (that really DO compete), would solve many of the problems cited above re "money".  Money has a slippery definition, almost everyone has their own ideas of what it is.

They guy I follow re "money" is a gold guy (FOFOA), but NOT in favor of a "gold standard" or similar.  He is in the camp that money ideally has the three below attributes all functioning well (but as he points out, NONE do):

1)  Unit of Account (how much wealth you have, what things are worth to a tax collector, ect.).  A measure.

2)  Means of Exchange (give some US$, euros, shekels, rupees, etc.) to buy stuff.  To make transactions convenient.

3)  Store of Value (the money in your wallet will be worth next year what it is today).   <--- Almost always fails given enough time.

Currencies essentially ALWAYS fail at Number Three.  The dollar's time will almost surely come...

*   *   *

"Triffin's Dilemma" (and FOFOA's own version) show that all three of the above are very difficult, especially for a "reserve currency" like the US$.  A reserve currency almost *has to depreciate* as it is exported to foreign countries to fund international trade).

FOFOA believes that gold will ultimately become the "Store of Value" of choice (as it has for most of the last 5000 years).  And that gold will not be "tied" to the dollar (that is, there will be no pretense of gold backing).  People will seek gold to preserve their wealth.

I have grossly over-simplified FOFOA's ideas.  But, they are worth a thought (or more) for any interested in how currencies and gold interact over longer periods of time.

[thaaanos]

...

Actually, IMO, allowing competing currencies (that really DO compete), would solve many of the problems cited above re "money".  Money has a slippery definition, almost everyone has their own ideas of what it is.

They guy I follow re "money" is a gold guy (FOFOA), but NOT in favor of a "gold standard" or similar.  He is in the camp that money ideally has the three below attributes all functioning well (but as he points out, NONE do):

1)  Unit of Account (how much wealth you have, what things are worth to a tax collector, ect.).  A measure.

2)  Means of Exchange (give some US$, euros, shekels, rupees, etc.) to buy stuff.  To make transactions convenient.

3)  Store of Value (the money in your wallet will be worth next year what it is today).   <--- Almost always fails given enough time.

Currencies essentially ALWAYS fail at Number Three.  The dollar's time will almost surely come...

why 3? what if 3 is not important or even better not wanted. If you want to store value buy gold!
I would also add
4. credit creation
without it there is no money

[sidhujag]

Actually i agree with you and am designing it into my coin such that it will inflate when it is in use amd deflate when not based on blocks getting filled up or not.. Ofcourse rate of inf def will be very small to not have a short term affect. This way you tie supply to real world usage somewhat and it scales with the usage of the currency.

not sure your dynamics will be stable, miners can choose to fill up transactions with spam, or not at all. Imho best to let miners decide on monetary supply, which will actually do it anyway.

It will cost more to fill up the blocks then any benefit of inflating or deflating.. currently im only inflating if services are used and 2x the amount of service fee which is the dust output threshold (very low)... thus you'd need to create spam the block with services which will cost a service fee aswell as the normal relay tx fee... it will cost more to spam then the amount it will inflate.

but deflating will be easier and double awarded. empty blocks will generate coins and increase their value. Grinding transaction processing to a halt and thus lowering money velocity too. Its a wild goose chase imho the rulebased control of money supply. Standards based approach is better, but that will require "interpretation" ie decision making and politics, as fed CBs do.

Deflating is not easier because it costs money. Empty blocks will not deflate nor inflate.. Only if services are used and under some limit of block size will it deflate. It incentisivesizes userbase to push others to use the service to fill up blocks and miners are happy from the extra supply given to them. As a society it will benefit as supply would not throttle growth over long term. Currently bitcoin may have a fungability issue due to not enough satoshis to go around if everyone in the workd were to convert to it (high demand)
Inflation rate or deflation rate ive set to dust amounts to start off, because if we come up with a p2p breakthrough so we can easily imcrease blocksizes above 1MB every 10 mins (note im doing 100k every 1 min to give better consumer level options of settlement)... Then dust amounts may be optimal for supply adjustments over the long term. They are not double block rewrds but like a millionth of them or somethung.

when you mean services dont you mean transaction count? all I am saying is that miners will try to game the transaction count to influence money supply, so why not give them direct control? so that the aggregate move of momey supply will be a collective decision.

