Deflation based currency such as Bitcoin to counter promote economy.

[Betwrong]

~
I understand your point. Almost every economist from the old school would agree with you. And by "old school" I don't mean something that is from the past. I understand that those are the economists that are in charge right now. I just think that maybe here, on bitcointalk, we can come up with an idea of a new economic system for which inflation will not be a mandatory component. I know it may seem too ambitious, but we can try at least

In simple terms, you can't run an economy on an appreciating currency

Well, technically, if the economy is quickly expanding economy, e.g. due to a major shift in technology (like free unlimited energy for all), its expansion can somewhat offset the burden of an appreciating currency that it puts on producers and their profit margins (read, these margins are so high that they can compensate for the negative effect of deflation). But it won't last forever and ultimately deflation will start to eat away at producers' profits and that will send the economy into the death spiral of first stagnation and then depression

Again, you are talking in terms of a system that has been working for more than 200 years, and I personally can't propose anything better, I'm not that smart, but I think maybe someone can. Or, we can do it together by proposing and discussing various ideas.

What do you think, for example, of a society where people are encouraged to think more of today that of tomorrow? I agree that all the people can't (and shouldn't) live like that, but maybe for the vast majority this model can be a good choice. And by "encouraged" I don't mean giving them loans, basically making slaves out of them, that's what we have today. It should be something else, something that makes people happy with their lives right now without overspending.

I personally think that current capitalist economy is the best one around. But I also agree with people who say that it is falling apart, and that something new have to be implemented in the nearest future

It all comes down to people and their flaws

Communism doesn't work exactly because of that. But we are what we are. Isn't it ridiculous to invent a system that is incompatible with life and then blame it on life?

[1714855909]

1714855909

[1714855909]

1714855909

[1714855909]

1714855909

[1714855909]

1714855909

[deisik]

What do you think, for example, of a society where people are encouraged to think more of today that of tomorrow? I agree that all the people can't (and shouldn't) live like that, but maybe for the vast majority this model can be a good choice. And by "encouraged" I don't mean giving them loans, basically making slaves out of them, that's what we have today. It should be something else, something that makes people happy with their lives right now without overspending

Most likely, it will be "incompatible with life"

And then someone will start blaming its failure on life itself. The point is, we can't do anything economically to change the current state conceptually. It is like trying to discover a new physical law in the nature, which is highly unlikely in this Universe. So our only choice is to change humans themselves (or wait for that to come about naturally). But that would have more to do with eugenics rather than economics (read, not everyone will be happy). Otherwise, it may take long years, actually many thousands if not millions of years (unless we stick with some form of eugenics after all)

[South Park]

Currently, all major currencies issued by the government have natural inflation of about 2%.
Bitcoin, on the other hand, is much different, it, in fact, does not have any inflation but deflation.
Bitcoins are created less and less and the number of users does not affect the quantity of creation of Bitcoins.

Inflation on a low level promotes spending while deflation in Bitcoin promotes holding...

My question is, would an economy with a deflation based currency such as Bitcoin work?

Some define deflation as the decrease in the money supply and each day more bitcoin is being mined so this is not accurate, what happens is that eventually the rate at which bitcoin is being mined will be very small compared to the available supply but it will still count as inflation, now if what you are talking about is the amount of bitcoin lost, the truth is that those coins are not lost forever since someone could generate the private key in the future by accident and they could move and use those coins as they please, this is unlikely but there is a very small chance of that happening.

[webtricks]

Some define deflation as the decrease in the money supply and each day more bitcoin is being mined so this is not accurate, what happens is that eventually the rate at which bitcoin is being mined will be very small compared to the available supply but it will still count as inflation, now if what you are talking about is the amount of bitcoin lost, the truth is that those coins are not lost forever since someone could generate the private key in the future by accident and they could move and use those coins as they please, this is unlikely but there is a very small chance of that happening.

Who said deflation refers to decrease in supply? The concept of inflation/deflation is not proportional to supply rather it is related to price.
You can't say Bitcoin is inflationary because new bitcoins are mined everyday. When you compare the rise in demand of Bitcoin with rise in supply, you will notice that demand is rising at much more rate than supply. This is what causing surge in Bitcoin prices. Thus, the value of other commodities in terms of Bitcoin is decreasing as the demand is rising and new supply is shrinking with every halvening. This makes the Bitcoin deflationary.

