Consumerism and Destructive Behavior: A Case against ANY Monetary Inflation

[d5000]

In a perfect world inflation would be around 0.5 % a little surplus when more kids get born than people die.

What would be your rationale for the "little surplus" for inflation when there is population growth?

I can only imagine that rationale for a money supply increase, but not really for inflation, i.e. price growth.

My own opinion is that money supply growth is still healthy if it grows roughly at the same rate than GDP, or alternative, wealth (if there are big differences between both growth rates), and population growth would mean often also a GDP growth. But that would not need rising prices.

Not healthy is playing with inflation, deflation, recession and devaluations for means to become more competitive.

I would agree with you about the "playing" point, if it was only a single Central Bank who experiments from one moment to the other with a deflationary strategy, without any preparation. But I think the most realistic scenario for a deflationary economy is just ... Bitcoin (and maybe some other cryptos like Monero) becoming more used in commercial transactions. This would be a very gradual process.

Once crypto (including Lightning, altcoins etc.) "accrues" a significant market share for the world's transactions (e.g. 5%) and thus its volatility lowers further we would see the first inflation estimations in Bitcoin perhaps. We would have two measures co-existing for some time.

This could create a domino effect if people realize that they're better off using Bitcoin. The calculations to see if you're "better off" would be complex at first, because the positive effects of deflation would have to wait until the market share is quite high. But if you personally already adjust your consumption behaviour to your "deflating" currency (=BTC) and only consume the things your really need (without fears of devaluation), then you would benefit from the beginning on.

[Ambatman]

But I think the most realistic scenario for a deflationary economy is just ... Bitcoin (and maybe some other cryptos like Monero) becoming more used in commercial transactions. This would be a very gradual process.

I talked about something similar in the other forum
Sadly the response was poor.

So from what you proposing Monetary policy becomes obsolete
And Government would have to rely on fiscal policy like tax
Which imo would encourage them to ramp up regulations.
With Government I don't believe we would still have 'Bitcoin' or it been used correctly.

Not to mention the existence of War
I believe the fact that the Gold standard limited how they could fund war was among the reason it was changed.

[d5000]

So from what you proposing Monetary policy becomes obsolete

Indeed, monetary policy would become less important, although not completely obsolete perhaps. There could be still situations where the economy needs some stimulation via extra credits. Fiat could become a kind of altcoin "backed by the State's word of mouth".

And Government would have to rely on fiscal policy like tax

Only if the government has resorted to overt "financing by printing" like in Argentina.

Which imo would encourage them to ramp up regulations.

If the results of the change are good for the economy of the country, and good for the people, would a politician dare to restrict it?

I often read here assumptions about governments that I think are incorrect. Power abuse exists and is widespread. But the reason isn't some "elite" wanting to "suppress" the general people, but simply politicians extracting the most benefit they can, and staying in power the most time possible. And thus: If a certain change like a major Bitcoin adoption is popular, then any politician who has a sane mind (and is egoist enough) will very likely embrace it, even if it's otherwise a corrupt, malicious person. Because it will help them win the next election.

There could be challenges of course if there are economic turbulences, like industries closing due to deflation, and such. In this case I could indeed expect regulations trying to restrict Bitcoin usage. I think however this is unlikely. If there is a dynamic where people use Bitcoin increasingly, then they're probably benefitting, and this is quite incompatible with a suffering economy.

Not to mention the existence of War

Personal opinion, but I think that in most countries people are becoming aware that most wars are utterly stupid. What can you achieve attacking another country? And if it's "something", like natural resources, does it really outweigh the cost of "conquering" and "rebuilding"?

As soon as this opinion becomes generalized even in nationalistic-chauvinist dictatorships like Russia (where propaganda still makes many people think that war can be "profitable" or "good"), war will become unpopular everywhere. And so no government could actually benefit from it.

[WillyAp]

So from what you proposing Monetary policy becomes obsolete

The world does not work in an on and off mode.
Windows 95 went out decades ago, and it is used today.
Most popular things are phased out gradually, they don't die they live on.

You still have beta max users. Videothek are operational in some parts of the world. 
No absolutes besides the human dead.

The British pound lost reserve status, still the pound is a legal tender in several countries.
One needs to see the shades of grey. The colors the world is running on.

[Ambatman]

Indeed, monetary policy would become less important, although not completely obsolete perhaps. There could be still situations where the economy needs some stimulation via extra credits. Fiat could become a kind of altcoin "backed by the State's word of mouth".

Then Gresham law starts coming into play
And Bitcoin would become more like a store of value
While Fiat would be spent though the impact they would have on inflation would be less than today.

And with a leeway like this the Gold standard drama would repeat and Fiat would have to be the dominant one

If the results of the change are good for the economy of the country, and good for the people, would a politician dare to restrict it?

maybe I've been influenced by my country's government
Yes they would
Most times they care more about what they would gain not the people.

