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Author Topic: "A currency that increases in value is a terrible thing"  (Read 2991 times)
Ibian (OP)
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March 24, 2014, 12:52:04 PM
 #1

That's what the volatility complaint boils down to as far as I can tell. The question is: Why? Why do people think it is bad that the value of their holdings goes up? People are literally saying that for bitcoin to be able to be used as a currency the price needs to stop increasing. What the hell is that about?

Look inside yourself, and you will see that you are the bubble.
Dalmar
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March 24, 2014, 12:56:11 PM
 #2

Bitcoin's volatility is only a problem when prices consistently drop. When it's rising, nobody complains.


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chessnut
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March 24, 2014, 01:09:01 PM
 #3

But eventually it would reach a point where I'd like my dollars to stop getting less valuable..... (hypothetically speaking)

The greatest myth of economics is that inflation is a natural and good thing. they will believe it to the end.

TERA
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March 24, 2014, 01:12:05 PM
 #4

You're stuck in the mode of thinking of bitcoin from the single use case of a speculator buying bitcoins as an investment, like gold. Bitcoin is much more than this - it is a technology with many uses. You need to get past this and think of how bitcoin will be used in the future once it's big and has serious adoption.

The future of bitcoin is not supposed to be merely as a speculation or an investment. It is supposed to also be a payment gateway, store of value, and a form of programmable money, used by large enterprises.  When it comes to business and accounting, stability is in demand and very important for the books, especially when it comes to things like contracts and lending. The special features of bitcoin are the reason why bitcoin would be used, and not because the value of a bitcoin might go up. The change in value might not neccessarily be desired, especially if it creates an unfair advantage for a party in a transaction or messed up accounting books.

Perhaps more importantly, another point is that the price isn't limited to just going up - it can go DOWN also. Just because it has historically gone up for 4 years (which is not really that long), doesn't mean it's guaranteed to do that for the rest of eternity, or even over the next year. World-related and bitcoin-related events can change the trend at any time, and even the current price history is littered with 50-80% crashes and that horrible 2011 crash. You as a bull might have confidence that the value will be restored and that the trend will last forever, and will be willing to wait. However, this is completely unacceptable to a business and that is not how they want a currency to function - it makes it very unusable for them.
Ibian (OP)
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March 24, 2014, 01:29:21 PM
 #5

You're stuck in the mode of
Don't make assumptions. Instead try reading the WORDS in your screen. I specifically discuss bitcoin as a currency here. So I ask you, specifically: Why would you be upset that your purchasing power keeps increasing (assume for the sake of discussion that it does)?

Look inside yourself, and you will see that you are the bubble.
Zapffe
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March 24, 2014, 01:49:47 PM
 #6

You're stuck in the mode of
Don't make assumptions. Instead try reading the WORDS in your screen. I specifically discuss bitcoin as a currency here. So I ask you, specifically: Why would you be upset that your purchasing power keeps increasing (assume for the sake of discussion that it does)?


It's because price stability is THE quality aspect of every currency. Low quality currencies are those of high volatility.
The reason is simple, you can't use low quality currencies to do business. When your company gets billed X amount of bitcoins, but you have a 3 weeks to pay that bill, then it's a lottery if that bill increases in value or decreases. You can't run a business where most of the liquid asset prognosis are based on a lottery.

Currency stability is created by complex calculations, based on the relation of current available resources and money in circulation. This calculation will decide if it's necessary to add or remove money from the circulation, so available resources and circulating money is in constant balance. The better the balance is kept, the higher is the currencies quality and more stable the prices.
Bitcoin has a fixed coin supply, without any consideration given to available resources. Bitcoin can never be a quality currency because it just lacks the necessary complexity to keep the balance. If anyone wants to do business with bitcoin, then it's only possible through services like Bitpay, who offer fiat stability to support bitcoin.
There is a chance that we will see a new open sourced monetary system in the future, that could handle all the necessary complexities to create an real quality transparent currency. I certainly hope we do. But right now, bitcoin seems like a quality currency only to those, who have learned about finance from youtube videos.
Peter R
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March 24, 2014, 01:53:13 PM
 #7

Presently, we operate under a myth that mild inflation is a positive.  We believe that the mild deflation that a fixed supply currency would entail (once adoption equilibrium had been achieved) would be a bad thing and lead to decreased wealth in the aggregate.  

I disagree:

*******************

The quantity theory of money states that

   M V = P Q,         (1)

where M = money supply, V = money velocity, P = price level, Q = real output (goods, service, etc).  I think the vast majority of economists agree with this equation, although their opinion may differ on how it should be used.