[deisik]

Some define deflation as the decrease in the money supply and each day more bitcoin is being mined so this is not accurate, what happens is that eventually the rate at which bitcoin is being mined will be very small compared to the available supply but it will still count as inflation, now if what you are talking about is the amount of bitcoin lost, the truth is that those coins are not lost forever since someone could generate the private key in the future by accident and they could move and use those coins as they please, this is unlikely but there is a very small chance of that happening.

Who said deflation refers to decrease in supply? The concept of inflation/deflation is not proportional to supply rather it is related to price

Personally, I keep to the same convention

But whenever possible (which is almost always) I myself use the term appreciating (depreciating) currency if i want to make it cleat that I refer to the deflation (inflation) of prices. Like I said, I have no grudge against anyone using the terms in respect to changes in prices but when I first tried to use the terms inflation and deflation in this context specifically (i.e. in respect to purchasing power of a currency), I was surprised that some people were hellbent on proving that deflation as well as inflation is related only to the money supply (as in shrinking or expanding)

[Betwrong]

What do you think, for example, of a society where people are encouraged to think more of today that of tomorrow? I agree that all the people can't (and shouldn't) live like that, but maybe for the vast majority this model can be a good choice. And by "encouraged" I don't mean giving them loans, basically making slaves out of them, that's what we have today. It should be something else, something that makes people happy with their lives right now without overspending

Most likely, it will be "incompatible with life"

And then someone will start blaming its failure on life itself. The point is, we can't do anything economically to change the current state conceptually.

It wasn't my intention to go off-topic, and I'm sorry that I didn't explain what I meant more precisely. By "happy" I meant economically happy. There are more happy people in North Korea than in Switzerland, in percentage terms, but that zombie-happiness has nothing to do with the economical one. People are starving in North Korea, and they are definitely not economically happy. Since we are in the Economy section, let's talk in economic terms only.

It is like trying to discover a new physical law in the nature, which is highly unlikely in this Universe. So our only choice is to change humans themselves (or wait for that to come about naturally). ~

Yet, Albert Einstein proposed such a law, and it has been working until today. If you would tell physicists in the end of 19th century that time is dependent on speed and on the distance from a heavy object, they'd call you crazy ... But, sorry, I'm going off topic again.

My main point is that I think maybe there can be a working economic model of Bitcoin-based economy, a new economic system for which inflation is not a mandatory component.

[Supercrypt]

I guess the question is not actually "will it work", its more like "what will it become". After all we can see how it could actually work, it works right now, we have over 200 billion dollars in marketcap, that is more than some of the smallest countries stock markets combined, which means bitcoin actually works. The question should be will bitcoin ever be used daily for regular stuff since it has a deflation based system.

Considering you can actually buy something for small but then bitcoin goes up so that payment you just made became a lot larger whereas a 10 thousand dollar worth of house 50 years ago worth over a million today. That is why I think bitcoin will replace stock markets and forex and stuff like that for regular people but it will have a huge problem with regular daily stuff payments.

[deisik]

What do you think, for example, of a society where people are encouraged to think more of today that of tomorrow? I agree that all the people can't (and shouldn't) live like that, but maybe for the vast majority this model can be a good choice. And by "encouraged" I don't mean giving them loans, basically making slaves out of them, that's what we have today. It should be something else, something that makes people happy with their lives right now without overspending

Most likely, it will be "incompatible with life"

And then someone will start blaming its failure on life itself. The point is, we can't do anything economically to change the current state conceptually.

It wasn't my intention to go off-topic, and I'm sorry that I didn't explain what I meant more precisely. By "happy" I meant economically happy. There are more happy people in North Korea than in Switzerland, in percentage terms, but that zombie-happiness has nothing to do with the economical one. People are starving in North Korea, and they are definitely not economically happy. Since we are in the Economy section, let's talk in economic terms only

But that's the problem

As it pretty much means there's is nothing to discuss in that case because any discussion in that direction assumes that some deep changes in the human nature have already occurred. But that implies we should first define these changes, i.e. what a fresh human should look like, metaphorically speaking, for the new laws of economics not to fall to pieces and be "compatible with life". Put simple, we should define that life (and its life forms). Otherwise, we will be talking about "economic communism"