No on my blockchain we can do service txs that are different, for decentralized market, imtegrated aliases certificates, encrypted messages. These txs are what i call service transactions which count toward real work, sending coins doesnt mean work has been done to me.

You keep miners honest by putting the rules in consensus rules so that everyone verifies they are doing what you think. If you make it make it more expensive to game the system then miners wont do it unless they want to waste money.

[CoinCube]

...

Actually, IMO, allowing competing currencies (that really DO compete), would solve many of the problems cited above re "money".  Money has a slippery definition, almost everyone has their own ideas of what it is.

They guy I follow re "money" is a gold guy (FOFOA), but NOT in favor of a "gold standard" or similar.  He is in the camp that money ideally has the three below attributes all functioning well (but as he points out, NONE do):

1)  Unit of Account (how much wealth you have, what things are worth to a tax collector, ect.).  A measure.

2)  Means of Exchange (give some US$, euros, shekels, rupees, etc.) to buy stuff.  To make transactions convenient.

3)  Store of Value (the money in your wallet will be worth next year what it is today).   <--- Almost always fails given enough time.

Currencies essentially ALWAYS fail at Number Three.  The dollar's time will almost surely come...

why 3? what if 3 is not important or even better not wanted. If you want to store value buy gold!
I would also add
4. credit creation
without it there is no money

Individuals primarily tend interact with a currency system in one of two ways

1) Producers: Providing good and or services in exchange for the currency unit
2) Consumers: Exchanging the currency unit for goods and or services

Net producers would be happy to sell their goods and services for in exchange for a deflationary currency. Receiving payment in deflationary currency results in a future purchasing power that grows without the need to productively work or deploy/risk capital.

Net consumers would for the opposite reasons prefer to pay with inflationary currencies. Inflation allows for the maximization of today's purchasing power, minimizes the burden of debt repayments and transfers the problem of how to quickly deploy depreciating capital to someone else.

If individuals are able to freely move between competing currencies one would expect producers to minimize their involvement in inflationary currencies and consumers to likewise minimize their involvement in deflationary ones (to the degree possible). Market interactions require each producer be matched to a consumer you need a buyer for every seller. If we assume minimal costs in transitioning between currency options one would expect rapid convergence to the choice that results in the largest possible sustainable market.

Only at the the currency choice that most closely approximated 0% change over time (aka 0% inflation and 0% deflation in terms of purchasing power) would there be no economic incentive for market participants to transition to a competing currency. At that level a producer would still love to accept payments or give robustly secured and enforced loans in a deflationary currency but he will find few customers willing to buy his goods or take on such liabilities. Similarly, consumer would love to pay for or take on debt in an inflationary currencies but will find producers prefer to sell in more stable currencies.

Network effects, such as the current network effects which favor fiat currency increase the cost of transitioning to a superior alternative but unless the cost is prohibitive as to entirely prohibit any transition one would expect an existing network effect to only slow not stop such a transition.

I believe the optimal rate of debasement is a one that equals or approximates the underlying growth rate of the economy it services. Any other debasement turns into an ultimately unjustifiable redistributive mechanism.

Bitcoin represents an extreme essentially a currency with no ultimate debasement. If bitcoin ever gains traction as a world currency it would be massively redistributive. In the hypothetical where it became the dominant currency simply holding bitcoin would guarantee a return equal to the aggregate growth of the economy. As no work is needed to achieve this return bitcoin would essentially act as a tax on growth and idea generators siphoning off a portion of their work to benefit those hording bitcoin. This scenario would create profound disincentive against risk suppress overall investment and thus suppress growth...

Similarly, an excessive debasement rate (one exceeding the overall growth rate in the economy) is redistributive in the opposite direction. In this scenario saved money does not maintain purchasing power. Wealth is siphoned from savers to those who are generating growth right this second. The scenario is one that encourages excess risk and a sort of desperate use it now or lose it mentality. 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. Savers and retirees would see their wealth and purchasing power continuously eroded giving them a profound incentive to move to an alternative currency that maintains their purchasing power.