It is common to associate a growing economy with growing real output, Q (i.e., more goods being produced, more services being used, etc.).  If you re-arrange Eq. (1) to solve for real output, Q, you get

   Q = M V / P .

So real output, Q, can grow three different ways (or more properly, it has 3 degrees of freedom):

   1.  Money supply, M,  can increase.
   2.  Money velocity, V, can increase (e.g., an increase in the rate that bitcoin-days are destroyed).
   3.  Price level, P, can decrease (the feared deflationary spiral).


What I wrote above can be understood as fact.  Now let's talk mythology.  (Myths can be useful as they align peoples' views, permitting communication from a common frame of reference.  However, it is important to question from time-to-time whether our shared myths are still useful).  

Presently, we operate under a myth that "deflation is bad."  This means that if we want to increase real output, Q, we must rule out Option #3:

   1.  Money supply, M,  can increase.
   2.  Money velocity, V, can increase.
   3.  Price level, P, can decrease. NOT ALLOWED DUE TO OUR SHARED MYTHS

According to our mythology, we must choose #1 or #2.  So the Fed lowers interest rates to encourage spending (increase V) and buys assets to increase its balance sheet (increase M).

I would argue that focusing on #1 and #2 tend to increase output, but the increase is mostly garbage output, not real and useful output.  Manipulating #1 and #2 cause us to exploit our natural resources at a faster rate but provides less real and useful output than if the economy was left to its own devices, also leaving less resources available for our children.  

*******************

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ErisDiscordia
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March 24, 2014, 01:54:47 PM
 #8

You're stuck in the mode of
Don't make assumptions. Instead try reading the WORDS in your screen. I specifically discuss bitcoin as a currency here. So I ask you, specifically: Why would you be upset that your purchasing power keeps increasing (assume for the sake of discussion that it does)?

to be fair, TERA does have a point. A currency which is not relatively stable in its value (be it by losing or gaining value) might be impractical for business and settlement of contracts.

Besides that most of the argument of "deflation = bad" seems to stem from the assumption, that without a currency which is constantly losing value, people will resort to *gasp* saving and not consuming beyond their means, which is supposed to be universally bad for any economy. Though that is only correct for a fiat economy based on debt with interest, which is demanding perpetual growth to avoid inflationary collapse.

To summarize: a currency that increases in value is a terrible thing for the current establishment, which is in charge of the current monetary system. It is a wonderful thing for its users and the biosphere in general, because it provides incentive to spend and consume less - which seems to be exactly what is needed now.

It's all bullshit. But bullshit makes the flowers grow and that's beautiful.
Ibian (OP)
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March 24, 2014, 02:01:00 PM
 #9

You're stuck in the mode of
Don't make assumptions. Instead try reading the WORDS in your screen. I specifically discuss bitcoin as a currency here. So I ask you, specifically: Why would you be upset that your purchasing power keeps increasing (assume for the sake of discussion that it does)?

to be fair, TERA does have a point. A currency which is not relatively stable in its value (be it by losing or gaining value) might be impractical for business and settlement of contracts.

Besides that most of the argument of "deflation = bad" seems to stem from the assumption, that without a currency which is constantly losing value, people will resort to *gasp* saving and not consuming beyond their means, which is supposed to be universally bad for any economy. Though that is only correct for a fiat economy based on debt with interest, which is demanding perpetual growth to avoid inflationary collapse.

To summarize: a currency that increases in value is a terrible thing for the current establishment, which is in charge of the current monetary system. It is a wonderful thing for its users and the biosphere in general, because it provides incentive to spend and consume less - which seems to be exactly what is needed now.
Sounds reasonable. But if we can assume that most posters here are not part of the establishment, why then are so many people opposed to it? Simple brainwashing? That answer seems a little too easy somehow.

Look inside yourself, and you will see that you are the bubble.
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March 24, 2014, 02:06:57 PM
 #10

Presently, we operate under a myth that mild inflation is a positive.  We believe that the mild deflation that a fixed supply currency would entail (once adoption equilibrium had been achieved) would be a bad thing and lead to decreased wealth in the aggregate.  

I disagree:

*******************

The quantity theory of money states that

   M V = P Q,         (1)

where M = money supply, V = money velocity, P = price level, Q = real output (goods, service, etc).  I think the vast majority of economists agree with this equation, although their opinion may differ on how it should be used.

