When the majority decides to change the rules

[hugolp]

If I don't know what I'm talking about then every monetary reformist and every government and most economists on the planet are wrong and you are right.

No, most of the economists dont think like this. Still using the argument of "most people think like this" thus you are wrong is extremely weak, borderline manipulative.

There is nothing wrong with prices going down, no matter how many times you repeat the same idea. Repeat it again, still wrong.

Why do you think we came off a gold standard. I'll tell because France asked to be paid in gold and America didn't have enough gold.

Bretton Woods was designed in a way that this was unavoidable. The USA kept printing more dollars than gold had and finally it could not pay. In fact the story of how the USA government gradually took over the monetary system its very interesting. It shows why fiat currencies, even if they claim to be backed by gold dont work. Competing currencies dont suffer from this problems.

[Jered Kenna (TradeHill)]

I'll agree that bitcoin isn't perfect. One problem I could see with the changing value of the currency:

You buy a house for 1000btc
You make 10btc a month.

2 years later..

You still owe 850btc on the house
You make 9btc a month because the value has risen relative to the USD.


You can still afford to make your payments but if it continues to rise you're going to be in trouble.
Someone correct me if I'm wrong but isn't this a big part of what happened to farmers in the dustbowl?
I don't mean they hand loans in BTC obviously  but their value of the money went up and food was easier to buy but they still owed the same in loans.

[hugolp]

I'll agree that bitcoin isn't perfect. One problem I could see with the changing value of the currency:

You buy a house for 1000btc
You make 10btc a month.

2 years later..

You still owe 850btc on the house
You make 9btc a month because the value has risen relative to the USD.


You can still afford to make your payments but if it continues to rise you're going to be in trouble.
Someone correct me if I'm wrong but isn't this a big part of what happened to farmers in the dustbowl?
I don't mean they hand loans in BTC obviously  but their value of the money went up and food was easier to buy but they still owed the same in loans.

The other side of the story is that saving for yourself and then using that capital becomes easier, so people can start their own projects without going so much into debt and depending so much on the banks. Inflation on the other hand promotes debt.

About the farmers of dustbowl I guess you are referring to the incident during the Great Depression. The thing is that inflation propagandists always point to deflation for making loans more dificult to pay, but always hide that during the roaring 20's it was the inflationary policies of the Fed that promoted the creation of all that debt. Without inflation all that debt would not have been there and the crash of 1929 would not have happened.

[Jered Kenna (TradeHill)]

I'll agree that bitcoin isn't perfect. One problem I could see with the changing value of the currency:

You buy a house for 1000btc
You make 10btc a month.

2 years later..

You still owe 850btc on the house
You make 9btc a month because the value has risen relative to the USD.


You can still afford to make your payments but if it continues to rise you're going to be in trouble.
Someone correct me if I'm wrong but isn't this a big part of what happened to farmers in the dustbowl?
I don't mean they hand loans in BTC obviously  but their value of the money went up and food was easier to buy but they still owed the same in loans.

The other side of the story is that saving for yourself and then using that capital becomes easier, so people can start their own projects without going so much into debt and depending so much on the banks. Inflation on the other hand promotes debt.

About the farmers of dustbowl I guess you are referring to the incident during the Great Depression. The thing is that inflation propagandists always point to deflation for making loans more dificult to pay, but always hide that during the roaring 20's it was the inflationary policies of the Fed that promoted the creation of all that debt. Without inflation all that debt would not have been there and the crash of 1929 would not have happened.

Yes I was talking about the incident during the great depression. Ideally we'd be able to avoid inflation or deflation but it sounds like that is going to be impossible as long as there is more than one currency in the world. Well maybe I should just say anything to compare it to. Even if BTC were the sole "currency" value of commodities would change and affect the value. I think fluctuations and changes in purchase power (don't want to debate if it inflates or deflates) are going to be unavoidable for my lifetime.

[FatherMcGruder]

I'll agree that bitcoin isn't perfect. One problem I could see with the changing value of the currency:

You buy a house for 1000btc
You make 10btc a month.

2 years later..

You still owe 850btc on the house
You make 9btc a month because the value has risen relative to the USD.