Because it will help them win the next election.

and what happens after?

What can you achieve attacking another country? And if it's "something", like natural resources, does it really outweigh the cost of "conquering" and "rebuilding"?

The cost? In today's economy just print more while controlling interest rate. .

[davis196]

My last statement here would be that inflation promotes all kind of irrational behavior, dangerous consumerism and degeneracy. We could split this into a separate thread entirely and discuss where appropriate.

I believe that consumerism and degeneracy would exist even if the inflation levels were low. Consumerism and living beyond your means is massively promoted by all the marketing teams of the big corporations. Consumerism and degeneracy are being promoted by the pop-culture in itself(Holly Wood and all that sh*t). The corporate "fat cats" wants desperate consumers, who are drowning in debt. Debt is the perfect form of slavery. The working class have to work more and consume more. This is what drives capitalism to the next level.
Monetary inflation is just a byproduct of the fiat money system. The central banks have an access to a "credit card without limits". Why not use it, when you have it?

[d5000]

And with a leeway like this the Gold standard drama would repeat and Fiat would have to be the dominant one

Gresham's law is not a law of natural science but an observation of conditions of the past. In the "prediction" I outlined above, where Bitcoin gradually increases its market share, the conditions would be different from a typical situation where Gresham's law typically would be a thing.

The clue is that for that to happen, a growing "Bitcoin sector" must emerge, i.e. a sector of the economy where the circulation is based mostly on Bitcoin. So the income of the people working in this sector, be it businesspeople or employees, would also be in Bitcoin.

How can this be achieved? In previous posts I wrote that merchants could be the drivers of the change. Once Bitcoin volatility is low enough that hedging costs become lower than the costs merchants have to afford when managing fiat (payment systems like VISA/Mastercard/Amex, or cash management costs) then merchants would always prefer payments in Bitcoin and would thus attempt to force them, e.g. by offering discounts.

This would mean that we have a force that is working against Gresham's law, both based on math. And it has to be seen which one is stronger.

In the case of government stimulation via fiat in a Bitcoin-dominant economy, we could speculate that fiat money is only temporarily needed. Once the necessity decreases, governments/central banks could reduce the fiat circulation again. We could speculate that inflation rate then could be fluctuating between -2%/year in low-fiat phases and 0%-0,5% in phases with government stimulation. That would all in all be much better than now (if we follow the argumentation in the OP).

Most times they care more about what they would gain not the people.

Yes, but what would they gain in restricting it? They would only diminish the voter potential. There must be a lot of corruption from the TradFi sector to make up for an election loss.

and what happens after?

The next election (well he may have some time, like a year or so, to do "selfish" measures, but above all if you have municipal/provincial/midterm elections in-between, a single party/government can't do that much against the will of the majorities, at least in democracies.)

The cost? In today's economy just print more while controlling interest rate. .

With long term effects on inflation and employment which are difficult to justify once people are aware of the mechanisms. Still they aren't, so the "war is good for us if we win" narrative still can work for Putin and friends.

[Satofan44]

The British pound lost reserve status, still the pound is a legal tender in several countries.
One needs to see the shades of grey. The colors the world is running on.

The world is complicated but most often in bad ways, very rarely in good ways. You bring up a good example. We know that the legal tender status is primarily due to historical reasons, many of which involve force and butchering people. The legal tender stuff is hard to get past, for several reasons. One that it could be economic suicide. Establishing your own currency, but one that does not collapse shortly or hyperinflate is very difficult. Secondly, there are geopolitical implications. I am sure that some of these countries would want to get away from the pound or the dollar but it is risky. I don't think that the Western world would just stand by and do nothing. Often they act like they respect the rights of others, but they really don't. There would be consequences. What exactly are going to be the consequences can not be said in advance, it depends a lot on the exact circumstances and the involved parties.

In the case of government stimulation via fiat in a Bitcoin-dominant economy, we could speculate that fiat money is only temporarily needed. Once the necessity decreases, governments/central banks could reduce the fiat circulation again. We could speculate that inflation rate then could be fluctuating between -2%/year in low-fiat phases and 0%-0,5% in phases with government stimulation. That would all in all be much better than now (if we follow the argumentation in the OP).

I wish that we could build a simulation for this, I am really interested in this though experiment.

Most times they care more about what they would gain not the people.

Yes, but what would they gain in restricting it? They would only diminish the voter potential. There must be a lot of corruption from the TradFi sector to make up for an election loss.