The only scenario that is not redistributive is one where the currency is debased at a rate equal to the aggregate economic growth in the economy. This is the point of equilibrium where idle savings maintain purchasing power but do not grow or decline.

That said just because a currency system is not ideal money does not mean it may not grow substantially or perhaps even replace the status quo as a superior solution that is closer to ideal money than our existing system.  Also bitcoin may be ideal if the future involves one of stable population levels and a future technological plateau.

[thaaanos]

Individuals primarily tend interact with a currency system in one of two ways

1) Producers: Providing good and or services in exchange for the currency unit
2) Consumers: Exchanging the currency unit for goods and or services

Those 2 just cancel each other out effectively converge to a 0% inflation rate and the fact that there are no net consumers or net producers but a combination makes the convergence faster. However we tend to prefer to keep consumer side happier ie have a demand driven economy.

But imo the money supply is determined mainly by the next 3 actors

1 Credit seekers (business creators)
2 Investors
3 "farmers" owning a cash cow

the first would prefer inflation so that the debt underperforms the equity created
the second would also prefer inflation as they too will prefer their stake in the business to outperform the money burned or any collateral to appreciate to ensure repayment and steady cash flow
the 3rd is everyones dream to own a business that generates cash with no re-investment they would prefer deflation as it will give them increasing value. but cash cows are not usefull or wanted in an economy so their preference is not taken into account.
We want to keep the first 2 happy, as above because the main concern of a society is unemployment not wealth retention.

Credit demand is imo the best index to measure if an economy grows or shrinks, therefore I find no fault in the current system that expands the supply when a loan applicant needs funds

[sidhujag]

No on my blockchain we can do service txs that are different, for decentralized market, imtegrated aliases certificates, encrypted messages. These txs are what i call service transactions which count toward real work, sending coins doesnt mean work has been done to me.

You keep miners honest by putting the rules in consensus rules so that everyone verifies they are doing what you think. If you make it make it more expensive to game the system then miners wont do it unless they want to waste money.

I see so you try to measure growth by watching services used? All you need then is to determine the multiplier how do you do that?

What multiplier? When you create the service you burn some coins based on amount of data used(services are allowed up to a few kb).. Then i regenerate those burned coins or lesve them burned depending on some arbritrary threshold i said something like 5 services per block would leave them burned (deflation) and when usage picks up such that they get to over 10 a block becomes inflationary. Remember im using 1 min blocktimes and a 100kb max block size.

[sidhujag]

No on my blockchain we can do service txs that are different, for decentralized market, imtegrated aliases certificates, encrypted messages. These txs are what i call service transactions which count toward real work, sending coins doesnt mean work has been done to me.

You keep miners honest by putting the rules in consensus rules so that everyone verifies they are doing what you think. If you make it make it more expensive to game the system then miners wont do it unless they want to waste money.

I see so you try to measure growth by watching services used? All you need then is to determine the multiplier how do you do that?

What multiplier? When you create the service you burn some coins based on amount of data used(services are allowed up to a few kb).. Then i regenerate those burned coins or lesve them burned depending on some arbritrary threshold i said something like 5 services per block would leave them burned (deflation) and when usage picks up such that they get to over 10 a block becomes inflationary. Remember im using 1 min blocktimes and a 100kb max block size.

ok that was my concern that the parameters of expansion or shrink are arbitary, you cant have that. Either you pay the cost to determine the optimal parameters to use in a rule, or you let those parameters to be determined by the users in the long run by trial and error. Else you force the users to "reverse engineer" the service count to get the effect that suits their needs, ie keep mining empty blocks until a certain number of services are in the buffer (burst), or throttle the services to a certain threshold.

The miners cannot change parameters as they are enforced by consensus which is enforced on connectblock on every node. If they mine an empty block they wont get the reward of the service fees so there is no point in doing that because someone else will take it if they dont.