It is common to associate a growing economy with growing real output, Q (i.e., more goods being produced, more services being used, etc.).  If you re-arrange Eq. (1) to solve for real output, Q, you get

   Q = M V / P .

So real output, Q, can grow three different ways (or more properly, it has 3 degrees of freedom):

   1.  Money supply, M,  can increase (what you said).
   2.  Money velocity, V, can increase (e.g., an increase in the rate that bitcoin-days are destroyed)
   3.  Price level, P, can decrease (the feared deflationary spiral).


What I wrote above can be understood as fact.  Now let's talk mythology.  (Myths can be useful as they align peoples' views, permitting communication from a common frame of reference.  However, it is important to question from time-to-time whether our shared myths are still useful).  

Presently, we operate under a myth that "deflation is bad."  This means that if we want to increase real output, Q, we must rule out Option #3:

   1.  Money supply, M,  can increase.
   2.  Money velocity, V, can increase.
   3.  Price level, P, can decrease. NOT ALLOWED DUE TO OUR SHARED MYTHS

According to our mythology, we must choose #1 or #2.  So the Fed lowers interest rates to encourage spending (increase V) and buys assets to increase its balance sheet (increase M).

I would argue that focusing on #1 and #2 tend to increase output, but the increase is mostly garbage output, not real and useful output.  Manipulating #1 and #2 cause us to exploit our natural resources at a faster rate but provides less real and useful output than if the economy was left to its own devices, also leaving less resources available for our children.  But this is a subject for another longer post….

*******************


Stable inflation didn't cause the financial problems that we see in US. The problem is not in the school of thought, but in lose management principles and corruption. Greenspan was the one who started promoting that everyone should just trust the private sector of finance, without any regulation or supervision. And he was the one who promoted the idea that the private sector of finance should have safety-nets for all the risks it took. These management principles created a careless environment, where certain privileged people could only win even if they lost. And all of course at the expense of everyone else.

It's funny to read some of the posts here, who are anti-Fed and pro-ultra liberal at the same time. The ultra liberal principles allowed all the crooks to leech on everyone else, because there were no rules why they shouldn't do this. This is the same reason that has ruined any trust towards the bitcoin market system. Most of the community were sheep who thought that the free market will take care of everything, just so they could justify their passiveness. But the free market can't handle corruption, and if there isn't enough supervision and regulations then you can be sure that crooks will exploit the free market in their favor.
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March 24, 2014, 02:14:22 PM
 #11


Stable inflation didn't cause the financial problems that we see in US. The problem is not in the school of thought, but in lose management principles and corruption.



I simply argued that we operate under a myth that "deflation is bad."  

I made no claim that inflation caused "the financial problems that we see in US."  What caused the problems in the US financial system is the same thing that's been causing problems in the bitcoin financial system: trust in third parties.

In the US dollar financial system trust is required; in the bitcoin financial system trust is optional.  

Run Bitcoin Unlimited (www.bitcoinunlimited.info)
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March 24, 2014, 02:20:41 PM
 #12

For businesses to use bitcoin as a mainstream payment gateway, it's value (market cap) and liquidity is far from sufficient, however large it might seem.  If it reaches stability too early and too low it will not be able to achieve that purpose.  That is why I believe it will be mostly speculative for a few more years, and hopefully increase in value a lot more before it stabilizes.

Just my noob opinion.
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March 24, 2014, 02:23:14 PM
 #13


Stable inflation didn't cause the financial problems that we see in US. The problem is not in the school of thought, but in lose management principles and corruption.



I simply argued that we operate under a myth that "deflation is bad."  

I made no claim that inflation caused "the financial problems that we see in US."  What caused the problems in the US financial system is the same thing that's been causing problems in the bitcoin financial system: trust in third parties.

In the US dollar financial system trust is required; in the bitcoin financial system trust it is optional.  


While I agree that stable deflation (1% year) could be done without heavy drawbacks, then it's still not as efficient as with stable inflation. (with bitcoin there is no stability with deflation either). In the modern world, the major powers are in a constant economic battle with each other. If deflation would be more efficient, then you could be sure that they would adopt it just to have an edge over their competition. The world isn't stupid and bitcointalk isn't the community of tortured geniuses, who are the only ones who know how to do it right.
Without trust, bitcoin will just die. Trust is the main thing that makes people put their wealth into bitcoin. Without trust there will be no wealth in bitcoin, and it will be just a fun innovative play money.
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March 24, 2014, 02:30:45 PM
Last edit: March 24, 2014, 02:50:38 PM by Zapffe
 #14

For businesses to use bitcoin as a mainstream payment gateway, it's value (market cap) and liquidity is far from sufficient, however large it might seem.  If it reaches stability too early and too low it will not be able to achieve that purpose.  That is why I believe it will be mostly speculative for a few more years, and hopefully increase in value a lot more before it stabilizes.