I think that he is talking about things in general, and he is definitely right on this. If you look at the concentration of wealth in the last 20 to 40 years, it is clear that very little is being done to balance the situation out. Meanwhile middle class people are paying an effective tax rate of 70 to 90% if you sum in every single tax that is being used. Of course it depends on where you live exactly, but generally we look at the worst cases in the western world. They never talk about collecting less taxes, it is always about collecting even more. Most of the negative impact is on the poor and middle class. These problems may seem complicated to fully solve, but very little is done. Many clear ways of evading taxes that only work for the really wealthy have been open for a long time, addressing those is almost trivial.

The cost? In today's economy just print more while controlling interest rate. .

With long term effects on inflation and employment which are difficult to justify once people are aware of the mechanisms. Still they aren't, so the "war is good for us if we win" narrative still can work for Putin and friends.

I think you are a bit too positive on the Western world. The West will wage war too, we just don't know how it will look like. If China expands its territory in Asia, that gives an even stronger incentive for the US to expand its territory on America. Europe on the other hand may head into a civil war, and so on. In my honest opinion, the main reason that the US isn't invading already its neighbors has nothing to do with rules of law or respecting sovereignty. The primary reason is that its markets would crash hard. However, with the world being in a delicate balance as it is and with geopolitical challenges this may not always be true. There may come ways in which to enter a war with a mild impact on the stock market or there may come a time where the perception is that entering a war would even be beneficial (do it now rather than later at a higher cost style, since market price in the future).

[BlackHatCoiner]

This thread will make most economists and economics graduates shake. 

Sometimes it is claimed that deflation discourages investment and spending and that people will speculate on further price declines and refuse to engage in these behaviors. However, this is essentially taking and twisting a benefit into a negative. Deflation encourages smart consumption and investing, whereas inflation encourages reckless spending and investing. Obviously smart consumption and investing will be more slow, and often will lead to someone delaying an investment as consumers consider longer whether the potential investment/spending is worth it.

Also, if you think about it, you can't have deflation, hereby a "decrease in the prices of goods and services", without investments. Investments are capital placed and maintained in such a manner that it used to produce goods and services. You can't have deflation without goods being produced at a faster rate than the money supply. If capitalists liquidate their capital to buy bitcoin, at some point, goods and services would become scarcer, and the bitcoin would lose its purchasing power in comparison. So, it's impossible to imagine living in an economy with deflationary money (bitcoin) and having no investments taking place.

[Satofan44]

This thread will make most economists and economics graduates shake. 

That is the unfortunate state of things in recent times, many universities are degree-printing mechanisms that are extremely dogmatic. This is less true where objective sciences are studied, but it is quite true in social sciences like economics. If you look at their courses and course contents, you will see that very few contrarian arguments are ever really explored except as some historical relics -- how economic thinking evolved and things like that. Often you won't be allowed to write a thesis that goes against the status quo opinion or you will be punished with a bad grade if you really insist. The same will happen if you try to get published. That is why most of the papers are essentially just repeating the same old arguments and taking over the same assumptions from others.

The universities in the old age, while being restrictive and not available to most, were not as dogmatic as they are now. That is why we had different periods that could be considered golden ages for innovative thought. Nowadays we have the boring same old stuff. Democratization of access, while being championed by many small-brains as a benefit for everything, often leads to the worsening of everything (it is a benefit for some things, but not for others). You can see this effect happening in the shitcoin market. As it became trivial for any person to print a token on platforms like Pump.fun using a nice GUI, it turned into a degenerate scam fest where everyone is trying to scam everyone with as little effort as possible. At some point people even started threatening to kill themselves if others didn't buy their tokens. Obviously, not being allowed by a centralized decision maker -- or much better through a lack of technical expertise needed to issue a token -- would have led to much better outcomes. Anyway, this topic could be its own thread.

Sometimes it is claimed that deflation discourages investment and spending and that people will speculate on further price declines and refuse to engage in these behaviors. However, this is essentially taking and twisting a benefit into a negative. Deflation encourages smart consumption and investing, whereas inflation encourages reckless spending and investing. Obviously smart consumption and investing will be more slow, and often will lead to someone delaying an investment as consumers consider longer whether the potential investment/spending is worth it.

Also, if you think about it, you can't have deflation, hereby a "decrease in the prices of goods and services", without investments. Investments are capital placed and maintained in such a manner that it used to produce goods and services. You can't have deflation without goods being produced at a faster rate than the money supply. If capitalists liquidate their capital to buy bitcoin, at some point, goods and services would become scarcer, and the bitcoin would lose its purchasing power in comparison. So, it's impossible to imagine living in an economy with deflationary money (bitcoin) and having no investments taking place.

Now as I think about what you've written here, capital going away from productive industries and into non-productive assets or simply for speculation leads to a reduction in produced goods which drives up price inflation. Deflation would reverse this trend I believe, it would pull more and more capital from speculative ventures and into productive ones. If you can invest only once in 10 years you will make sure that it is the best possible investment that you could make. If you can invest 100 times per year, you are most likely going to move capital in all kinds of junk investments.