It is like trying to discover a new physical law in the nature, which is highly unlikely in this Universe. So our only choice is to change humans themselves (or wait for that to come about naturally). ~

Yet, Albert Einstein proposed such a law, and it has been working until today. If you would tell physicists in the end of 19th century that time is dependent on speed and on the distance from a heavy object, they'd call you crazy ... But, sorry, I'm going off topic again

That was just an example

And while we are at it, he was not alone back then and he was definitely not the last one at that. The fundamental laws of quantum mechanics (e.g. Heisenberg's uncertainty principle) were discovered some time after "Albert Einstein had proposed such a law"

[Mig-23]

Currently, all major currencies issued by the government have natural inflation of about 2%.
Bitcoin, on the other hand, is much different, it, in fact, does not have any inflation but deflation.
Bitcoins are created less and less and the number of users does not affect the quantity of creation of Bitcoins.

Inflation on a low level promotes spending while deflation in Bitcoin promotes holding...

My question is, would an economy with a deflation based currency such as Bitcoin work?

Deflation of a currency is also not good for an economy and it can't be used as payment method as well.For that we have to get something stable price range for bitcoin and most of the people hoping that it will happen when most people adopted crypto currency as type of payment.

[el kaka22]

I think what people are mistaking is bitcoin doesn't have to be "currency" by itself, bitcoin could be like gold that supplements the economy but has the advantage of being used for purchases as well. I mean being able to purchase something with bitcoin doesn't have to be the main selling point for bitcoin, it is a great thing to have and I am glad we are capable of doing it specially online however it doesn't have to be the main topic.

Bitcoin could have that option but still could be like gold where people who have excess money that they saved over the years invest into bitcoin and wait for it to mature, you do not look at gold prices every single day unless you are some sort of margin day trader, any normal citizen in the world will look at it only when they need to cash out and bitcoin could be perfect for that.

[deisik]

I think what people are mistaking is bitcoin doesn't have to be "currency" by itself, bitcoin could be like gold that supplements the economy but has the advantage of being used for purchases as well. I mean being able to purchase something with bitcoin doesn't have to be the main selling point for bitcoin, it is a great thing to have and I am glad we are capable of doing it specially online however it doesn't have to be the main topic

But gold is not a currency, at least not anymore (or yet)

If we consider Bitcoin kind of digital gold, then the whole point in meaningless and there's essentially nothing to discuss because Bitcoin wouldn't be a currency either and thus cannot be "deflation-based currency", to begin with. In other words, it is assumed in this topic that Bitcoin is a currency and an appreciating one at that, i.e. constantly acquiring more and more purchasing power (though these two ideas seem to be a little at odds with each other)

[Betwrong]

~
It wasn't my intention to go off-topic, and I'm sorry that I didn't explain what I meant more precisely. By "happy" I meant economically happy. There are more happy people in North Korea than in Switzerland, in percentage terms, but that zombie-happiness has nothing to do with the economical one. People are starving in North Korea, and they are definitely not economically happy. Since we are in the Economy section, let's talk in economic terms only

But that's the problem

As it pretty much means there's is nothing to discuss in that case because any discussion in that direction assumes that some deep changes in the human nature have already occurred. But that implies we should first define these changes, i.e. what a fresh human should look like, metaphorically speaking, for the new laws of economics not to fall to pieces and be "compatible with life". Put simple, we should define that life (and its life forms). Otherwise, we will be talking about "economic communism"

I agree with you, we should be definitely taking into account what you said, while discussing whether it's possible to create an economy on a deflationary currency such as Bitcoin. No way I was thinking that it was an easy task. It can take years, but I think such a discussion must start at some point somewhere, and not on economy oriented forums where many people still have no idea what Bitcoin is, regarding it as a financial pyramid, but rather here, on bitcointalk, where, I'm sure, some good economists can take part in it.

