DEFLATION GETS A BAD NAME

[dynodog]

I am still trying to figure out why deflation is so bad. My understanding is that the late 1800s were deflationary and times were considered very good. The Depression was caused by huge borrowing and leverage during the 1920s, which caused problems naturally when unwound. My biggest problem with even a 2% annual inflation is that it literally transfers wealth from the middle class and poor to the rich. If you own assets like stocks and real estate, you literally make money for nothing. The middle class and poor, who don't have wealth, lose money every year for no reason simply bc now they have to pay more for daily living expenses. Why is it fair to transfer that wealth to the rich? No one has ever provided a satisfactory answer to that basic question. It seems a slightly deflationary environment would be best for society as a whole. I don't buy the idea that people will hoard money bc the price will be lower. So you're not going to buy a $1000 tv today bc you can buy it for $990 next year? That would mean that no one was buying computers and flat screen tvs as the prices declined in value.

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[Kungfucheez]

No ones provided the answer you seek because there is no answer. It's a debatable topic that has been discussed since before you were born.

But usually inflation indicates an economy is growing, however too much inflation or hyperinflation is of course very bad. But it's such a broad topic that it can be discussed in length. Deflation is not necessarily a good thing either. Generally the accepted agreement is to keep inflation and deflation on an even keel, usually around the 2%-3% inflation per year and same with deflation. But inflation effects different people in different ways

[Lloydie]

I am still trying to figure out why deflation is so bad. My understanding is that the late 1800s were deflationary and times were considered very good. The Depression was caused by huge borrowing and leverage during the 1920s, which caused problems naturally when unwound. My biggest problem with even a 2% annual inflation is that it literally transfers wealth from the middle class and poor to the rich. If you own assets like stocks and real estate, you literally make money for nothing. The middle class and poor, who don't have wealth, lose money every year for no reason simply bc now they have to pay more for daily living expenses. Why is it fair to transfer that wealth to the rich? No one has ever provided a satisfactory answer to that basic question. It seems a slightly deflationary environment would be best for society as a whole. I don't buy the idea that people will hoard money bc the price will be lower. So you're not going to buy a $1000 tv today bc you can buy it for $990 next year? That would mean that no one was buying computers and flat screen tvs as the prices declined in value.

You are right, it is not fair to transfer wealth to the rich. Deflation is the cure to that outcome.

The problem is that central banks and banks in general have profited from the current inflationary system. They keep everyday inflation at around 2% so the masses don't revolt but they inflate asset prices by as much as possible. Last year share prices in the US was inflated up by over 20%!

This widens the gap between the rich and poor, PERMANENTLY.  The gini coefficient for inflationary monetary systems is rising all the time. The banking sector is growing as a percentage of GDP and has done so for the last two decades.

Gen Ys are getting completely screwed. This is why Bitcoin is such a great monetary system if you are young and don't own significant assets in the fiat money system. With Bitcoin, your spending power cannot be inflated away.

Although fiat money systems are less volatile over short periods, they produce massive crashes after a few years due to credit imbalances. That is no way to run stable economies. Avoiding short term economic pain by increasing debt is tremendously short sighted and counterproductive in the long run.

I choose to save in Bitcoin because central banks and fiat money cannot be trusted.  Every such system in history has eventually collapsed. I much prefer a decentralised monetary system with predictable outcomes.

[Lloydie]

The op is also 100% right about cheaper goods making people wanting to spend more.

The velocity of money has been falling in the US despite the US Fed Reserve printing $4 Trillion and creating 2% inflation.

Cheaper goods are a good thing because it means society is more productive.

Useless speculation in assets such as property and shares are not productive and should not be counted as part of real economic growth. It is speculation.

The current monetary system forces people to borrow money and speculate on useless economic activities. This is a huge waste of our economic resources.

[Kungfucheez]

The op is also 100% right about cheaper goods making people want to spend more.

The velocity of money has been falling in the US despite the US Fed Reserve printing $4 Trillion and creating 2% inflation.

Cheaper goods are a good thing because it means society is more productive.

Useless speculation in assets such as property and shares are not productive and should not be counted as part of real economic growth. It is speculation.

The current monetary system forces people to borrow money and speculate on useless economic activities. This is a huge waste of our economic resources.

Well now that all depends on who we're talking about in this situation. Sure, the consumer has stronger purchasing power and they might benefit, but businesses rely on profit margins to operate and maintain themselves. Stronger purchasing power means the value of a good or service must go down, limiting the profits a company can make from selling a good or a service.

[Lloydie]

Well now that all depends on who we're talking about in this situation. Sure, the consumer has stronger purchasing power and they might benefit, but businesses rely on profit margins to operate and maintain themselves. Stronger purchasing power means the value of a good or service must go down, limiting the profits a company can make from selling a good or a service.

With corporate profits in the US at record levels as a percentage of GDP and relative to workers wages, I'm not too worried about corporates. Anyway, who ultimately owns corporates? The wealthy people who own shares. Please queue the sound of the world's tiniest violin if corporate profits go down.

Further, the financial sector as a percentage of US GDP is at all time high levels. How can this be after the biggest debt debacle since the Great Depression? Makes me sick to the stomach.

The price of goods and services need to come down so ordinary people can survive.

[FenixRD]

Whether inflation or deflation are inherently good or bad, and I suspect that there are times in a natural, unimpeded market where both may be necessary, here's all you need to know about the inflation we currently have:

"By a continuous process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method, they not only confiscate, but they confiscate arbitrarily; and while the process impoverishes many, it actually enriches some."

Who said that? John Maynard Keynes. Don't tell the Keynesians.

Keynes said this referring to his recommendation against return to the gold standard, where banknotes were not fiat just yet, but promissory: say, $25 in banknotes is a promise by the government to allow exchange for $25 in gold, and that was set too, at say 1 ounce. The trouble is, the government could also change the fix: $28 per ounce, $32 per ounce. Read about the dollar devaluation against gold in the Nixon administration. Keynes warned against it in the 20s. (They eventually gave up and said, screw it, the dollar is now pure fiat.)

Thus, contrary to popular "villain vs. hero" notions around Bitcoinland, Keynes' ideas weren't necessarily wrong. People who apply bits and pieces of his work often are. Bernanke likes Bitcoin. Bernanke's a Keynesian. There are no purely evil villains, and sadly no purely... pure heroes. The world is complicated, and often, so complicated that people can have seemingly contradictory beliefs without knowing it.

Anyway, inflation has been historically preferred to deflation because deflation could historically spiral out of control, whereas inflation could easily be managed (if the managers behaved nicely). A little bit like a car, you can powerslide going forward in a RWD car if you know what's up, but you cannot powerslide in reverse in a FWD car because you lose the ability to steer once you break traction. Yeah, that's my analogy. I've been watching House reruns. I'm in an analogy mood.

With all previous systems of value transfer, the the inertia of V was very high, and it resisted change, thus economic fluctuations manifested in lower-inertia variables first. If M quickly was rising, k rose and P fell. You had to go places, withdraw, spend, get change, carry gold or notes or coins, cheques take days to clear. With Bitcoin, the inertia of V is so low, that the deflationary spiral likely does not exist.

Like... Driving a car in a video game with a very choppy frame rate, vs. one with a fluid one. Maybe the car can drift in reverse after all, but it's tricky and you need a high frame rate and fast reaction time to pull it off.

But seriously, about the inertia: This is new stuff that isn't in the Cambridge equation, because I invented it. It's being analyzed and reviewed before being published. But, this is my contribution to the body of economics. I believe it is correct, and more accurate than its forbears.  

And I believe it explains with math, something we inherently know to be true: Deflation is not a flaw in the Bitcoin system.

[Lloydie]

Minsky might disagree. He posited that all debt based systems would eventually end in disequilibrium. So far, the evidence supports Minsky. In my view, he deserves the Nobel prize in econs (yes I know there isn't one really).

2% inflation in a fractional reserve banking system that is able to create credit money out of thin air is dangerous. The lobbying power of the financial sector will always push for more credit growth.

The results are plain to see: high asset prices. Widespread inequality. Financial crises every 7 to 10 years.

Now that the boomers are loaded up with assets for their retirement, you the Gen Ys will have to work your butt off to get a small slice of the action and in the process make the life of boomers more comfortable.