Any reasonable market would have price adaptations. If you think about the current housing market, one primary reason why it is overpriced is because there are many large entities that are able to park capital into non-productive assets like this and wait. This dynamic would most likely change in a deflationary environment, it would pull the capital away from these and we would see less distorted prices -- where supply and demand actually meet, real demand as in demand for living in those houses and not speculative demand.

[Ambatman]

In the case of government stimulation via fiat in a Bitcoin-dominant economy, we could speculate that fiat money is only temporarily needed. Once the necessity decreases, governments/central banks could reduce the fiat circulation again. We could speculate that inflation rate then could be fluctuating between -2%/year in low-fiat phases and 0%-0,5% in phases with government stimulation. That would all in all be much better than now (if we follow the argumentation in the OP).

I believe this neglects the impact on debt and also undermines how hard it is the contract compare to expand
What's the need of the Central Bank or interest rate as Fiat is temporary withdrawn?
Well they could shift more into Bitcoin regulations (bad)
Would the government let such occur?
Maybe make Fiat more like an instrument to curb crisis with an end date
Rather than money but this is assuming a government that is rational

Okay maybe I'm a little pessimistic in outlook but we dealing with humans here not machines

[BlackHatCoiner]

That is why most of the papers are essentially just repeating the same old arguments and taking over the same assumptions from others.

Another consequence of having state-funded universities is that economists are getting paid by the fiat printer to write and publish useless papers nobody reads. The academics of fiat economics is just bullshit that not even the journals that supposedly read them to approve them, engage in. This thing would absolutely not survive without a fiat printer.

This dynamic would most likely change in a deflationary environment, it would pull the capital away from these and we would see less distorted prices -- where supply and demand actually meet, real demand as in demand for living in those houses and not speculative demand.

Exactly, housing would stop being seen as a capital good, and it'd return back to consumption only. It wouldn't be impossible for the average young man to work a few years and afford a new house. Definitely a lot easier than now that they're competing against GenX, banks and BlackRock.

[Satofan44]

In the case of government stimulation via fiat in a Bitcoin-dominant economy, we could speculate that fiat money is only temporarily needed. Once the necessity decreases, governments/central banks could reduce the fiat circulation again. We could speculate that inflation rate then could be fluctuating between -2%/year in low-fiat phases and 0%-0,5% in phases with government stimulation. That would all in all be much better than now (if we follow the argumentation in the OP).

I believe this neglects the impact on debt and also undermines how hard it is the contract compare to expand
What's the need of the Central Bank or interest rate as Fiat is temporary withdrawn?
Well they could shift more into Bitcoin regulations (bad)
Would the government let such occur?
Maybe make Fiat more like an instrument to curb crisis with an end date
Rather than money but this is assuming a government that is rational

Okay maybe I'm a little pessimistic in outlook but we dealing with humans here not machines

There you have the answer to your question. There is an implicit assumption in the wider understanding and knowledge on these matters that a central bank is necessary. This is being copied as an unchallenged assumption, something that must be true. This is why when we think about these things, we find it hard to even imagine a world without one. It is very plausible that things would be fine, or even better without any central bank at all. The bank could be removed or transitioned to a role of reserve and regulation management. People must keep in mind that just because fiat would get withdrawn, that does not mean that fractional reserve banking would go away. You can do this even on a Bitcoin standard. They can build it in an objectively transparent way, as a layer on top of Bitcoin where for 1 L1 BTC you get 10 L2 BTC or they can do it with a centralized system as it is now. Therefore there are two outcomes:
1) Central banks role shifts away from printing to interest rates, and other roles. Interest rates can still have a big impact on liquidity flows even if there is no money printer.
2) Central bank becomes a thing of the past.

That is why most of the papers are essentially just repeating the same old arguments and taking over the same assumptions from others.

Another consequence of having state-funded universities is that economists are getting paid by the fiat printer to write and publish useless papers nobody reads. The academics of fiat economics is just bullshit that not even the journals that supposedly read them to approve them, engage in. This thing would absolutely not survive without a fiat printer.

People who are not in academia and who are not strict have no idea what is going on. There is fraud that is just 1 level lower than the fraud being perpetuated by NGOs, subsidies and other things as we've seen recently with the daycare fraud. The difference here that it takes more consistent effort. Essentially around 99% of the published papers are complete junk. To continue to receive funding and to be able to apply for other funding, often universities have to meet a publishing quota. Therefore this system has an incentive to create complete junk content.

This dynamic would most likely change in a deflationary environment, it would pull the capital away from these and we would see less distorted prices -- where supply and demand actually meet, real demand as in demand for living in those houses and not speculative demand.