You can still afford to make your payments but if it continues to rise you're going to be in trouble.
Someone correct me if I'm wrong but isn't this a big part of what happened to farmers in the dustbowl?
I don't mean they hand loans in BTC obviously  but their value of the money went up and food was easier to buy but they still owed the same in loans.

I think the answer is to not accept loans of bitcoins with interest.

[Jered Kenna (TradeHill)]

I'll agree that bitcoin isn't perfect. One problem I could see with the changing value of the currency:

You buy a house for 1000btc
You make 10btc a month.

2 years later..

You still owe 850btc on the house
You make 9btc a month because the value has risen relative to the USD.


You can still afford to make your payments but if it continues to rise you're going to be in trouble.
Someone correct me if I'm wrong but isn't this a big part of what happened to farmers in the dustbowl?
I don't mean they hand loans in BTC obviously  but their value of the money went up and food was easier to buy but they still owed the same in loans.

I think the answer is to not accept loans of bitcoins with interest.

Same could be said about any loan but that's a pretty fundamental part of society. People want what they can't afford right now.
Not always a bad thing though, it allows a lot of growth that wouldn't be possible.

[BitterTea]

I'll agree that bitcoin isn't perfect. One problem I could see with the changing value of the currency:

You buy a house for 1000btc
You make 10btc a month.

2 years later..

You still owe 850btc on the house
You make 9btc a month because the value has risen relative to the USD.


You can still afford to make your payments but if it continues to rise you're going to be in trouble.
Someone correct me if I'm wrong but isn't this a big part of what happened to farmers in the dustbowl?
I don't mean they hand loans in BTC obviously  but their value of the money went up and food was easier to buy but they still owed the same in loans.

I think the answer is to not accept loans of bitcoins with interest.

That doesn't solve the problem, he never mentioned interest in the original question. It could be that a negative interest rate is necessary in the face of price deflation. This isn't a problem since the issuer of the loan is still making money on the appreciation of the currency.

[Jered Kenna (TradeHill)]

I'll agree that bitcoin isn't perfect. One problem I could see with the changing value of the currency:

You buy a house for 1000btc
You make 10btc a month.

2 years later..

You still owe 850btc on the house
You make 9btc a month because the value has risen relative to the USD.


You can still afford to make your payments but if it continues to rise you're going to be in trouble.
Someone correct me if I'm wrong but isn't this a big part of what happened to farmers in the dustbowl?
I don't mean they hand loans in BTC obviously  but their value of the money went up and food was easier to buy but they still owed the same in loans.

I think the answer is to not accept loans of bitcoins with interest.

That doesn't solve the problem, he never mentioned interest in the original question. It could be that a negative interest rate is necessary in the face of price deflation. This isn't a problem since the issuer of the loan is still making money on the appreciation of the currency.

Also it's going to be hard to predict the rate of deflation.

I suppose the best way to do it is base loan repayments on the value of the currency at the time.
You would have to compare it to something though. Obviously the USD would work but maybe you'd want something else like gold.

Just to keep it simple though lets say 1btc = 1usd at the time you get your home loan.
You're paying 1000btc a month
btc goes up to .5btc = 1usd.

Now you only have to pay 500btc because that still buys the same amount of house / food / whatever.


I'd prefer to tie it to how much gold you can buy with 1btc though because it's global but that would be when btc is more established.

[FatherMcGruder]

What about making any interest rate on bitcoins a function of network difficulty. It may not be a perfect indicator of bitcoin value, but it seems better than trying to gauge it against something relatively unrelated, like gold or USD.

[trentzb]

I suppose the best way to do it is base loan repayments on the value of the currency at the time.
You would have to compare it to something though. Obviously the USD would work but maybe you'd want something else like gold.

Why does it need to be compared to anything?

[Jered Kenna (TradeHill)]

I suppose the best way to do it is base loan repayments on the value of the currency at the time.
You would have to compare it to something though. Obviously the USD would work but maybe you'd want something else like gold.

Why does it need to be compared to anything?

To compensate for change in purchase power and long term effect of loans.

I'm ok with not tying it to anything I just assumed people want to repay the same (real value) that they borrow.
That sounds kind of confusing but I'm guessing you know what I mean, obviously borrow 100btc pay 100btc back.