The boomers are a selfish generation. Bitcoin challenges this sick economic paradigm by decentralising the monetary system and removing the debt based inflation machinery.

Bitcoin is an option for those who aren't already invested in the old, sick system.

[FenixRD]

Minsky might disagree. He posited that all debt based systems would eventually end in disequilibrium. So far, the evidence supports Minsky. In my view, he deserves the Nobel prize in econs (yes I know there isn't one really).

2% inflation in a fractional reserve banking system that is able to create credit money out of thin air is dangerous. The lobbying power of the financial sector will always push for more credit growth.

The results are plain to see: high asset prices. Widespread inequality. Financial crises every 7 to 10 years.

Now that the boomers are loaded up with assets for their retirement, you the Gen Ys will have to work your butt off to get a small slice of the action and in the process make the life of boomers more comfortable.

The boomers are a selfish generation. Bitcoin challenges this sick economic paradigm by decentralising the monetary system and removing the debt based inflation machinery.

Bitcoin is an option for those who aren't already invested in the old, sick system.

No quoted response point so, I hope you don't mean me. I'd agree with Minsky. Further, debt-based systems as defined by Minsky cannot stably exist for the same reason that gravity must somehow propagate at high superluminal velocity: unstable orbits are predicted by a luminal propagation of gravitational force. So, even without knowing how, we can know that gravity cannot be subject to classical 3-dimensional relativity.  

The same is true with economics. It's unclear if Bitcoin-like systems are the solution, but they look a lot better than the incumbents. Those are provably unstable.

[zachcope]

In my view Keynsian economics has directly contributed to the worst excesses of excess consumption that has lead to oil wars, environmental catastrophe and personal obesity, diabetes and depression.

'Excess consumption' because there is no incentive to save and plan for ones 80+ years on this earth, as many 'progressive' governments reward the improvident and punish those who forgo consumption during their life in order to save for the future.

Current monetary and political systems have created a world of prodigal sons, who can only live by the grace of father state when they have exhausted their wealth.

[FenixRD]

In my view Keynsian economics has directly contributed to the worst excesses of excess consumption that has lead to oil wars, environmental catastrophe and personal obesit, diabetes and depression.

'Excess consumption' because there is no incentive to save and plan for ones 80+ years on this earth, as many 'progressive' governments reward the improvident and punish those who forgo consumption during their life in order to save for the future.

Current monetary and political systems have created a world of prodigal sons, who can only live by the grace of father state when they have exhausted their wealth.

Yup. I'm worried for Japan now. It'll take a while for the effects to fully take hold, but it's so sad.

[player01]

Deflation is just fine if you have lots of money and your job won't cut your pay rate, otherwise, it really sucks. It generally happens when you have no money floating around. What is worse is stagflation, which imo is what is going on in the US right now. Prices stay steady or slightly higher, but wages and ways to make money decrease... the worst of both worlds.

[Kungfucheez]

Deflation is just fine if you have lots of money and your job won't cut your pay rate, otherwise, it really sucks. It generally happens when you have no money floating around. What is worse is stagflation, which imo is what is going on in the US right now. Prices stay steady or slightly higher, but wages and ways to make money decrease... the worst of both worlds.

Stagflation is a serious problem, and the term was first used in the UK in the 1970's when they experienced an unprecedented series of rising prices and wage halts. Same occurred here in the States, and throughout the world as well during the 70's, and peaked about 79'-82'.

I wouldn't classify what is occurring now as stagflation, that implies inflation is very high, which currently it is not. Wages have also increased steadily as well.

[Lloydie]

Stagflation is where we are headed because central banks are trying to create inflation whilst unemployment is high.

70's stagflation was a different animal. That was driven by oil price increases due to the formation of OPEC. I'm disappointed in the amount of FUD against Bitcoin/deflation in this forum.

If I had my tinfoil hat on, I would think some people here might be working for government. I can't see why gen Ys and even Xers would want to support the fiat credit monetary system.

Not only are government workers inefficient, they get in the way of progress.

[Lloydie]

Deflation is just fine if you have lots of money and your job won't cut your pay rate, otherwise, it really sucks. It generally happens when you have no money floating around. What is worse is stagflation, which imo is what is going on in the US right now. Prices stay steady or slightly higher, but wages and ways to make money decrease... the worst of both worlds.

CEX.io supporter says it all.

Deflation is bad for low income earners because goods are getting cheaper? Ridiculous.

[joulesbeef]

first lol at stagflation dude. You always try to keep inflation up when UE is high.. that is the feds mission. and the theory of stagflation, is that the markets are responding to the feds measures and anything done to LOWER INFLATION.. would increase UE. It is normally caused by things like a spike in oil prices DURING a recession.. when they normally go down.. like we had in the 70s.(which was made worse by the central bank but only due to stagflation effects t hat make the economy respond opposite to traditional measures)


and both inflation or deflation in high degrees suck balls and we have seen it several times with BTC.. not sure why people cant grasp it.
society likes a stable currency.. with our capitalistic and growing population, a slight bit of inflation is preferred.


Inflation sucks, it makes people not want to sell. Why sell a car for 2,000 today, if you can get 4k tomorrow?


deflation sucks. Why buy a car for 2000 today, when you can get it for 1000 tomorrow.

BOTH CONCEPTS  HARM AN ECONOMY. as they slow down economic activity as people wait for stability before buying discretionary goods.

[Lloydie]

first lol at stagflation dude. You always try to keep inflation up when UE is high.. that is the feds mission. and the theory of stagflation, is that the markets are responding to the feds measures and anything done to LOWER INFLATION.. would increase UE.


and both inflation or deflation in high degrees suck balls and we have seen it several times with BTC.. not sure why people cant grasp it.
society likes a stable currency.. with our capitalistic and growing population, a slight bit of inflation is preferred.


Inflation sucks, it makes people not want to sell. Why sell a car for 2,000 today, if you can get 4k tomorrow?


deflation sucks. Why buy a car for 2000 today, when you can get it for 1000 tomorrow.

BOTH CONCEPTS  HARM AN ECONOMY. as they slow down economic activity as people wait for stability before buying discretionary goods.

A slight bit of inflation might be good but share prices rising more than 20% in 2013 is not good. Property prices rising more than 10% is not good.  Yes, that is your purchasing power being devalued.

Deflation I can live with. I'd buy a car for 2000 even if I could have it for 1000 tomorrow. The Norwegian guy who bought an apartment by selling his btcs proves this point. He sold at around $886 per btc knowing full well that btcs could rise further. He retained 80% of his btcs and spent 20%.

I like Btc being deflationary. It will prove that deflationary systems can work.

[Kungfucheez]

first lol at stagflation dude. You always try to keep inflation up when UE is high.. that is the feds mission. and the theory of stagflation, is that the markets are responding to the feds measures and anything done to LOWER INFLATION.. would increase UE.


and both inflation or deflation in high degrees suck balls and we have seen it several times with BTC.. not sure why people cant grasp it.
society likes a stable currency.. with our capitalistic and growing population, a slight bit of inflation is preferred.


Inflation sucks, it makes people not want to sell. Why sell a car for 2,000 today, if you can get 4k tomorrow?


deflation sucks. Why buy a car for 2000 today, when you can get it for 1000 tomorrow.

BOTH CONCEPTS  HARM AN ECONOMY. as they slow down economic activity as people wait for stability before buying discretionary goods.

A slight bit of inflation might be good but share prices rising more than 20% in 2013 is not good. Property prices rising more than 10% is not good.  Yes, that is your purchasing power being devalued.

Deflation I can live with. I'd buy a car for 2000 even if I could have it for 1000 tomorrow. The Norwegian guy who bought an apartment by selling his btcs proves this point. He sold at around $886 per btc knowing full well that btcs could rise further. He retained 80% of his btcs and spent 20%.

I like Btc being deflationary. It will prove that deflationary systems can work.

I'm sorry, but I don't understand. Why would anyone pay more for something today when they know it will be more affordable tomorrow? Why would you ever buy a car for $2000 when you could have it for half that price the next day? That makes zero sense.

Also regarding the guy who bought an apartment. That's all well and good, but that's pure speculation. That's not confidence buying, it's speculative investing. He can't be sure the price of btc will rise over time, he can't be sure if the price will fall, neither can the seller.  and joulesbeef is correct. Deflation you most certainly cannot live with if it is sustained over time. Same with hyper inflation. 