The threshold I put in is just a safegaurd from inflating small supply amount befofe network affect takes the coin over. This gives incentive to hold the coin while network affect comes because it is deflationary until the services really start to be used (10 per block), it really could be anything that makes sense and its just timing really. If network affect never comes it will deflate away to find equilibrium between users holding and users using the coin, so it kind of creates a reenforcing cycle of incentives not only to hold but to start using it.

[sidhujag]

No on my blockchain we can do service txs that are different, for decentralized market, imtegrated aliases certificates, encrypted messages. These txs are what i call service transactions which count toward real work, sending coins doesnt mean work has been done to me.

You keep miners honest by putting the rules in consensus rules so that everyone verifies they are doing what you think. If you make it make it more expensive to game the system then miners wont do it unless they want to waste money.

I see so you try to measure growth by watching services used? All you need then is to determine the multiplier how do you do that?

What multiplier? When you create the service you burn some coins based on amount of data used(services are allowed up to a few kb).. Then i regenerate those burned coins or lesve them burned depending on some arbritrary threshold i said something like 5 services per block would leave them burned (deflation) and when usage picks up such that they get to over 10 a block becomes inflationary. Remember im using 1 min blocktimes and a 100kb max block size.

ok that was my concern that the parameters of expansion or shrink are arbitary, you cant have that. Either you pay the cost to determine the optimal parameters to use in a rule, or you let those parameters to be determined by the users in the long run by trial and error. Else you force the users to "reverse engineer" the service count to get the effect that suits their needs, ie keep mining empty blocks until a certain number of services are in the buffer (burst), or throttle the services to a certain threshold.

The miners cannot change parameters as they are enforced by consensus which is enforced on connectblock on every node. If they mine an empty block they wont get the reward of the service fees so there is no point in doing that because someone else will take it if they dont.

The threshold I put in is just a safegaurd from inflating small supply amount befofe network affect takes the coin over. This gives incentive to hold the coin while network affect comes because it is deflationary until the services really start to be used (10 per block), it really could be anything that makes sense and its just timing really. If network affect never comes it will deflate away to find equilibrium between users holding and users using the coin, so it kind of creates a reenforcing cycle of incentives not only to hold but to start using it.

Lets not clutter this thread any longer is there a thread we can discuss it further?

https://bitcointalk.org/index.php?topic=757255.0

[CoinCube]

Individuals primarily tend interact with a currency system in one of two ways

1) Producers: Providing good and or services in exchange for the currency unit
2) Consumers: Exchanging the currency unit for goods and or services

Those 2 just cancel each other out effectively converge to a 0% inflation rate and the fact that there are no net consumers or net producers but a combination makes the convergence faster. However we tend to prefer to keep consumer side happier ie have a demand driven economy.

But imo the money supply is determined mainly by the next 3 actors

1 Credit seekers (business creators)
2 Investors
3 "farmers" owning a cash cow

the first would prefer inflation so that the debt underperforms the equity created
the second would also prefer inflation as they too will prefer their stake in the business to outperform the money burned or any collateral to appreciate to ensure repayment and steady cash flow
the 3rd is everyones dream to own a business that generates cash with no re-investment they would prefer deflation as it will give them increasing value. but cash cows are not usefull or wanted in an economy so their preference is not taken into account.
We want to keep the first 2 happy, as above because the main concern of a society is unemployment not wealth retention.

Credit demand is imo the best index to measure if an economy grows or shrinks, therefore I find no fault in the current system that expands the supply when a loan applicant needs funds

Your first actor credit seekers simplify down into simple consumers once you look at them in more depth. Credit seekers are those who seek to pull consumption from the future into the present. Once they obtain credit they may use that on pure consumption, or they may redeploy that purchasing power into an activity that they believe will generate returns but in either case they are approaching the market as any consumer would and thus as you said would prefer inflationary currencies.

Your third actor "farmers" which you describe as owning a true cash cow can exist in only one a select few circumstances.
1) Investment in industries protected from competition by political influence aka laws. 
2) Direct beneficiaries of government largess and redistribution aka pork.
3) Those able to debase the money supply directly for their own gain aka banks.

It may be a common dream to own a business that generates ever increasing returns with no re-investment of time,effort, or capital but the only way such a business can exist is via some form of political suppression or indirect theft. Such "farmers" or potential "farmers" are essentially direct or indirect seekers of the government dole and large scale government largess of this kind is facilitated by inflationary currency.