[deisik]

~
It wasn't my intention to go off-topic, and I'm sorry that I didn't explain what I meant more precisely. By "happy" I meant economically happy. There are more happy people in North Korea than in Switzerland, in percentage terms, but that zombie-happiness has nothing to do with the economical one. People are starving in North Korea, and they are definitely not economically happy. Since we are in the Economy section, let's talk in economic terms only

But that's the problem

As it pretty much means there's is nothing to discuss in that case because any discussion in that direction assumes that some deep changes in the human nature have already occurred. But that implies we should first define these changes, i.e. what a fresh human should look like, metaphorically speaking, for the new laws of economics not to fall to pieces and be "compatible with life". Put simple, we should define that life (and its life forms). Otherwise, we will be talking about "economic communism"

I agree with you, we should be definitely taking into account what you said, while discussing whether it's possible to create an economy on a deflationary currency such as Bitcoin. No way I was thinking that it was an easy task. It can take years, but I think such a discussion must start at some point somewhere, and not on economy oriented forums where many people still have no idea what Bitcoin is, regarding it as a financial pyramid, but rather here, on bitcointalk, where, I'm sure, some good economists can take part in it

Actually, I don't mind people on economic forums discussing this matter

After all, it is their business what to discuss there and ain't ours, right? With that said, though, the matter is not just about Bitcoin as it is equally about any other hard asset out there. For example, gold would pretty well fit in as a deflationary (i.e. appreciating) currency. In other words, this topic is broader than it seems at first glance and definitely not limited or applicable to Bitcoin only (though Bitcoin would suit just fine as an illustrative example here)

On the other hand, here what we can discuss what we want including what changes humans need to be made to, even if purely hypothetically (let's call it speculative eugenics) in case we want such an economy to prosper in the long run as that will be entirely on topic and for this board exactly (Economics). But first we should decide on whether it will be a worthy discussion at all (other than idle talk)

[Betwrong]

~
Actually, I don't mind people on economic forums discussing this matter

After all, it is their business what to discuss there and ain't ours, right? With that said, though, the matter is not just about Bitcoin as it is equally about any other hard asset out there. For example, gold would pretty well fit in as a deflationary (i.e. appreciating) currency. In other words, this topic is broader than it seems at first glance and definitely not limited or applicable to Bitcoin only (though Bitcoin would suit just fine as an illustrative example here)

On the other hand, here what we can discuss what we want including what changes humans need to be made to, even if purely hypothetically (let's call it speculative eugenics) in case we want such an economy to prosper in the long run as that will be entirely on topic and for this board exactly (Economics). But first we should decide on whether it will be a worthy discussion at all (other than idle talk)

If no real economists will join this discussion, it will definitely look more like an idle talk, I agree. But I hope they will sooner or later. And I agree that they have the right to discuss on their forums anything they want. Wasn't saying anything against it actually.

Regarding gold, I believe there were gold-based economies and they worked okay in the past, but currently using gold as currency would be incredibly inconvenient, and for this reason gold has been used as such less and less.

[South Park]

Some define deflation as the decrease in the money supply and each day more bitcoin is being mined so this is not accurate, what happens is that eventually the rate at which bitcoin is being mined will be very small compared to the available supply but it will still count as inflation, now if what you are talking about is the amount of bitcoin lost, the truth is that those coins are not lost forever since someone could generate the private key in the future by accident and they could move and use those coins as they please, this is unlikely but there is a very small chance of that happening.

Who said deflation refers to decrease in supply? The concept of inflation/deflation is not proportional to supply rather it is related to price.
You can't say Bitcoin is inflationary because new bitcoins are mined everyday. When you compare the rise in demand of Bitcoin with rise in supply, you will notice that demand is rising at much more rate than supply. This is what causing surge in Bitcoin prices. Thus, the value of other commodities in terms of Bitcoin is decreasing as the demand is rising and new supply is shrinking with every halvening. This makes the Bitcoin deflationary.

This is why I said 'some', there are different definitions of what it is inflationary and deflationary and there are many like you that use it in that way and I am fine with it, if you use that criteria bitcoin is in fact deflationary and that is fine, I was just trying to bring another point of view in which inflation and deflation refers to the money supply and seen from that context bitcoin is still inflationary, even if in the future the rate of this growth in the money supply is very low.