Exactly, housing would stop being seen as a capital good, and it'd return back to consumption only. It wouldn't be impossible for the average young man to work a few years and afford a new house. Definitely a lot easier than now that they're competing against GenX, banks and BlackRock.

Luckily they can't do this with food. If they could, I am sure that they would buy up massive quantities and hoard it and speculate on it.  

[d5000]

I wish that we could build a simulation for this, I am really interested in this though experiment.

I like that idea! I'm however currently not knowledgeable at simulation stuff. But perhaps as a long term project ...

I think that he is talking about things in general, and he is definitely right on this. If you look at the concentration of wealth in the last 20 to 40 years, it is clear that very little is being done to balance the situation out.

(You were talking about the tax situation here, which hasn't benefitted "the average Joes".)

IMO the reason why I think with a Bitcoin policy the issue could be different than with taxes, is that Bitcoin restrictions would be something very easy to understand and affect everybody using BTC directly. Tax policy is very complex, I dispute that the solution to tax evasion by the rich is actually "trivial". But if a significant proportion of the population uses Bitcoin, they benefit from it, and a politician is threatening to restrict that usage, this would imo have the same effect as some ecologist party threatening to ban cars. In Europe there have been such examples in the recent past (even if nobody actually threatened to ban cars, the threat worked for the competitors) and it has definitely affected the "ecologist" parties' voting potential.

In my honest opinion, the main reason that the US isn't invading already its neighbors has nothing to do with rules of law or respecting sovereignty. The primary reason is that its markets would crash hard.

I think you misunderstood my argumentation, because that's exactly the point. The economy doesn't benefit from wars. Wars burn resources, and only in some very extreme situations (extremly fast and efficient blitzkrieg scenario) the attacking country could benefit from it. And once the common folks understand that, narratives like Putin's justification for Ukraine war will be difficult to sustain (only perhaps within countries with a very bad education level).

I just recently heard a podcast with an expert on Taiwan/China and he argued that it is almost impossible that China attacks Taiwan just because of this reason. TSMC is too important for the world economy, and China is a merchant nation selling lots of goods to other countries, so sanctions would hit hard. Good luck to Xi if he does anything leading into a deep recession in China. I think things like the brutal repression of separatism in Xinjiang or the abolition of democratic remnants in Hongkong show how paranoid he is regarding anything threatening "instability".

There may come ways in which to enter a war with a mild impact on the stock market or there may come a time where the perception is that entering a war would even be beneficial (do it now rather than later at a higher cost style, since market price in the future).

As written above this would be a very extreme and unlikely situation, but the "Blitzkrieg scenario" was indeed the dream of most attackers (Putin failed, the US is a hit and miss ...). And thus countries are preparing their defense policy for it, or directly form alliances which would make such an attack very costly economically (BRICs boycotting te US for example could soon be much more of a threat than the US raising tariffs). Yeah, maybe I'm too optimistic, but in general, if people learn about the real character and consequences of wars, and education level is increasing, then the logic outcome should be that they're increasingly unlikely.

So for me, at least this reason for inflation will be probably less likely in the future. Exception: if "the masses" get dumber again.

I believe this neglects the impact on debt and also undermines how hard it is the contract compare to expand

Don't fully understand the sentence, in particular the latter part. Can you clarify/reformulate?

What's the need of the Central Bank or interest rate as Fiat is temporary withdrawn?

Regarding Central Bank's existence, Central Banks have other functions too, as the oversight of the commercial banks. Satofan44 already mentioned some possible scenarios. If the Central Bank becomes more of a "crisis managment tool", then the structure could continue to exist even in boom phases (where no/few fiat is necessary). It is however also possible that the private sector provides a fiat-like currency in the form of altcoins.

I'd be a bit worried about cash though in such a scenario. Cash is still one of the most private payment tools, even if it's technically outdated. Perhaps "private cash" would be a possible solution (a Monero-based paper currency, for example?).

Okay maybe I'm a little pessimistic in outlook but we dealing with humans here not machines

Yes, you're definitely right there, but I think in a more theoretical discussion like this one, we shouldn't be that worried about all human-related problems which could obstaculize such a process towards a (Bitcoin-based) deflationary economy.

For me the logic that Bitcoin mass adoption is the healthiest and best way to prevent any excessive government restrictions is still valid. The more people using Bitcoin, the more will be affected by excessive regulation, and the less benefit have politicians to ban or restrict because people would vote other candidates or protest (see the example above in my answer to @Satofan44 about the "banning cars" narrative).

[taufik123]

Okay maybe I'm a little pessimistic in outlook but we dealing with humans here not machines

Yes, you're definitely right there, but I think in a more theoretical discussion like this one, we shouldn't be that worried about all human-related problems which could obstaculize such a process towards a (Bitcoin-based) deflationary economy.