[Lloydie]

first lol at stagflation dude. You always try to keep inflation up when UE is high.. that is the feds mission. and the theory of stagflation, is that the markets are responding to the feds measures and anything done to LOWER INFLATION.. would increase UE.


and both inflation or deflation in high degrees suck balls and we have seen it several times with BTC.. not sure why people cant grasp it.
society likes a stable currency.. with our capitalistic and growing population, a slight bit of inflation is preferred.


Inflation sucks, it makes people not want to sell. Why sell a car for 2,000 today, if you can get 4k tomorrow?


deflation sucks. Why buy a car for 2000 today, when you can get it for 1000 tomorrow.

BOTH CONCEPTS  HARM AN ECONOMY. as they slow down economic activity as people wait for stability before buying discretionary goods.

A slight bit of inflation might be good but share prices rising more than 20% in 2013 is not good. Property prices rising more than 10% is not good.  Yes, that is your purchasing power being devalued.

Deflation I can live with. I'd buy a car for 2000 even if I could have it for 1000 tomorrow. The Norwegian guy who bought an apartment by selling his btcs proves this point. He sold at around $886 per btc knowing full well that btcs could rise further. He retained 80% of his btcs and spent 20%.

I like Btc being deflationary. It will prove that deflationary systems can work.

I'm sorry, but I don't understand. Why would anyone pay more for something today when they know it will be more affordable tomorrow? Why would you ever buy a car for $2000 when you could have it for half that price the next day? That makes zero sense.

Also regarding the guy who bought an apartment. That's all well and good, but that's pure speculation. That's not confidence buying, it's speculative investing. He can't be sure the price of btc will rise over time, he can't be sure if the price will fall, neither can the seller.  and joulesbeef is correct. Deflation you most certainly cannot live with if it is sustained over time. Same with hyper inflation.  

It's easy to understand that people will buy stuff more based on real needs rather than take out speculative loans to buy inflating assets, which is not real GDP growth.

As Norwegian guy's wealth approaches $40 Million (or $10,000 per Bitcoin), I guarantee you he will be spending Bitcoins even though Bitcoins might keep rising in value.  

Look at China OTOH.  Millions of empty apartments whilst poor people live in cramped basements and ghettos.  What a sick debt driven economic system.  The inequity is just sickening.

Sure the Norwegian guy can be confident that Btcs will rise in price.  Afterall, he retained 80% of them.  It's simple: there is a limited supply of Btcs and as long as Btc users increase at the rate of 30% per month as it is currently doing, all will be well in Bitcoin land.

The only problem is when some Government tries to intervene and regulate Bitcoin to death.  

[ning]

Having a cap on the total number of currency has two aspects. One is that the price denominated by this currency will decrease as the economy grows. Another aspect is that people will have to use smaller and smaller units of the currency as prices decrease. The second aspect is really a pain in the ass with traditional fiat currency so central banks advocate the idea of printing more fiat as the economy grows and they have ever since been milking it. However, the second aspect isn't a problem with Bitcoin because Bitcoins are technically infinitely divisible.

[zachcope]

Stagflation is what happens when economic contraction and rebalancing would have occurred, but instead the Keynsians increased the money supply. So instead of everyone being hit by deflation, it is converted to stagflation which will save the rich and politicians, whilst making the poor and middle income groups suffer more.

[Lethn]

Current economic theory has become a religion and like arguing with anybody religious it's pointless, the only thing you can do is prove them wrong with undeniable evidence, think about it, how long did it take for people to prove the world was round and that evolution isn't a theory? Even with all the evidence presented to them there are still people who have been pretty much brainwashed into believing in this stuff so there's no point in giving them the attention and trying to come to a consensus with them.

Yes, I think we've been socially engineered to think that deflation is a bad thing but when you look at the numbers this belief system just doesn't add up, especially if you take into account how much is being borrowed to pay for this inflationary economy we're in, deflation doesn't just get a bad name, it gets blatantly attacked.

[FenixRD]

first lol at stagflation dude. You always try to keep inflation up when UE is high.. that is the feds mission. and the theory of stagflation, is that the markets are responding to the feds measures and anything done to LOWER INFLATION.. would increase UE.


and both inflation or deflation in high degrees suck balls and we have seen it several times with BTC.. not sure why people cant grasp it.
society likes a stable currency.. with our capitalistic and growing population, a slight bit of inflation is preferred.


Inflation sucks, it makes people not want to sell. Why sell a car for 2,000 today, if you can get 4k tomorrow?


deflation sucks. Why buy a car for 2000 today, when you can get it for 1000 tomorrow.

BOTH CONCEPTS  HARM AN ECONOMY. as they slow down economic activity as people wait for stability before buying discretionary goods.

A slight bit of inflation might be good but share prices rising more than 20% in 2013 is not good. Property prices rising more than 10% is not good.  Yes, that is your purchasing power being devalued.

Deflation I can live with. I'd buy a car for 2000 even if I could have it for 1000 tomorrow. The Norwegian guy who bought an apartment by selling his btcs proves this point. He sold at around $886 per btc knowing full well that btcs could rise further. He retained 80% of his btcs and spent 20%.

I like Btc being deflationary. It will prove that deflationary systems can work.

I'm sorry, but I don't understand. Why would anyone pay more for something today when they know it will be more affordable tomorrow? Why would you ever buy a car for $2000 when you could have it for half that price the next day? That makes zero sense.

Also regarding the guy who bought an apartment. That's all well and good, but that's pure speculation. That's not confidence buying, it's speculative investing. He can't be sure the price of btc will rise over time, he can't be sure if the price will fall, neither can the seller.  and joulesbeef is correct. Deflation you most certainly cannot live with if it is sustained over time. Same with hyper inflation. 

And I can't understand why this is such a difficult concept! For the same reason that Bitcoin has any value at all, or why gold is worth more than just what can be made of it in electronics etc: Percieved value. Intrinsic value is actually nonexistent, because even it is based on our perception. It is meaningless without the human context. Gold connectors? That's not intrinsic. That's potential. And there is no potential without human perception. A cat certainly gives zero fucks about gold, or bitcoins.

Therefore people will buy a car today, despite it being assuredly less costly tomorrow, for the same reason. The percieved value of owning a car today is worth more than the value lost by buying it today.

Even in our economic system, where most things inflate, Moore's law provides a clear example of his occurring on a wide scale, regularly. Every 18 months, computing power has doubled while the price has halved. Not even the same for half: DOUBLE, for HALF. Why does anyone buy a computer, or a tablet, or an iPhone? Why don't you wait?

[zerodrama]

Deflation is just fine if you have lots of money and your job won't cut your pay rate, otherwise, it really sucks. It generally happens when you have no money floating around. What is worse is stagflation, which imo is what is going on in the US right now. Prices stay steady or slightly higher, but wages and ways to make money decrease... the worst of both worlds.

CEX.io supporter says it all.

Deflation is bad for low income earners because goods are getting cheaper? Ridiculous.

Income goes down as well. Cheap is as unstable as expensive is. Cheap is only cheap for people who can save. And people get railroaded on four fronts:
Food (includes water)
Rent
Fuel (includes electric)
Vehicle

You have to have them to have a job. You have to spend all your money on them. The system essentially gets your labor for free. You're not earning anything.

[Lethn]

Income does not go down if everything goes down, it means it's easier to earn money because you don't have to earn as much of the currency you're paying in, this is another bullshit statement perpetrated by pro-inflation economists that ignores basic mathematics which I am getting quite annoyed by nowadays.

Tell me, how exactly does it mean that people have to work more if things are cheaper? Are you actually going to use an example? Or are you just going to keep parroting that same bullshit again and again?

Let me give you an example:

If I wanted to get a Cintiq it would cost me:

$1000

In Bitcoin that's roughly 1.22 BTC - 1.22BTC is worth a tiny bit more than $1000 lol, I'd have to go into 8 decimals to calculate it properly but I'm not that good at maths

Now the problem here is you assume that deflation will carry on infinitely, that's just not the case because there is a hard limit of 21 million coins, so eventually if hyperinflation keeps going $1000 will be 0.00000012 BTC rather than 1.2 because of course a Bitcoin can be broken up into decimals. So in actual fact over time it will simply get cheaper and cheaper to buy a cintiq assuming you still want to value things in dollars but I suspect by the time 1 BTC reaches higher than $3000 people are going to think twice.