Just my noob opinion.


It isn't probable that the increased market cap will create stability. It will only attract players with deeper pockets and better knowledge on how to manipulate the market. The problem is that the main attraction towards bitcoin is speculation, so there will always be volatility, that is the outcome of speculative play. Right now we have these "whales" who play with millions of dollars. But in the future, we would have large institution playing the same game but only with billions and also with better ability to understand market manipulation.
Only way to lose this instability is for it to be unattractive for speculative play.
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March 24, 2014, 02:31:46 PM
 #15

While I agree that stable deflation (1% year) could be done without heavy drawbacks, then it's still not as efficient as with stable inflation. (with bitcoin there is no stability with deflation either). In the modern world, the major powers are in a constant economic battle with each other. If deflation would be more efficient, then you could be sure that they would adopt it just to have an edge over their competition.

I agree that deflation would be less "efficient" for the "major powers" who presently have first access to the newly printed money and that this is why we haven't adopted it.    


Without trust, bitcoin will just die. Trust is the main thing that makes people put their wealth into bitcoin. Without trust there will be no wealth in bitcoin, and it will be just a fun innovative play money.

I agree that trust is important.  A society that values honesty and integrity will be happier and more productive than a society that doesn't.  We want to trust people and have them trust us back, because business and relationships are more efficient after trust has been earned.  

I am only making the point that with bitcoin trust is optional.  

Would you rather have a financial system where trust in third-parties and authorities is required (whether you feel they've earned it or not), or one where trust is optional and at your discretion?  

Run Bitcoin Unlimited (www.bitcoinunlimited.info)
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March 24, 2014, 02:46:19 PM
Last edit: March 24, 2014, 03:22:23 PM by Zapffe
 #16

While I agree that stable deflation (1% year) could be done without heavy drawbacks, then it's still not as efficient as with stable inflation. (with bitcoin there is no stability with deflation either). In the modern world, the major powers are in a constant economic battle with each other. If deflation would be more efficient, then you could be sure that they would adopt it just to have an edge over their competition.

I agree that deflation would be less "efficient" for the "major powers" who presently have first access to the newly printed money and that this is why we haven't adopted it.    


Without trust, bitcoin will just die. Trust is the main thing that makes people put their wealth into bitcoin. Without trust there will be no wealth in bitcoin, and it will be just a fun innovative play money.

I agree that trust is important.  A society that values honesty and integrity will be happier and more productive than a society that doesn't.  We want to trust people and have them trust us back, because business and relationships are more efficient after trust has been earned.  

I am only making the point that with bitcoin trust is optional.  

Would you rather have a financial system where trust in third-parties and authorities is required (whether you feel they've earned it or not), or one where trust is optional and at your discretion?  

I think that our main disagreement comes between your opinion that inflation creates garbage output, and my opinion that inflation has little to do with garbage output, but the problem is in management supervision and corruption.
That is the main reason why more developed countries, with better education and tradition, can handle inflation better. They can handle the fast money flow, while still keeping constructive directions in production. When you throw a lot of money at fools, then they can't do anything constructive with it, and they are just wasteful.

I think that a rule emerges there, that better developed countries can use higher inflation where deflation could fit to less developed countries.

I'm totally pro privatized monetary systems, where people could choose the currency they use without the restrictions of legal tender. Just bitcoin itself is far from something that could be trusted. The idea has a lot of potential for the future though.
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March 24, 2014, 03:36:12 PM
Last edit: March 24, 2014, 03:59:37 PM by Peter R
 #17


I think that our main disagreement comes between your opinion that inflation creates garbage output, and my opinion that inflation has little to do with garbage output, but the problem is in management supervision and corruption.


Perhaps there are two disagreements here:

1.  Is a mildly-inflating currency better or worse than a fixed-supply currency?

2.  It is possible to inflate a currency without having to trust a central planner?

The answer to #2 is "YES".  If you modify bitcoin to have a constant % block reward then what you get is a forever-inflating currency.  But if this were the case, we would also know for a fact that the freshly-printed money would go entirely to garbage output (miners will simply consume electricity [natural resources] faster than is required to secure the network).  

So, to have any hope of not wasting the extra money inflation, you must argue that the central planner is not only wiser than the free-market, but vastly wiser to turn a net waste into a net gain.  This is a tenable position in my opinion, and I think the answer to #1 is "WORSE."


Hmm, maybe we can put this into a theorem.  Still half-baked, but here's a start:

Peter R's Theorem on Monetary Inflation for Fully-Adopted Currencies

Money created by a trustless currency by way of inflation goes entirely to exploiting natural resources.  

Corollary #1

An inflating currency that is not provably inferior to its fixed-supply equivalent requires trust in a central planner.

Corollary #2

An inflating currency is superior to its fixed-supply equivalent if and only if the unproveable efficiencies made possible by the wisdom of the central planners outweighs the loss of monetary freedom that placing trust in central planners entails.






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proudhon
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March 24, 2014, 03:44:53 PM
 #18

Presently, we operate under a myth that mild inflation is a positive.  We believe that the mild deflation that a fixed supply currency would entail (once adoption equilibrium had been achieved) would be a bad thing and lead to decreased wealth in the aggregate.  

I disagree:

*******************

The quantity theory of money states that

   M V = P Q,         (1)

where M = money supply, V = money velocity, P = price level, Q = real output (goods, service, etc).  I think the vast majority of economists agree with this equation, although their opinion may differ on how it should be used.

It is common to associate a growing economy with growing real output, Q (i.e., more goods being produced, more services being used, etc.).  If you re-arrange Eq. (1) to solve for real output, Q, you get

   Q = M V / P .

So real output, Q, can grow three different ways (or more properly, it has 3 degrees of freedom):

   1.  Money supply, M,  can increase (what you said).
   2.  Money velocity, V, can increase (e.g., an increase in the rate that bitcoin-days are destroyed)
   3.  Price level, P, can decrease (the feared deflationary spiral).


What I wrote above can be understood as fact.  Now let's talk mythology.  (Myths can be useful as they align peoples' views, permitting communication from a common frame of reference.  However, it is important to question from time-to-time whether our shared myths are still useful).  

Presently, we operate under a myth that "deflation is bad."  This means that if we want to increase real output, Q, we must rule out Option #3:

   1.  Money supply, M,  can increase.
   2.  Money velocity, V, can increase.
   3.  Price level, P, can decrease. NOT ALLOWED DUE TO OUR SHARED MYTHS

According to our mythology, we must choose #1 or #2.  So the Fed lowers interest rates to encourage spending (increase V) and buys assets to increase its balance sheet (increase M).

I would argue that focusing on #1 and #2 tend to increase output, but the increase is mostly garbage output, not real and useful output.  Manipulating #1 and #2 cause us to exploit our natural resources at a faster rate but provides less real and useful output than if the economy was left to its own devices, also leaving less resources available for our children.  But this is a subject for another longer post….

*******************


Stable inflation didn't cause the financial problems that we see in US. The problem is not in the school of thought, but in lose management principles and corruption. Greenspan was the one who started promoting that everyone should just trust the private sector of finance, without any regulation or supervision. And he was the one who promoted the idea that the private sector of finance should have safety-nets for all the risks it took. These management principles created a careless environment, where certain privileged people could only win even if they lost. And all of course at the expense of everyone else.

It's funny to read some of the posts here, who are anti-Fed and pro-ultra liberal at the same time. The ultra liberal principles allowed all the crooks to leech on everyone else, because there were no rules why they shouldn't do this. This is the same reason that has ruined any trust towards the bitcoin market system. Most of the community were sheep who thought that the free market will take care of everything, just so they could justify their passiveness. But the free market can't handle corruption, and if there isn't enough supervision and regulations then you can be sure that crooks will exploit the free market in their favor.

Peter,

It may be that under historic conditions, deflation does tend to be bad.  Though, I wonder conditions have changed sufficiently to mitigate its historical "badness".  Specifically, I wonder if being able to price goods in real-time helps mitigate deflation's badness.  Is it possible to assess the extent to which the inability to price in real-time affected historical cases of depression from deflation?  Just thinking out loud here. 

Bitcoin Fact: the price of bitcoin will not be greater than $70k for more than 25 consecutive days at any point in the rest of recorded human history.
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March 24, 2014, 04:52:34 PM
Last edit: March 24, 2014, 06:12:32 PM by Peter R
 #19

It may be that under historic conditions, deflation does tend to be bad.  Though, I wonder conditions have changed sufficiently to mitigate its historical "badness".  Specifically, I wonder if being able to price goods in real-time helps mitigate deflation's badness.  Is it possible to assess the extent to which the inability to price in real-time affected historical cases of depression from deflation?  Just thinking out loud here.  

Thanks for the question, Proudhon.

For a myth to be adopted by a society, it must have at one point in time been useful.  Between 1700 - 1900, England was on a hard-money standard and price levels over these two centuries were fairly stable (although sometimes volatile).  The "deflation is bad" myth had not yet been adopted1.

Around the turn of the last century is when the "deflation is bad" myth truly took hold.  Our productive abilities were increasing extremely fast--so much could be produced with so little human input.  We had the factories in place to increase real output Q (from M V = P Q) and the will of the capitalists to push technology forward, but with a fixed-supply currency the only way Q could increase was if P decreased.  

Like you said, we didn't have the internet back then and efficiently communicating real-time prices was difficult.  Q increased only modestly, but since productivity had improved to such an extent, there was less work available an unemployment increased during the Great Depression.  And thus was born the myth that "inflation is good."  The Fed increased the money supply M (by devaluing the dollar vs gold), which allowed Q to reach its potential without the fast drop in P that would have been required due to mankind's rapid advances in productivity.

The first thing the increased Q went to was WWII.  We could produce so much stuff that we had to destroy it in order to keep the people employed!

But this got the people working, validated the "inflation is good" myth, and gave birth to our modern consumer economy.  Our consumer economy is a relic from the Great Depression that says that if we don't consume our resources fast enough then people will lose jobs and will be back in a depression.  

Our "deflation is bad" myth stems from our grandparents' inability to communicate real-time prices in 1933 efficiently enough to just let P fall to where it needed to be.  


1But already early pioneers in anarchism like your namesake were working towards ways to provided fair access to capital for the people.  Pierre-Joseph Proudhon "unsuccessfully tried to create a national bank, to be funded by what became an abortive attempt at an income tax on capitalists and shareholders...it would have given interest-free loans."  I think Proudhon saw the unrealized potential in the people to increase real output Q if they only had equitable access to money.  [Wikipedia]

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March 24, 2014, 05:04:20 PM
 #20

It may be that under historic conditions, deflation does tend to be bad.  Though, I wonder conditions have changed sufficiently to mitigate its historical "badness".  Specifically, I wonder if being able to price goods in real-time helps mitigate deflation's badness.  Is it possible to assess the extent to which the inability to price in real-time affected historical cases of depression from deflation?  Just thinking out loud here.  

Thanks for the question, Proudhon.

For a myth to be adopted by a society, it must have at one point in time been useful.  Between 1700 - 1900, England was on a hard-money standard and price levels over these two centuries were fairly stable (although sometimes volatile).  The "deflation is bad" myth had not yet been adopted1.

Around the turn of the last century is when the "deflation is bad" myth truly took hold.  Our productive abilities were increasing extremely fast--so much could be produced with so little human input.  We had the factories in place to increase real output Q (from M V = P Q) and the will of the capitalists to push technology forward, but with a fixed-supply currency the only way Q could increase was if P decreased.  

Like you said, we didn't have the internet back then and efficiently communicating real-time prices was difficult.  Q increased only modestly, but since productivity had improved, there was less work available an unemployment increased during the Great Depression.  And thus was born the myth that "inflation is good."  The Fed increased the money supply M (by devaluing the dollar vs gold), which allowed Q to reach its potential without the fast drop in P that would have been required due to mankind's rapid advances in productivity.

The first thing the increased Q went to was WWII.  We could produce so much stuff that we had to destroy it in order to keep the people employed!

But this got the people working, validated the "inflation is good" myth, and gave birth to our modern consumer economy.  Our consumer economy is a relic from the Great Depression that says that if we don't consume our resources fast enough then people will lose jobs and will be back in a depression.  

Our "deflation is bad" myth stems from our grandparents' inability to communicate real-time prices in 1933 efficiently enough to just let P fall to where it needed to be.  


1But already early pioneers in anarchism like your namesake were working towards ways to provided fair access to capital for the people.  Pierre-Joseph Proudhon "unsuccessfully tried to create a national bank, to be funded by what became an abortive attempt at an income tax on capitalists and shareholders...it would have given interest-free loans."  I think Proudhon saw the unrealized potential in the people to increase real output Q if they only had equitable access to money.  [Wikipedia]

Wow, thank you, Peter.  Very insightful response.

Bitcoin Fact: the price of bitcoin will not be greater than $70k for more than 25 consecutive days at any point in the rest of recorded human history.
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