For me the logic that Bitcoin mass adoption is the healthiest and best way to prevent any excessive government restrictions is still valid. The more people using Bitcoin, the more will be affected by excessive regulation, and the less benefit have politicians to ban or restrict because people would vote other candidates or protest (see the example above in my answer to @Satofan44 about the "banning cars" narrative).

I agree with what you think, I like that. The focus of this theoretical discussion, of course, is not on the perfection of human behavior itself,
but on how systemic incentives work in practice from real examples and, actually, for real examples in Indonesia in my own country will reinforce that logic.

I often see some government policies in Indonesia have a direct impact on people's daily economic lives,
and it makes the government's space to move even narrower even though the majority of people do not know about the theory behind these policies.

The most obvious example is the increase in fuel prices some time ago and any increase or adjustment in fuel prices will definitely have a direct impact on public protests,
political pressure and some defensive response from the government because the impact will be felt directly by the public even though they theoretically do not understand what is behind the policy.

On the other hand, overly complex and invisible policies such as monetary expansion, liquidity policies,
or some fiscal structural changes rarely trigger conflicts or public protests, even though the long-term impact will be greater.
This proves that what determines it is not the level of human rationality but the direct effect that will be felt from every policy that is enforced.

And this logic is also very relevant to the mass adoption of Bitcoin, because in Indonesia Bitcoin is not banned and is classified as a commodity asset which makes Indonesia a Bitcoin-friendly country.
Policies like this have a direct impact because there are more and more Bitcoin users in Indonesia, so if there is a total ban on Bitcoin, it will create real public and political protests

The number of investors in Indonesia is increasing and more people are aware of Bitcoin and crypto due to the rapid advancement of technology,
if the restrictions imposed on crypto are extreme enough, it will have a direct impact on the wider user base.

And this is in line with the analogy conveyed by @Satofan44 about the narrative of "Banning Cars", When something is widely used by the general public,
the political benefits of restrictions will be less than the risks because politics will not be faced with ideological debates, but with real consequences such as legitimacy, social stability and loss of support from the public.

And I agree that we don't need to worry about "Human Imperfections" in this context, and the examples that exist in Indonesia that I have experienced myself show that the right incentives and real direct impacts are enough to shape Collective behavior, and within that framework such as the Mass Adoption of bitcoin remains one of the most sensible mechanisms to limit an overly restrictive tendency and restrictions of governments.  not because humans are changing but the political cost will be too high

https://www.reuters.com/world/asia-pacific/rallies-expected-across-indonesia-anger-simmers-over-fuel-price-hike-2022-09-06/
https://www.bappebti.go.id/siaran_pers/detail/5385

Legal explanation:
https://www.hukumonline.com/klinik/a/legalitas-ibitcoin-i-dan-iblockchain-i-sebagai-komoditas-dan-teknologi-finansial-di-indonesia-lt5a4f55496db2c/
https://coinvestasi.com/berita/investor-kripto-indonesia-tembus-19-juta-pengguna

[Satofan44]

(You were talking about the tax situation here, which hasn't benefitted "the average Joes".)

IMO the reason why I think with a Bitcoin policy the issue could be different than with taxes, is that Bitcoin restrictions would be something very easy to understand and affect everybody using BTC directly. Tax policy is very complex, I dispute that the solution to tax evasion by the rich is actually "trivial". But if a significant proportion of the population uses Bitcoin, they benefit from it, and a politician is threatening to restrict that usage, this would imo have the same effect as some ecologist party threatening to ban cars. In Europe there have been such examples in the recent past (even if nobody actually threatened to ban cars, the threat worked for the competitors) and it has definitely affected the "ecologist" parties' voting potential.

Sorry, I didn't mean to say that solving all tax evasion is trivial. I meant to limit it to some specific and very obvious tax loopholes that create huge advantages for the rich. As you can see, there is very little interest in making any progress at all. Probably there are hundreds of different tax holes, but there is nothing really being done to close any of them. The complete solution would obviously be quite complicated, it would take a long time and there would be a lot of resistance and manipulation from the rich. Nevertheless, we are never going to be able to win this battle if we don't ever attempt it.

After rereading the relevant part, it is more clear to me that the topic was more specific to Bitcoin restrictions -- It would be better then for me to focus back on that. You question what is to gain from restricting it, but the question can be asked in a general sense. What is to be gained from restricting anything? It depends a lot on the circumstances. I would say that the situation in the US in regards to this is currently much better than in most places of the world. There is a fair share of the voting block that want Bitcoin and cryptocurrencies, even if it is not that significant on its own, and Bitcoin has been embraced by TradFi. There are just a few more deep integrations left. With this, the chance that the Democrats try to restrict Bitcoin has been severely reduced -- even if they are very manipulative and controlling. If the Republicans can hold and continue with another presidency I would say this could be seen as a done deal.