[deisik]

~
Actually, I don't mind people on economic forums discussing this matter

After all, it is their business what to discuss there and ain't ours, right? With that said, though, the matter is not just about Bitcoin as it is equally about any other hard asset out there. For example, gold would pretty well fit in as a deflationary (i.e. appreciating) currency. In other words, this topic is broader than it seems at first glance and definitely not limited or applicable to Bitcoin only (though Bitcoin would suit just fine as an illustrative example here)

On the other hand, here what we can discuss what we want including what changes humans need to be made to, even if purely hypothetically (let's call it speculative eugenics) in case we want such an economy to prosper in the long run as that will be entirely on topic and for this board exactly (Economics). But first we should decide on whether it will be a worthy discussion at all (other than idle talk)

If no real economists will join this discussion, it will definitely look more like an idle talk, I agree. But I hope they will sooner or later. And I agree that they have the right to discuss on their forums anything they want. Wasn't saying anything against it actually

I'm that economist and I don't know how to tackle this problem

Regarding gold, I believe there were gold-based economies and they worked okay in the past, but currently using gold as currency would be incredibly inconvenient, and for this reason gold has been used as such less and less

It is not about inconvenience as such

You can easily create an economy based on gold without actually using physical gold as a means of exchange. In fact, this is how the gold standard worked in its last century with paper money being backed up by the precious metal. In other words, it is rather a technical matter. But what is not is the kind of the economy based on gold. Gold-based economies worked in the past because they had been mostly stuck in development with constant (more or less) population over literally centuries

[Artemis3]

Currently, all major currencies issued by the government have natural inflation of about 2%.
Bitcoin, on the other hand, is much different, it, in fact, does not have any inflation but deflation.
Bitcoins are created less and less and the number of users does not affect the quantity of creation of Bitcoins.

Inflation on a low level promotes spending while deflation in Bitcoin promotes holding...

My question is, would an economy with a deflation based currency such as Bitcoin work?

There is nothing "natural" about it, its induced, often by old fashioned money printing. Because of the reigning lies of the mainstream schools of economy, lately the Chicago one.

If you want to understand how deflationary currency can work, you have to drop those debit mongers and study the Austrian school. Then you will see how all fits into place.


Economics: The Austrian School vs. The Chicago School

[Marry Finch]

The economy of any state will not be able to work on the basis of cryptocurrency at all. Cryptocurrency and the economy of any state are in no way connected with each other. Cryptocurrency exists by itself, and the state's economy works on the basis of its national money. Cryptocurrency is not able to become the main types of money in the state. She very quickly unbalances the economy of the state. Cryptocurrency and national money of the states can go to the state only together.

[Harlot]

Contrary to popular belief deflation is not really a sign of a good economy in fact its still has the same economic impact as big inflations have. Why? Deflation is a sign that demand is decreasing in that country yes you might be increasing the value of your money but its a sign of economic imbalance that leads to that. A sign of a good economy shows inflation typically around to bearable numbers like 3-6% which shows signs of a healthy economy. BTC as a main currency of a country won't show signs of deflation nor inflation at all since its price isn't even based on that country's economy in that first place.

[Betwrong]

~
There is nothing "natural" about it, its induced, often by old fashioned money printing. Because of the reigning lies of the mainstream schools of economy, lately the Chicago one.

If you want to understand how deflationary currency can work, you have to drop those debit mongers and study the Austrian school. Then you will see how all fits into place.


Economics: The Austrian School vs. The Chicago School

Laissez Faire literally means allow to act, or, in other words, Let (people) do (as they choose) regarding market.

Austrian theory concludes that interventions as taxes, subsidies, mandates, and prohibitions, which interfere with peaceful and honest human action, reduce the productivity of economies and human well-being.

This is a very attractive theory, and I was its supporter for some time several years ago. The problem with it, though, is that it is incompatible with real life. Most people living in the cozy Western world, are unable to objectively assess the threat that comes from enemies of this (Western) world, and thus they don't want to pay taxes, big part of which, indeed, goes "on war". But the truth is that without the most modern weapons the Western world would not be able to fight its enemies effectively, and consequently would lose to some system no one would be happy about. ( By "no one" I mean people who love freedom and democracy. Of course dictators and their servants would be happy.) Same goes for deadly diseases, local gangs etc., we need taxation to fight all that. I think that market should be as free as possible, but we can not avoid taxation completely.

Yes, I understand that most part of our taxes is illegally distributed among the ruling elite, and something has to be done about that. But at the same time I realize that in the world we are living currently, no state would survive without taxation in the long run.

Regarding how deflationary currency can work, I posted earlier, that I don't think that inflation indeed encourages money spending, and think that deflationary currency can work perfectly in some economic model. So I agree with the Austrians in this regard.