In inflationary money like the dollar it would be the opposite, because the federal reserve keeps printing so much you'd have $1000 at first but because they keep printing the money the overall money supply increases and the suppliers are FORCED to charge higher because everything else goes up to eventually you're going to end up with a Zimbabwe situation where you're going to have to pay $100,000,000 just to get something like a Cintiq. The thing you fail to realise is that in an inflationary economy everything goes up when you print money you can't just have it affecting 'the rich' or benefiting 'the poor' and that means that in order to get anything they need anyone would have to work longer hours for less pay because again suppliers and employers would be forced to put the prices up to cover their needs as well as the price for materials and tools etc. would have gone up along with anything else. These are just rough estimates I've done in my head but I think pretty realistic of the kind of problems we'll be facing in the next five or so years.

Yes, you can maybe remedy the situation by giving tax cuts and fixing prices like our leaders have been doing currently for their own ends now, but it's only a temporary fix and it doesn't get rid of the overall problem which is the fact that you're increasing the currency supply and forcing prices up thereby making it more difficult to get what they need never mind what they want.

If anybody still ignores this, you really are a moron.

[zerodrama]

Income does not go down if everything goes down, it means it's easier to earn money because you don't have to earn as much of the currency you're paying in, this is another bullshit statement perpetrated by pro-inflation economists that ignores basic mathematics which I am getting quite annoyed by nowadays.

If my small business makes less, my small business must pay employees less.

What part of second degree function do people not understand?

[Lethn]

Income does not go down if everything goes down, it means it's easier to earn money because you don't have to earn as much of the currency you're paying in, this is another bullshit statement perpetrated by pro-inflation economists that ignores basic mathematics which I am getting quite annoyed by nowadays.

If my small business makes less, my small business must pay employees less.

What part of second degree function do people not understand?

No it mustn't pay less, that doesn't make any sense, you're applying ultimatums to a situation that doesn't require it.

[zerodrama]

Income does not go down if everything goes down, it means it's easier to earn money because you don't have to earn as much of the currency you're paying in, this is another bullshit statement perpetrated by pro-inflation economists that ignores basic mathematics which I am getting quite annoyed by nowadays.

If my small business makes less, my small business must pay employees less.

What part of second degree function do people not understand?

No it mustn't pay less, that doesn't make any sense, you're applying ultimatums to a situation that doesn't require it.

I love how you're dodging the math with rhetorical declarations. So right, I could just fire people. Still less income. See there's this thing called investors. Some of them are top tier and some other are second tier. Top tier investors expect the value of the company to rise. If I make less and pay the same, that goes down. Second tier investors expect the short term opportunity value to go up. So they expect me to cut wages but keep production capacity. Yeah income goes down.

So I've shown two cases where income must go down.

Oh and that other thing: if I fire people production capacity goes down. Oops. That ends up causing a dive for both tiers.

Your entire position rests on projections from theory unbounded by time or speed of change. This is disturbing. Employee purchasing power increase does not manifest instantaneously. It lags. Hell, IT RESISTS. The vendor can always last longer in this staring contest.

[Xav]

C'mon gentlemen, let's be reasonable and use that common sense. Deflation is not a problem, and not the cause of any drama in any society. If we do our maths correctly then we'll realize that in a deflationary situation all prices shall go down. So economic growth can still be achieved even when the current GDP is less than the GDP in the previous year. Imagine this year's GDP is 10 million BTC and last year's was 10.1 million BTC. On first glance one would think growth is (10 - 10.1) X 100 / 10.1 = - 0.99 %. But, let's say the inflation rate (lost coins) is 2%, which changes the calculation into (10 - (10.1 X0.98)) X 100 /(10.1X0.98) = 1.03%.

See how that works?

[zerodrama]

C'mon gentlemen, let's be reasonable and use that common sense. Deflation is not a problem, and not the cause of any drama in any society. If we do our maths correctly then we'll realize that in a deflationary situation all prices shall go down. So economic growth can still be achieved even when the current GDP is less than the GDP in the previous year. Imagine this year's GDP is 10 million BTC and last year's was 10.1 million BTC. On first glance one would think growth is (10 - 10.1) X 100 / 10.1 = - 0.99 %. But, let's say the inflation rate (lost coins) is 2%, which changes the calculation into (10 - (10.1 X0.98)) X 100 /(10.1X0.98) = 1.03%.

See how that works?

Why do you pro-inflation/pro-deflation advocates ALWAYS leave time-to-effect out of the analysis? You have no credibility if you base all your analysis on 10-year scales where time-to-effect becomes negligible. The average person deals with week to week, month to month, maximum two year time scales.

So far I see how neither side has a clue.

Deflation is good for those who have fiat stashed and owe nothing on property.
Inflation is good for those who have nothing stashed and owe on property.

As for saying that people who have no savings spend too much. They spend nothing. They earn nothing. They simply move money for the rest of the economy and essentially work for free.

In order to spend, you need disposable income. They have none.

If any analysis is done without taking into account deliberate and easily demonstrated bankster warfare against municipal funds and communities (yes I can), then it is bullshit.

[Lloydie]

Income does not go down if everything goes down, it means it's easier to earn money because you don't have to earn as much of the currency you're paying in, this is another bullshit statement perpetrated by pro-inflation economists that ignores basic mathematics which I am getting quite annoyed by nowadays.

Tell me, how exactly does it mean that people have to work more if things are cheaper? Are you actually going to use an example? Or are you just going to keep parroting that same bullshit again and again?

Let me give you an example:

If I wanted to get a Cintiq it would cost me:

$1000

In Bitcoin that's roughly 1.22 BTC - 1.22BTC is worth a tiny bit more than $1000 lol, I'd have to go into 8 decimals to calculate it properly but I'm not that good at maths

Now the problem here is you assume that deflation will carry on infinitely, that's just not the case because there is a hard limit of 21 million coins, so eventually if hyperinflation keeps going $1000 will be 0.00000012 BTC rather than 1.2 because of course a Bitcoin can be broken up into decimals. So in actual fact over time it will simply get cheaper and cheaper to buy a cintiq assuming you still want to value things in dollars but I suspect by the time 1 BTC reaches higher than $3000 people are going to think twice.

In inflationary money like the dollar it would be the opposite, because the federal reserve keeps printing so much you'd have $1000 at first but because they keep printing the money the overall money supply increases and the suppliers are FORCED to charge higher because everything else goes up to eventually you're going to end up with a Zimbabwe situation where you're going to have to pay $100,000,000 just to get something like a Cintiq. The thing you fail to realise is that in an inflationary economy everything goes up when you print money you can't just have it affecting 'the rich' or benefiting 'the poor' and that means that in order to get anything they need anyone would have to work longer hours for less pay because again suppliers and employers would be forced to put the prices up to cover their needs as well as the price for materials and tools etc. would have gone up along with anything else. These are just rough estimates I've done in my head but I think pretty realistic of the kind of problems we'll be facing in the next five or so years.

Yes, you can maybe remedy the situation by giving tax cuts and fixing prices like our leaders have been doing currently for their own ends now, but it's only a temporary fix and it doesn't get rid of the overall problem which is the fact that you're increasing the currency supply and forcing prices up thereby making it more difficult to get what they need never mind what they want.

If anybody still ignores this, you really are a moron.

+999999999999999999999999999

[Lloydie]

C'mon gentlemen, let's be reasonable and use that common sense. Deflation is not a problem, and not the cause of any drama in any society. If we do our maths correctly then we'll realize that in a deflationary situation all prices shall go down. So economic growth can still be achieved even when the current GDP is less than the GDP in the previous year. Imagine this year's GDP is 10 million BTC and last year's was 10.1 million BTC. On first glance one would think growth is (10 - 10.1) X 100 / 10.1 = - 0.99 %. But, let's say the inflation rate (lost coins) is 2%, which changes the calculation into (10 - (10.1 X0.98)) X 100 /(10.1X0.98) = 1.03%.

See how that works?

Amen brother! Finally, some really excellent perspectives.