But what about the rest of the world? The situation in Europe is not that great, in Russia and China even less so. The European Union is well underway to release a CDBC and deploy complete Orwellian control of all spending and activities. What do they have to gain by restricting Bitcoin? A lot! Especially when the voting block that is demanding Bitcoin is not sufficiently strong over there. TradFi in Europe is complete junk, so that does not need mentioning. The story is the same with Russia and China, where control and panopticon-like surveillance is more preferable over freedom there is always a lot to be gained by restricting Bitcoin. The battle is not yet lost in those places, but the rate of adoption is slow compared to the time that we need to build sufficient voting blocks (Europe) or adoption blocks (Russia, China -- I assume voting blocks here don't really have real power).

In my honest opinion, the main reason that the US isn't invading already its neighbors has nothing to do with rules of law or respecting sovereignty. The primary reason is that its markets would crash hard.

I think you misunderstood my argumentation, because that's exactly the point. The economy doesn't benefit from wars. Wars burn resources, and only in some very extreme situations (extremly fast and efficient blitzkrieg scenario) the attacking country could benefit from it. And once the common folks understand that, narratives like Putin's justification for Ukraine war will be difficult to sustain (only perhaps within countries with a very bad education level).

I just recently heard a podcast with an expert on Taiwan/China and he argued that it is almost impossible that China attacks Taiwan just because of this reason. TSMC is too important for the world economy, and China is a merchant nation selling lots of goods to other countries, so sanctions would hit hard. Good luck to Xi if he does anything leading into a deep recession in China. I think things like the brutal repression of separatism in Xinjiang or the abolition of democratic remnants in Hongkong show how paranoid he is regarding anything threatening "instability".

I get your point, but I would say that this is slightly still too optimistic for me. Do you really believe that we have already completely gotten away from the bullshit and lies from Keynesian economics? Was it not Keynes that argued that even spending for war efforts was great for the economy, as in any spending is good? Furthermore, it depends a lot on what you are capturing and how (you've addressed this already). War leads to rapid innovation, as you have seen in the war that you are referring to between Ukraine and Russia. However, Russia is fighting a proxy war with NATO which could not be compared to something like the US attacking one of its neighbors -- especially a small one.  As you've seen with Israel, if you have a pretext or you create one (whichever it really is, I don't care) -- you can wage a brutal war against a much smaller or weaker side and have the backing of many others, or at the very least the absence of any real sanctions to stop you.

Imagine some very grim scenario. Let's say that the US does not care about human rights at all or any war laws. They obliterate Venezuela and its people on a massive scale, something similar to what Israel is doing but just on a larger scale. They capture oil worth $10 - $20 trillion, among other resources. Can you be really sure that this scenario would not be economically profitable? I would not be. We are in a transition period where wars are going to be done with machines (most often very cheap machines), the real loss at home will be minimal in human cost which makes wars easier to sell. There may be some economic turmoil, but if a good enough pretext is given and the end outcome is economically positive -- I think that wars can still be sold and will be sold to the population.

Yeah, maybe I'm too optimistic, but in general, if people learn about the real character and consequences of wars, and education level is increasing, then the logic outcome should be that they're increasingly unlikely.

So for me, at least this reason for inflation will be probably less likely in the future. Exception: if "the masses" get dumber again.

I hope that you are not, but for now I think that we are more likely to head towards a formation of super blocks like 1984 than an Utopia where there are no more wars because of trade and inter-connectivity of the world economies. In this sense I do agree, and I consider it one of the few positives of globalization (most claimed benefits are junk or actually negatives for the average person) is that it reduces the likelihood of big wars due to economic interconnection. That said, we've good a long way to go with education, awareness and the money printer. As long as there is a money printer, and as long as it is not those that wage that suffer the consequences directly nothing is certain.

[d5000]

What do they have to gain by restricting Bitcoin? A lot! Especially when the voting block that is demanding Bitcoin is not sufficiently strong over there.

What exactly could they gain?

I have some insights into Europe as I know Germany quite well (having lived there several years). Yes, the Bitcoin adoption there is probably currently not strong enough for an important politician to take Bitcoiners into account and to block restrictive regulations. On the other hand, there is a strong appreciation for cash in Europe (except Scandinavia), and that will make it impossible for any "Orwellian surveillance" of payments to gain any popular support. If a politician in Germany for example promises to abolish cash and replace it by CBDC, he will lose his election without doubts.

(By the way, the European CBDC idea is more of a competitor to VISA/Mastercard and PayPal as European companies until now were unable to create a relevant payment system and so a lot of debit card and PayPal fees flow into the US every day. I honestly am more worried about surveillance in Europe when it comes to things like social media, where the EU with the pretext of combatting CSAM wanted to implement mandatory device scanning for media for WhatsApp and similar messaging apps. Fortunately for now they failed, but now they're going for "KYC" on social media exploiting fears about kids becoming addicted to TikTok ... , at least I read they plan this in France)</OT>

Anyway my remarks were about a society where Bitcoin would have already advanced a bit more both as a means of payment as as a store of value (to save). The scenario I was discussing here is: a significant Bitcoin adoption which starts to have effects like a deflation (like more incentives to save) for their users and a growing merchant network, and beginning to affect the economy as a whole. We're talking thus at least about 20-30% adoption, more than in the US (~15%) today, and thus the effect on election dynamics would be even stronger than in the Trump/Harris election.

I get your point, but I would say that this is slightly still too optimistic for me. Do you really believe that we have already completely gotten away from the bullshit and lies from Keynesian economics? Was it not Keynes that argued that even spending for war efforts was great for the economy, as in any spending is good?

You can easily debunk that with a very simple thought experiment: What if instead of spending for costs of war you provide goods for the same value to every citizen?

For example, I had seen a Putin fanboi here in the forum argue that "Putin's war is good for Russia, because the Russian companies will then rebuild the destroyed homes and roads in Ukraine and make a lot of profit!". But what if they simply built the same homes and roads without any war? You'd solve the housing crisis and improve transportation a lot

Even if there is a minimal profit, ask people: would you sacrifice even one of your loved ones for that?

Imagine some very grim scenario. Let's say that the US does not care about human rights at all or any war laws. They obliterate Venezuela and its people on a massive scale, something similar to what Israel is doing but just on a larger scale. They capture oil worth $10 - $20 trillion, among other resources. Can you be really sure that this scenario would not be economically profitable?

That would tank the oil price So no, while I won't analyze that in detail here, its still unlikely to be profitable, taking into account all costs. And if the US get too cruel, then they risk even getting sanctioned or boycotted (rare earths!). China doesn't really need the US market anymore.

That said, we've good a long way to go with education, awareness and the money printer. As long as there is a money printer, and as long as it is not those that wage that suffer the consequences directly nothing is certain.

I doubt we need the money printer for that. Alternatively we can discuss deflationary scenarios, like here

IMO the main problem for the deflationary scenario with a deflationary currency (like Bitcoin) competing with fiat is the conflict of forces:

- on one hand, Gresham's law: the deflationary currency has a lower circulation rate, so companies exclusively taking Bitcoin will have less sales,
- but on the other hand, and this is specific to Bitcoin, the merchant advantage to not depend on any electronic payment system with fees, and later (in a Bitcoin lower-volatility scenario) to be able to use the funds directly for treasury and be able to benefit from long term growth, without having to invest it into risky assets like stocks.
- and in addition, also only if Bitcoin lowers its volatility, the advantage for "common people" to count with a currency they can use both for payments and for saving, they could get discounts at merchants, and even become conscient about the possible advantages if they restrict consumerism a bit.

As the first force only applies to companies exclusively taking Bitcoin, this will be a very rare case, so the most likely case is that they will take both fiat and Bitcoin. And this could evolve into the "ideal" configuration for merchants, and later also for customers if they get discounts. So I think there's a good chance that the pro-Bitcoin and thus the pro-deflationary forces are stronger.

The most obvious example is the increase in fuel prices some time ago and any increase or adjustment in fuel prices will definitely have a direct impact on public protests,
political pressure and some defensive response from the government because the impact will be felt directly by the public even though they theoretically do not understand what is behind the policy.

Fuel price driven protests are indeed an excellent example that unpopular government decisions can put their power in danger. And yes, as you write, that can also be the case if Bitcoin is restricted.

[Tonimez]

Fuel price driven protests are indeed an excellent example that unpopular government decisions can put their power in danger. And yes, as you write, that can also be the case if Bitcoin is restricted.

This point is very global as we speak. I live in a part of the world where fuel price is the key driver of inflation and every slight adjustment of price causes serious inflation. This has been very peculiar since over 18 years ago when I could vividly say I understand what inflation means and witness it's effects simultaneously with the fuel prices. Many protesters has been organised to cub the government strategic devaluation of currency and it's concurrent inflation through fuel price hikes. In the past 3 years, the economy has turned around and inflation at its peak here as it's said that fuel is the major economic driver of our economy.

Yeah, there has been over 600% inflation on commodities over the past 10 years when this fuel price was frequently employed to debase the economy here.

[Satofan44]

What do they have to gain by restricting Bitcoin? A lot! Especially when the voting block that is demanding Bitcoin is not sufficiently strong over there.

What exactly could they gain?

Control? