Well, I don't think there will be an iphone 34 or that anyone should buy any drm iphone.
In any case, ok, deflation doesn't fully stop consumption but it does halt investments.
Say you have 10,000 btc and are considering investing them on building a cell-phone factory, for example.
If you have 10% annual deflation, the factory must yield more than 10% (more than 1000 btc annually) for the investment to make sense.
Just saving you don't grow the economy, you need to invest what you don't consume (savings) in order to make that happen.
An economy without investments actually contracts, since real capital (like Freicoin and Gesell's free-money but unlike capital-money) perishes.
I think my claim "deflation reduces money velocity" isn't particularly crazy or controversial among economists.
That is correct. I do not grok why it matters. Why does money hoarding matter? it is not a real asset. Hoarding money is not like hoarding copper or food that could be productively employed or consumed. You cannot build something out of bitcoin or eat it. Furthermore it is not necessarily the case that reducing economic activity is bad. Is it better to pump petroleum out of the ground as fast as possible or to hoard some of it? Some resources are finite and their consumption should not be blindly stimulated.
Because hoarding is a non-explicit loan contract, but very strange.
When much value joins, it rises. When value "cashes out", it drops in
price. So the conservative saver is not "storing value" at all. You
can't just "store value" like that. If you want to travel to the
future, you need a counter-party to travel back to the present, to
take your cash from your hands. You can't just trust-less and
risk-free store "value".
Unless of course you have a bank you can trust to manage risk for you.
But I've heard those are missing, they've turned into paper minters.
Because bank's credit is equivalent to state cash by law.
Meaning...they don't really hold any risk and have no real incentive
to manage it properly.
Value can't be intrinsic. People value, only then things are worth.
Marx was wrong. Cash is a "let's all we trust this so we have no
counter-party risk for trust-less exchange", and it's not its fault to
change in value, you just shouldn't rely on cash for "storing value"
or even as a unit of exchange.
So called value is not only relative but immaterial.
The problem is that without demurrage, the medium of exchange and
lending are coupled. The fault's not on cash, it's on basic interest
of everlasting cash.
With everlasting cash, why would you lend at risk-free 0%?
Adding deflation, why would you discount the inflation premium (which
is negative for deflation) if you're the lender? You can apply it to
a certain extend, but certainly you will never lend on invest
capital-cash below nominal 0%, even if there's 20% deflation.
When money is lend, the saver doesn't consume in the present so that
the borrower can invest to be able to generate that value for the
lender in the future.
But when cash is hoarded, what's taken from consumption is not put
into investments. What does that hoarding then?
When capital accumulation and competition naturally lower yields and
interests (signaling an increased efficiency and the fulfillment of
the demand), some savers stop lending and prefer to hoard.
Even if the risk free interest rates are still positive, the free
insurance that represents a pile of wildcard cash to cover
uncertainties or take advantages of unpredictable future events is
preferable to low interests.
An increase in hoarding produces deflation, since less money
circulating needs to move the same wares. That makes lending even
less attractive, creating a positive feedback loop. The more
deflation, the better it is for the saver to hoard over lend, until
eventually the spiral stops.
The first hoarders in this self-fulfilling prophecy can now "cash
out" (to real capital instead of capital-cash) their huge gains.
Note that many investments that would have had positive yields aren't
made during this deflationary period.
When the deflationary artificial scarcity of wares caused by the
lacks of investment rises consuming good prices in relation to
producing goods (real capital), interest rise again and savings can
be lent instead of hoarded again and profitable investments get
A common alternative to deflation as the tool to restore the scarcity
needed to cover the basic interest rate is war. With more destroyed
buildings the remaining ones can yield more with a higher
rent/building_price ratio that has resulted from destruction.
The only equilibrium here is that capitalists must receive the basic
interest rent on all their real capital AND capital-money, how that's
achieved it's not important.
Gold is the first implementation of cash, before there was only
credit and barter. Later we've seen state-cash, but that's much more
complicated since it has a managed supply. That would be the so
called "debt-free" money. Today we have state and banks credit that
works like cash by law. The state enforces it but leaves the
signoriage to the banks.
Now we crypto-cash.
But all these new forms of cash and bitcoin have chosen to maintain
the design flaw that was mandatory for gold. Make it possible to the
holders to freeze the cash for as long as they want with now cost. All
of them have chosen to ensure price cycles and rents for the master
capitalists (the owner of production goods or medium of exchange that
enjoy a guarantied rent).
Freicoin in the other hand has chosen to tell the holders of the
medium of exchange to preferably save elsewhere and invest or lend
what you don't want to spend in the near future. Thus FRC loans at
risk-free 0% make sense. And -4% rates make sense with 4% deflation.
I will never use that thing. Early adopters must be rewarded.