It is only your second actor the true investor who would prefer a non inflationary currency. The investor is an individual with some form of capital to deploy. Such an individual would logically prefer:

A) Not be forced to prematurely invest or invest in sup optimal opportunities because the value of his capital was rapidly depreciating.
B) To be paid for his time and effort in a currency that holds its value and does not need to be immediately redeployed.
 
Thus if individuals are able to move freely between competing currencies the debtor and the government mooch will happily stay in the inflationary currency but actual growth generators are strongly incentivized to move to non inflationary options.
I will leave it as an exercise for the reader to predict the long term future of a currency system which attracts debtors and government parasites while whenever possible being abandoned by the productive growth generators of society.

[thaaanos]

Individuals primarily tend interact with a currency system in one of two ways

1) Producers: Providing good and or services in exchange for the currency unit
2) Consumers: Exchanging the currency unit for goods and or services

Those 2 just cancel each other out effectively converge to a 0% inflation rate and the fact that there are no net consumers or net producers but a combination makes the convergence faster. However we tend to prefer to keep consumer side happier ie have a demand driven economy.

But imo the money supply is determined mainly by the next 3 actors

1 Credit seekers (business creators)
2 Investors
3 "farmers" owning a cash cow

the first would prefer inflation so that the debt underperforms the equity created
the second would also prefer inflation as they too will prefer their stake in the business to outperform the money burned or any collateral to appreciate to ensure repayment and steady cash flow
the 3rd is everyones dream to own a business that generates cash with no re-investment they would prefer deflation as it will give them increasing value. but cash cows are not usefull or wanted in an economy so their preference is not taken into account.
We want to keep the first 2 happy, as above because the main concern of a society is unemployment not wealth retention.

Credit demand is imo the best index to measure if an economy grows or shrinks, therefore I find no fault in the current system that expands the supply when a loan applicant needs funds

Your first actor credit seekers simplify down into simple consumers once you look at them in more depth. Credit seekers are those who seek to pull consumption from the future into the present. Once they obtain credit they may use that on pure consumption, or they may redeploy that purchasing power into an activity that they believe will generate returns but in either case they are approaching the market as any consumer would and thus as you said would prefer inflationary currencies.

Your third actor "farmers" which you describe as owning a true cash cow can exist in only one a select few circumstances.
1) Investment in industries protected from competition by political influence aka laws. 
2) Direct beneficiaries of government largess and redistribution aka pork.
3) Those able to debase the money supply directly for their own gain aka banks.

It may be a common dream to own a business that generates ever increasing returns with no re-investment of time,effort, or capital but the only way such a business can exist is via some form of political suppression or indirect theft. Such "farmers" or potential "farmers" are essentially direct or indirect seekers of the government dole and large scale government largess of this kind is facilitated by inflationary currency.

It is only your second actor the true investor who would prefer a non inflationary currency. The investor is an individual with some form of capital to deploy. Such an individual would logically prefer:

A) Not be forced to prematurely invest or invest in sup optimal opportunities because the value of his capital was rapidly depreciating.
B) To be paid for his time and effort in a currency that holds its value and does not need to be immediately redeployed.
 
Thus if individuals are able to move freely between competing currencies the debtor and the government mooch will happily stay in the inflationary currency but actual growth generators are strongly incentivized to move to non inflationary options.
I will leave it as an exercise for the reader to predict the long term future of a currency system which attracts debtors and government parasites while whenever possible being abandoned by the productive growth generators of society.

well I disagree on the negative content you give to debtors as they are the ones that create innovation and mobilize capital.
 Also in a deflationary currency there is no such thing as Investors but Hoarders. Hoarders are turned into investors because of inflation. There should be no rest for investors they should always look for profitable opportunities, never let them become hoarders. And as I mentioned before once the capital is commited investors will too prefer inflation as they have turned capital into asset one way or another.
A cash cow can simply be any company that dominates a market with high entry costs and has reached maximum efficiency, not necessary by dubious means but simply by  maturing of its market.