[AaronM]

Hi,

Let's be optimistic and suppose that Bitcoin does take off in a big way and goes mainstream to the point of becoming a significant actor in the world economy.  In this scenario, the early adopters -- those of you who populate this forum today -- will necessarily become a minority.

Since in Bitcoin the policy is dictated by the majority of nodes (weighted against hash/sec), how would you guys react if a future majority were to decide that the current policy needed tweaking?  I am thinking in particular of the policy that the total number of bitcoins is capped at 21 million.  It could very well happen that the majority comes to the conclusion that the builtin cap is having nefarious effects and decides to upgrade the software such that Bitcoin will switch to a controlled inflation system (say 2%/year).  How many of you would "fork" in such a scenario?

On a related note, it seems that many of you see the builtin cap as good thing.  What evidence would be required to change your mind about this?

Jon.

There's a serious problem with forks: any additional bitcoins generated with the new software wouldn't be recognized by the old software. I think practically everyone would have to upgrade, not just a majority.

[markm]

There is nothing to stop anyone producing yet another currency for use by their customers to buy their product, thus issuing precisely enough currency to purchase the new product(s) being produced.

For example OPEC could have issued OPEC$ and backed them with oil. MacDonalds could issue Mac$ and back them with big macs.

Just because there exists a nice deflationary bitcoin in the world does not at all mean no-one else can issue tickets or credits backed by their promise to provide something in return for them when someone want to redeem them.

So the whole FUD about limiting the number of original blockchain bitcoins being a bad thing is just FUD.

Notice that most such complainers not only do not create their own blockchain having the properties they claim are ideal but furthermore there does not seem to even be much real intention on their parts to even put any wealth into such an ideal even if someone else created it tailored to their specifications. How ideal *is* their ideal if even they are not willing to actually invest in it / buy into it?

So I guess a good question here would be okay great you are right now how much actual wealth are you ready to put into this better thing that you describe once we compile the relevant code to have it ready to use for you?

-MarkM-

[Catallaxy]

... how would you guys react if a future majority were to decide that the current policy needed tweaking?  I am thinking in particular of the policy that the total number of bitcoins is capped at 21 million.  It could very well happen that the majority comes to the conclusion that the builtin cap is having nefarious effects and decides to upgrade the software such that Bitcoin will switch to a controlled inflation system (say 2%/year). 

Please, please conduct your business in a controlled inflationary currency so that I can purchase your troubled assets with my sound currency when you have a liquidity crisis. I love me a good sale.

Competing currencies for the win.

[hazek]

Let's be optimistic and suppose that Bitcoin does take off in a big way and goes mainstream to the point of becoming a significant actor in the world economy

Forget everything you have read about bitcoin. If the above were to happen every manufactured item and every service would be worth less as time went by. Lets use a farmer as an example he buys all his seeds and plants them now it costs x mount  because, the currency has to cover more and more goods and services by the time the farmer reaps his harvest and sells it. The selling price does not cover what he paid for the seeds and stuff in the first place . Classic deflation. Like I said you can not use a finite resource in an exponential system to two are at odds with each other.

LOL What a bunch of horseshit. Sorry but it really is.

The farmer doesn't need to get nominally more money back with the harvest compared to how much he needed to plant the seends... I mean wtf, do we have money for the sake of having money or do we have money because it's a means to an end?

If the farmer receives less money back but the currency appreciated in the meantime, he will still be able to afford more goods and services and have a profit in real terms then he could have afforded before he bought those seeds.


Please stop making statements about stuff you didn't properly research yourself and you know no facts about.

EDIT: And judging from the rest of your posts I can see where the problem lies and it's the fact, yes fact, that you're clueless about what deflation or inflation really is. I suggest you read: http://forum.bitcoin.org/index.php?topic=10426.0

[tiberiandusk]

People really don't understand how the decimal works. 21 million "coins" doesn't really matter. What matters is where you put the decimal point therefore breaking these 21 million coins into a crapload of sub "coins". People may not like seeing that they have .000045942 bitcoins but if 1btc trades for $100,000,000 you have nearly $46,000 worth of coins. Don't try to picture a bitcoins as actual coins. Picture the value each of those decimal places holds. Way into the future the total decimal places may need to be increased but that won't be a problem for a looooong time.