[Lloydie]

first lol at stagflation dude. You always try to keep inflation up when UE is high.. that is the feds mission. and the theory of stagflation, is that the markets are responding to the feds measures and anything done to LOWER INFLATION.. would increase UE.


and both inflation or deflation in high degrees suck balls and we have seen it several times with BTC.. not sure why people cant grasp it.
society likes a stable currency.. with our capitalistic and growing population, a slight bit of inflation is preferred.


Inflation sucks, it makes people not want to sell. Why sell a car for 2,000 today, if you can get 4k tomorrow?


deflation sucks. Why buy a car for 2000 today, when you can get it for 1000 tomorrow.

BOTH CONCEPTS  HARM AN ECONOMY. as they slow down economic activity as people wait for stability before buying discretionary goods.

A slight bit of inflation might be good but share prices rising more than 20% in 2013 is not good. Property prices rising more than 10% is not good.  Yes, that is your purchasing power being devalued.

Deflation I can live with. I'd buy a car for 2000 even if I could have it for 1000 tomorrow. The Norwegian guy who bought an apartment by selling his btcs proves this point. He sold at around $886 per btc knowing full well that btcs could rise further. He retained 80% of his btcs and spent 20%.

I like Btc being deflationary. It will prove that deflationary systems can work.

I'm sorry, but I don't understand. Why would anyone pay more for something today when they know it will be more affordable tomorrow? Why would you ever buy a car for $2000 when you could have it for half that price the next day? That makes zero sense.

Also regarding the guy who bought an apartment. That's all well and good, but that's pure speculation. That's not confidence buying, it's speculative investing. He can't be sure the price of btc will rise over time, he can't be sure if the price will fall, neither can the seller.  and joulesbeef is correct. Deflation you most certainly cannot live with if it is sustained over time. Same with hyper inflation. 

And I can't understand why this is such a difficult concept! For the same reason that Bitcoin has any value at all, or why gold is worth more than just what can be made of it in electronics etc: Percieved value. Intrinsic value is actually nonexistent, because even it is based on our perception. It is meaningless without the human context. Gold connectors? That's not intrinsic. That's potential. And there is no potential without human perception. A cat certainly gives zero fucks about gold, or bitcoins.

Therefore people will buy a car today, despite it being assuredly less costly tomorrow, for the same reason. The percieved value of owning a car today is worth more than the value lost by buying it today.

Even in our economic system, where most things inflate, Moore's law provides a clear example of his occurring on a wide scale, regularly. Every 18 months, computing power has doubled while the price has halved. Not even the same for half: DOUBLE, for HALF. Why does anyone buy a computer, or a tablet, or an iPhone? Why don't you wait?

You are a really smart dude. Thank you. Thank you. Thank you.

[Lloydie]

Income does not go down if everything goes down, it means it's easier to earn money because you don't have to earn as much of the currency you're paying in, this is another bullshit statement perpetrated by pro-inflation economists that ignores basic mathematics which I am getting quite annoyed by nowadays.

If my small business makes less, my small business must pay employees less.

What part of second degree function do people not understand?

No it mustn't pay less, that doesn't make any sense, you're applying ultimatums to a situation that doesn't require it.

I love how you're dodging the math with rhetorical declarations. So right, I could just fire people. Still less income. See there's this thing called investors. Some of them are top tier and some other are second tier. Top tier investors expect the value of the company to rise. If I make less and pay the same, that goes down. Second tier investors expect the short term opportunity value to go up. So they expect me to cut wages but keep production capacity. Yeah income goes down.

So I've shown two cases where income must go down.

Oh and that other thing: if I fire people production capacity goes down. Oops. That ends up causing a dive for both tiers.

Your entire position rests on projections from theory unbounded by time or speed of change. This is disturbing. Employee purchasing power increase does not manifest instantaneously. It lags. Hell, IT RESISTS. The vendor can always last longer in this staring contest.

Like I said before. The 1% owning shares doing fuck all for their capital gains potentially earning less income. I can live with that. The rentier class should be eliminated per original Keynesian economics.

The banking sector, shuffling paper to allocate resources. Them I can live without. Especially in a debt free world. We don't need debt funding and complex financing. It's all bullshit. Let's go with equity financing. Way more robust. No runs on debts. Elimination of debt crisis. End of story.

With real skin in the game, even dumbasses on Wall Street will make rational choices.

[zerodrama]

Like I said before. The 1% owning shares doing fuck all for their capital gains potentially earning less income. I can live with that. The rentier class should be eliminated per original Keynesian economics.

The banking sector, shuffling paper to allocate resources. Them I can live without. Especially in a debt free world. We don't need debt funding and complex financing. It's all bullshit. Let's go with equity financing. Way more robust. No runs on debts. Elimination of debt crisis. End of story.

With real skin in the game, even dumbasses on Wall Street will make rational choices.

I'm for as little financing a distance as possible. Money needs to be a tool. Your real savings should be your property and reputation in the community where people know they can depend on you when things break.

Look I'm for less employment and more person to person, community to community, trade and commerce. We have the means to set it up. Global economics is all bean counter fantasy. But the fact is, we're ALL paper pushers. Inflation and deflation benefit one side or the other, when that side is in the position to make itself more secure through that option. Pushing for deflation in the short term just makes the rentier class less able to pull themselves out. Pushing for inflation makes their costs go up. It's lose-lose unless the rentier class gets inflation in money in their pocket and deflation in cost. But this isn't happening.

Either way people get screwed. The they write manifestos based on the idea that they will always get screwed, which isn't an unreasonable premise.

[Lloydie]

Like I said before. The 1% owning shares doing fuck all for their capital gains potentially earning less income. I can live with that. The rentier class should be eliminated per original Keynesian economics.

The banking sector, shuffling paper to allocate resources. Them I can live without. Especially in a debt free world. We don't need debt funding and complex financing. It's all bullshit. Let's go with equity financing. Way more robust. No runs on debts. Elimination of debt crisis. End of story.

With real skin in the game, even dumbasses on Wall Street will make rational choices.

I'm for as little financing a distance as possible. Money needs to be a tool. Your real savings should be your property and reputation in the community where people know they can depend on you when things break.

Look I'm for less employment and more person to person, community to community, trade and commerce. We have the means to set it up. Global economics is all bean counter fantasy. But the fact is, we're ALL paper pushers. Inflation and deflation benefit one side or the other, when that side is in the position to make itself more secure through that option. Pushing for deflation in the short term just makes the rentier class less able to pull themselves out rape the 99%. Pushing for inflation makes their costs go up farks up the poor, especially the unemployed. It's lose-lose unless the rentier class gets inflation in money in their pocket and deflation in cost are told to get real jobs and are not allowed to sit on their bums reaping capital gains for doing fuck all. But this isn't happening.

Ftfy

[zerodrama]

Like I said before. The 1% owning shares doing fuck all for their capital gains potentially earning less income. I can live with that. The rentier class should be eliminated per original Keynesian economics.

The banking sector, shuffling paper to allocate resources. Them I can live without. Especially in a debt free world. We don't need debt funding and complex financing. It's all bullshit. Let's go with equity financing. Way more robust. No runs on debts. Elimination of debt crisis. End of story.

With real skin in the game, even dumbasses on Wall Street will make rational choices.

I'm for as little financing a distance as possible. Money needs to be a tool. Your real savings should be your property and reputation in the community where people know they can depend on you when things break.

Look I'm for less employment and more person to person, community to community, trade and commerce. We have the means to set it up. Global economics is all bean counter fantasy. But the fact is, we're ALL paper pushers. Inflation and deflation benefit one side or the other, when that side is in the position to make itself more secure through that option. Pushing for deflation in the short term just makes the rentier class less able to pull themselves out rape the 99%. Pushing for inflation makes their costs go up farks up the poor, especially the unemployed. It's lose-lose unless the rentier class gets inflation in money in their pocket and deflation in cost are told to get real jobs and are not allowed to sit on their bums reaping capital gains for doing fuck all. But this isn't happening.

Ftfy

Are we talking about the same thing?

LOL. MY BAD. I kept reading/writing rentier as renter.

Ok we're on the same page then. LOL.

[Impaler]

If the OP actually wanted a serious explanation of why Deflation is bad for the economy then he should not be asking the deepest darkest fever-swamp of inflation haters in the world for the answer, if on the other hand he was looking to get his biases confirmed (as I suspect) he has come to the right place.

That being said I'll give him the in depth answer

In a deflationary currency the rates of interest will be very high because few people wish to loan money and borrowers will be very rare because the rising value of the currency can make their debt burden huge.  BTC matches expectations with very little loan activity and very high rates, in this link you can see a 16.33% rate offered https://www.bitbond.net/buyer/listings?utf8=%E2%9C%93&q

The effect of high interest rates are that only business ventures that have a very high rate of return will be funded, either by outside investors or with savings, the motivation to invest is equal, the act of loaning money just connects money with entrepreneurs.  In BTC world this has generally meant ASIC miners, drugs, gambling, currency exchanges and financial processors are the only things funded.  We do not hear about normal 'main-street' businesses like a retail store or a restaurant taking out BTC loans, these things are just not profitable enough to pay that kind of cost.  Everything else gets neglected and the lack of investment will cause productivity to drop even as average return on investment goes up, the lower overall productivity will lower total consumption in the future.  And Consumption is the one and only goal of all economic systems, thus deflationary currency is a poor system.

[FenixRD]

Consumption is the one and only goal of all economic systems, thus deflationary currency is a poor system.

We're going to disagree there. Which is okay, I suppose, but just remember that not all advocates of  ---- actually, screw that too, I'm not a deflation advocate; I believe that there should be zero intervention into the effective interest rate. Fix supply, take Bitcoin-like system with "zero" friction of transfer and near-zero intertia of V, and there's no way that it will be less efficient, and will almost assuredly be more so. Less human labor involved in tampering with the money, let the machines do the work transferring and securing value, and we get more free time to either pursue hobbies, work on projects that benefit humanity, etc. Janitorial duties that can be left to machines, should. If a Roomba can vacuum just as well, that's not stealing jobs from anywhere, that's doing work that used to cost money, for much less money; freeing that labor for other things. It makes no sense that this wouldn't work for value transfer systems too.

Anyway, by my study, money is a token, and it is *itself* a proof of work. Work done in the past, by you, or someone who gave it to you. You trade it for someone else's work, and we come to mutual agreements in the open market about what a piece of work is worth. That changes with time and variables like supply and demand. But it eliminates trying to figure out whether the work involved in creating three oven-ready 12-lb chickens of a certain quality, is worth ten pounds of raspberries from this particular farm and reputation during a fantastic season for growing berries etc etc. We just trade proofs-of-work (this is why it's so intriguing that mining and the chained-hashes model is called performing proof-of-work to me) and call it a day; and it doesn't matter whether it was really my work or not. It is of course important that proofs-of-work cannot be faked. Work can't be faked, so it's troublesome if the proof can.

Likewise, if I sweep your floor for 3 hours, we come to an agreement on the value of that work, and you pay me in... a proof of it, a token, money.

Over time, the net amount of work is the sum of all previous work, and even more happily, its value is greater than just the sum of the raw parts. Knowledge on top of knowledge. The global GDP is going up as long as humans are learning and discovering and inventing and becoming more efficient. So, firstly, using Bitcoin therefore directly accelerates our rate of acquiring efficiency, thereby raising global "wealth".

There's a lot to write on this... I hope this makes sense. I have a massive paper on the grand unified economic theory tying together the reasons why time is money, and proofs of work, etc.

[Lloydie]

If the OP actually wanted a serious explanation of why Deflation is bad for the economy then he should not be asking the deepest darkest fever-swamp of inflation haters in the world for the answer, if on the other hand he was looking to get his biases confirmed (as I suspect) he has come to the right place.

That being said I'll give him the in depth answer

In a deflationary currency the rates of interest will be very high because few people wish to loan money and borrowers will be very rare because the rising value of the currency can make their debt burden huge.  BTC matches expectations with very little loan activity and very high rates, in this link you can see a 16.33% rate offered https://www.bitbond.net/buyer/listings?utf8=%E2%9C%93&q

The effect of high interest rates are that only business ventures that have a very high rate of return will be funded, either by outside investors or with savings, the motivation to invest is equal, the act of loaning money just connects money with entrepreneurs.  In BTC world this has generally meant ASIC miners, drugs, gambling, currency exchanges and financial processors are the only things funded.  We do not hear about normal 'main-street' businesses like a retail store or a restaurant taking out BTC loans, these things are just not profitable enough to pay that kind of cost.  Everything else gets neglected and the lack of investment will cause productivity to drop even as average return on investment goes up, the lower overall productivity will lower total consumption in the future.  And Consumption is the one and only goal of all economic systems, thus deflationary currency is a poor system.

You mean millions of empty apartments in china counting as GDP growth is good? Wow.

You mean property prices rising by more than 10% and out of average income families is a good thing? Wow again.

Are you saying that Coffee shops selling coffee for btcs are not real businesses? Gimme a break.

Just because businesses are not taking out loans does not mean that business is not happening. It is called equity financing and it works perfectly fine. Yes, it does require a thought adjustment but it works perfectly fine. There will be zero possibility of debt crises.

Consumption is not the goal of all economic systems. That is the biggest lie of the current monetary system.

See Bhutan. The economic system there is not based on consumption.

Economics is actually about the allocation of scarce resources for the benefit of all.  I see a deflationary system as being able to achieve this objective better than the current fiat money system.

Can we prove that a deflationary system is better? Well, we are sure going to give it a try. I for one am sick of the top down inflationary system that enriches the 1% at the expense of the rest of us.  

I hate debt with a passion. I think it is equivalent to slavery.

[Lloydie]

Consumption is the one and only goal of all economic systems, thus deflationary currency is a poor system.

We're going to disagree there. Which is okay, I suppose, but just remember that not all advocates of  ---- actually, screw that too, I'm not a deflation advocate; I believe that there should be zero intervention into the effective interest rate. Fix supply, take Bitcoin-like system with "zero" friction of transfer and near-zero intertia of V, and there's no way that it will be less efficient, and will almost assuredly be more so. Less human labor involved in tampering with the money, let the machines do the work transferring and securing value, and we get more free time to either pursue hobbies, work on projects that benefit humanity, etc. Janitorial duties that can be left to machines, should. If a Roomba can vacuum just as well, that's not stealing jobs from anywhere, that's doing work that used to cost money, for much less money; freeing that labor for other things. It makes no sense that this wouldn't work for value transfer systems too.

Anyway, by my study, money is a token, and it is *itself* a proof of work. Work done in the past, by you, or someone who gave it to you. You trade it for someone else's work, and we come to mutual agreements in the open market about what a piece of work is worth. That changes with time and variables like supply and demand. But it eliminates trying to figure out whether the work involved in creating three oven-ready 12-lb chickens of a certain quality, is worth ten pounds of raspberries from this particular farm and reputation during a fantastic season for growing berries etc etc. We just trade proofs-of-work (this is why it's so intriguing that mining and the chained-hashes model is called performing proof-of-work to me) and call it a day; and it doesn't matter whether it was really my work or not. It is of course important that proofs-of-work cannot be faked. Work can't be faked, so it's troublesome if the proof can.

Likewise, if I sweep your floor for 3 hours, we come to an agreement on the value of that work, and you pay me in... a proof of it, a token, money.

Over time, the net amount of work is the sum of all previous work, and even more happily, its value is greater than just the sum of the raw parts. Knowledge on top of knowledge. The global GDP is going up as long as humans are learning and discovering and inventing and becoming more efficient. So, firstly, using Bitcoin therefore directly accelerates our rate of acquiring efficiency, thereby raising global "wealth".

There's a lot to write on this... I hope this makes sense. I have a massive paper on the grand unified economic theory tying together the reasons why time is money, and proofs of work, etc.

Those are some great economic concepts.

Economic systems will continue to gain value as long as they are allowed to expand by building on population growth and productivity.

Very elegant.

[zerodrama]

Consumption is a retarded premise for an economy.

Transaction a little less so.

Compensation a bit better use for money.

Trade is it.

[Impaler]

I believe that there should be zero intervention into the effective interest rate. Fix supply, take Bitcoin-like system with "zero" friction of transfer and near-zero intertia of V

This is your logical falicy you call a Fixed supply 'zero intervention' as if a fixed supply were the natural state of things.  Their is nothing natural amount money, it is a man made system of symbols and math and the supply is determined purely by human choice.  In the case of BTC a human chose to make a fixed supply and that choice was completely arbitrary, Satoshi could have chosen to do an unbounded supply as lots of alternatives have done.   That arbitrary choice by Satoshi constitutes a massive and ongoing intervention on the interest rate.  Because people create money and interest rates it behooves us to create the BEST rate of interest that will serve to create maximum productivity.

I find you deflation people to be so intellectually sloppy, when I demonstrate that Deflation lowers productivity you respond that you don't want economic growth, it is in fact 'bad'.  When I ask how you think it is fair to profit from holding deflationary currency you respond that your deferred consumption is encouraging investment and you then deserve to receive the fruits of thouse investments.  Your beloved deflation can not be both causing and rewarding you for hugely profitable investments AND causing economic growth to cease.  If you believe growth will be halted by deflationary currency then you can't believe that your speculative profit from holding it is anything but a transfer from other people.

[Ibian]

I believe that there should be zero intervention into the effective interest rate. Fix supply, take Bitcoin-like system with "zero" friction of transfer and near-zero intertia of V

This is your logical falicy you call a Fixed supply 'zero intervention' as if a fixed supply were the natural state of things.  Their is nothing natural amount money, it is a man made system of symbols and math and the supply is determined purely by human choice.  In the case of BTC a human chose to make a fixed supply and that choice was completely arbitrary, Satoshi could have chosen to do an unbounded supply as lots of alternatives have done.   That arbitrary choice by Satoshi constitutes a massive and ongoing intervention on the interest rate.  Because people create money and interest rates it behooves us to create the BEST rate of interest that will serve to create maximum productivity.

I find you deflation people to be so intellectually sloppy, when I demonstrate that Deflation lowers productivity you respond that you don't want economic growth, it is in fact 'bad'.  When I ask how you think it is fair to profit from holding deflationary currency you respond that your deferred consumption is encouraging investment and you then deserve to receive the fruits of thouse investments.  Your beloved deflation can not be both causing and rewarding you for hugely profitable investments AND causing economic growth to cease.  If you believe growth will be halted by deflationary currency then you can't believe that your speculative profit from holding it is anything but a transfer from other people.

None of that really matters. The important point is, the current debt-based fiat system is designed to end in periodic meltdowns at the expense of the poor and middle class and for the benefit of the very richest. The majority of us think the current system is a bad one, and we are voting with our wallets and hardware. And you are free to do the same, which is one of the many beauties of bitcoin. Nobody is forced to join in, everything is voluntary.

I hate debt with a passion. I think it is equivalent to slavery.

It is. That's why it's called being a wage-slave. It's not a fucking joke, that is exactly what most people are.

"Gold is the money of kings, silver the money of gentlemen, barter the money of peasants, debt the money of slaves."

[Lloydie]

I believe that there should be zero intervention into the effective interest rate. Fix supply, take Bitcoin-like system with "zero" friction of transfer and near-zero intertia of V

This is your logical falicy you call a Fixed supply 'zero intervention' as if a fixed supply were the natural state of things.  Their is nothing natural amount money, it is a man made system of symbols and math and the supply is determined purely by human choice.  In the case of BTC a human chose to make a fixed supply and that choice was completely arbitrary, Satoshi could have chosen to do an unbounded supply as lots of alternatives have done.   That arbitrary choice by Satoshi constitutes a massive and ongoing intervention on the interest rate.  Because people create money and interest rates it behooves us to create the BEST rate of interest that will serve to create maximum productivity.

I find you deflation people to be so intellectually sloppy, when I demonstrate that Deflation lowers productivity you respond that you don't want economic growth, it is in fact 'bad'.  When I ask how you think it is fair to profit from holding deflationary currency you respond that your deferred consumption is encouraging investment and you then deserve to receive the fruits of thouse investments.  Your beloved deflation can not be both causing and rewarding you for hugely profitable investments AND causing economic growth to cease.  If you believe growth will be halted by deflationary currency then you can't believe that your speculative profit from holding it is anything but a transfer from other people.

That's right but Satoshi didn't choose an unbounded supply.  Thank God for that.  Nothing that Satoshi did was arbitrary.  It was carefully planned and thought out.  It is the work of a genius that you can only begin to comprehend after the fact.

The problem is you are still thinking like a fiat creature, stuck in your three dimensional fiat world.  Debt is not the best response for productivity.  You have been conned.

Debt creates artificial increases in GDP growth that people pass off as real economic growth because the GDP number measured in dollars is getting bigger.  The reality is that real economic growth comes from research, hard work, population growth and general productivity increases.

The debt based system distorts real economic growth by adding credit to it.  Some dumb fuck borrowing a billion dollars to build some condos is suddenly a superhero because the value of those condos rise due to speculation caused by yet more debt.  What a sick fucking system.  

Bitcoin will increase in value as the Bitcoin economy expands.  Yes, there will initially be a transfer of wealth from new adopters to early adopters but this will sort itself out over time because the rich fucks will need to spend their Bitcoins to get economic value.  They can't just make more Bitcoins out of thin air, as the banks can do right now with credit-money under the current fiat monetary system.

I think you haven't considered that 16% interest in Bitcoin world was a design feature, not an arbitrary choice.  Someone understood that debt is deleterious to society as a whole and that person did something about it.  Now, that is the mind of a genius.

[Impaler]

None of that really matters. The important point is, the current debt-based fiat system is designed to end in periodic meltdowns at the expense of the poor and middle class and for the benefit of the very richest. The majority of us think the current system is a bad one, and we are voting with our wallets and hardware. And you are free to do the same, which is one of the many beauties of bitcoin. Nobody is forced to join in, everything is voluntary.

That would be relevant response IF I was defending the 'current debt-based fiat system', but I've simply been pointing out the Flaws with deflation not defending the current system.  As you can see in my Sig I support Freicion which uses demurrage rather then inflation to promote velocity, and if your familiar with other threads I am searching for a means to design a fully stable (no inflation or deflation) cryptographic currency.

[Ibian]

None of that really matters. The important point is, the current debt-based fiat system is designed to end in periodic meltdowns at the expense of the poor and middle class and for the benefit of the very richest. The majority of us think the current system is a bad one, and we are voting with our wallets and hardware. And you are free to do the same, which is one of the many beauties of bitcoin. Nobody is forced to join in, everything is voluntary.

That would be relevant response IF I was defending the 'current debt-based fiat system', but I've simply been pointing out the Flaws with deflation not defending the current system.  As you can see in my Sig I support Freicion which uses demurrage rather then inflation to promote velocity, and if your familiar with other threads I am searching for a means to design a fully stable (no inflation or deflation) cryptographic currency.

Right now there is no third option. But you are free to code one and release it into the wild.

[Lloydie]

None of that really matters. The important point is, the current debt-based fiat system is designed to end in periodic meltdowns at the expense of the poor and middle class and for the benefit of the very richest. The majority of us think the current system is a bad one, and we are voting with our wallets and hardware. And you are free to do the same, which is one of the many beauties of bitcoin. Nobody is forced to join in, everything is voluntary.

That would be relevant response IF I was defending the 'current debt-based fiat system', but I've simply been pointing out the Flaws with deflation not defending the current system.  As you can see in my Sig I support Freicion which uses demurrage rather then inflation to promote velocity, and if your familiar with other threads I am searching for a means to design a fully stable (no inflation or deflation) cryptographic currency.

It probably hasn't occurred to you that velocity should be left alone to real economic needs. The monetary system should just get out of the way of economic drivers.

There is a reason why freicoin is not popular. It goes something like this: please use my freicoin which costs you money the longer you use it and don't use bitcoin whose value is increasing in value the longer you use it.

Seriously, do you expect people to switch over to freicoin? They would have to be some kind of special stupid.

[Impaler]

It is not popular as a speculative investment, that is the point.  

As for velocity, you admit the velocity is embedded in the nature of the money, so how do you know that the velocity in BTC is what the economy needs?  As I've said it is an ARBITRARY choice to employ a money system with either a high or low velocity, with either velocity encouraging or discouraging features.  If you want money to 'get out of the way' then you money needs to give the velocity that the economy wants for full productivity.  You need to establish that the velocity of BTC is the correct velocity, even if it is just in a theoretical sense, what is the 'right amount'.  I'll give you my answer, money needs to have a velocity inducement that makes money no more desirable then holding real goods, BTC falls well short of that in my opinion.

With regard to your prior post

You confuse 'Arbitrary' with 'accidental'.  When I say the choice of a fixed supply is arbitrary I mean it is not forced on Satoshi by anyone or anything, he was free to choose from an infinity of money supply growth curves.  His intent was to create a deflationary asset and that lead him to pick the design he did and he succeeded in getting deflation.  What I've been arguing is if deflation is a good thing to have in an economy.

So far people seem to have conceded that deflation will cripple economic growth but that's 'good' or your argument which seems to be that it will cripple debt which is 'enslaving us'.  I think you confuse Debt with Usury here as a debt is something that humans have been creating and repaying for millennia before the existence of any form of money.  Usury is expecting your debt to be repaid with INTEREST.  I am firmly opposed to usury and believe the means to remove it is a money system which lowers interest rates to zero.  Thus people can and will and should continue to incur debt but they will repay them 1 for 1, no more no less.  

BTC if it were our money would manifestly NOT eliminate debt, first because debt is so necessary for any form of complex division of labor, which is the basis for our entire society.  But second because 16% is really not historically unprecedented, a simple look at an interest rate chart will show you that rate that high were reached in the 80's by Volker and frequently as high during the 19th century (during the gold standard).  The issuing of Debt did not and dose not cease because of high interest rates, their are always going to be some people willing to borrow and some people willing to lend, in fact the total interest payment may not even be declining much as rates rise.

[Ibian]

Reminder that bitcoin is only temporarily deflationary. Once saturation is near the peak, it will be close enough to stable for the argument not to have much merit. This could happen in as little as five years, and certainly within 20. An entirely new economic system within the span of one generation or less is not bad.

Personally, my main concern is to get rid of usury and for people in general to only spend money they have, not money they don't have as they do now. Bitcoin won't enforce this, but it may encourage it.

[FenixRD]

*sigh*

I'd hoped for a better debate. Or simple understanding. Or polite deferment that our basest opinions differ. Rather, I get condescension and insults. Typical, I suppose.

I can formulate a system that behaves exactly as Bitcoin does, but instead of a fixed supply, the price is fixed to an energy constant, and the supply (M) varies with demand. In our current state, this would mean you hold coins worth exactly the same relative to a basket of goods, but the *amount* you hold varies. Like dividends of a stock. So now you have no inflation or deflation, by primitive definitions. The price is unchanging. But the effect is the same. Your mind is so narrow... I'm not even sure how to go on from here. I extended my frond of diplomacy and you defecated on it. So be it, then...

[Lloydie]

It is not popular as a speculative investment, that is the point.  

As for velocity, you admit the velocity is embedded in the nature of the money, so how do you know that the velocity in BTC is what the economy needs?  As I've said it is an ARBITRARY choice to employ a money system with either a high or low velocity, with either velocity encouraging or discouraging features.  If you want money to 'get out of the way' then you money needs to give the velocity that the economy wants for full productivity.  You need to establish that the velocity of BTC is the correct velocity, even if it is just in a theoretical sense, what is the 'right amount'.  I'll give you my answer, money needs to have a velocity inducement that makes money no more desirable then holding real goods, BTC falls well short of that in my opinion.

With regard to your prior post

You confuse 'Arbitrary' with 'accidental'.  When I say the choice of a fixed supply is arbitrary I mean it is not forced on Satoshi by anyone or anything, he was free to choose from an infinity of money supply growth curves.  His intent was to create a deflationary asset and that lead him to pick the design he did and he succeeded in getting deflation.  What I've been arguing is if deflation is a good thing to have in an economy.

So far people seem to have conceded that deflation will cripple economic growth but that's 'good' or your argument which seems to be that it will cripple debt which is 'enslaving us'.  I think you confuse Debt with Usury here as a debt is something that humans have been creating and repaying for millennia before the existence of any form of money.  Usury is expecting your debt to be repaid with INTEREST.  I am firmly opposed to usury and believe the means to remove it is a money system which lowers interest rates to zero.  Thus people can and will and should continue to incur debt but they will repay them 1 for 1, no more no less.  

BTC if it were our money would manifestly NOT eliminate debt, first because debt is so necessary for any form of complex division of labor, which is the basis for our entire society.  But second because 16% is really not historically unprecedented, a simple look at an interest rate chart will show you that rate that high were reached in the 80's by Volker and frequently as high during the 19th century (during the gold standard).  The issuing of Debt did not and dose not cease because of high interest rates, their are always going to be some people willing to borrow and some people willing to lend, in fact the total interest payment may not even be declining much as rates rise.

No you are wrong. There is this thing called DIVISIBILITY in bitcoin. The bitcoin economy will do just fine. It doesn't need your intervention or anyone's velocity intervention.

The special stupids can use freicoin. That is their right to vote with their money. You can rationalise it all you want as non speculative or whatever but at the end of the day you've gotta to be stupid to use a devaluing currency if given a choice.

Debt doesn't have to be necessary. We can use equity investments instead. If someone wants to borrow at 16% in bitcoin land then let them. I for one think that equity based investments will work perfectly fine.

[Impaler]

It's okay. I like it here. Your explanation sucks and was inadequate so I helped it. Divisibility in bitcoin means that freicoin is a stillborn. Argue all you want but everyday the growth in bitcoin and the stagnation in freicoin will stare you in the face as a reminder that divisibility is better than demurrage.

Here, I'll help you a little more. The divisibility in bitcoin allows people to spend smaller units of bitcoin even as the value of one bitcoin rises. Hey presto, liquidity problem solved. All without inflation or demurrage.

For the last time stop jumping into other threads and attempting to hijack them, it is rude to people already participating in thouse thread and if you do it again you'll go on my ignore list.

Your apparently ignorant that Freicion is actually more divisible then BTC as a side effect of the use of high precision math to calculate demurrage rates down to exceedingly small fractions of what would be a 'Satoshi' in BTC.  Also we don not measure success by valuation.

Your also confused as to what liquidity means.    http://en.wikipedia.org/wiki/Market_liquidity

It has nothing to do with granularity or coins being 'too valuable' to make small transactions with.  I've never argued that BTC will run into a problem with divisibility so I do not see why you feel your refuting anything.  BTC clearly experiences deflation irregardless of if it is divisible or not, being divisible simply means their is no point where deflation has to stop due to granularity limitations.

[Lloydie]

It's okay. I like it here. Your explanation sucks and was inadequate so I helped it. Divisibility in bitcoin means that freicoin is a stillborn. Argue all you want but everyday the growth in bitcoin and the stagnation in freicoin will stare you in the face as a reminder that divisibility is better than demurrage.

Here, I'll help you a little more. The divisibility in bitcoin allows people to spend smaller units of bitcoin even as the value of one bitcoin rises. Hey presto, liquidity problem solved. All without inflation or demurrage.

For the last time stop jumping into other threads and attempting to hijack them, it is rude to people already participating in thouse thread and if you do it again you'll go on my ignore list.

Your apparently ignorant that Freicion is actually more divisible then BTC as a side effect of the use of high precision math to calculate demurrage rates down to exceedingly small fractions of what would be a 'Satoshi' in BTC.  Also we don not measure success by valuation.

Your also confused as to what liquidity means.    http://en.wikipedia.org/wiki/Market_liquidity

It has nothing to do with granularity or coins being 'too valuable' to make small transactions with.  I've never argued that BTC will run into a problem with divisibility so I do not see why you feel your refuting anything.  BTC clearly experiences deflation irregardless of if it is divisible or not, being divisible simply means their is no point where deflation has to stop due to granularity limitations.

I didn't realise this thread "belonged" to you. A bit arrogant don't you think? Isn't that what the ignore button is for? Use it then.

I'm not confused about anything. You're the one confused about why demurrage is pointless. High precision maths. Gimme a break. No one will use the freicoin with demurrage built in.

Here use my coin that costs you money if you hold it versus bitcoin that is rising in value. No contest. Freicoin loses 1 million times out of 1 million. 

Yes, bitcoin is deflationary, get used to it. It's actually a product feature.

[Kungfucheez]

Just ignore him Impaler, it helps clean a thread up nicely.

[Lloydie]

Just ignore him Impaler, it helps clean a thread up nicely.

As they say, do as you do, not as you say. Otherwise that makes you a hypocrite. Who are you?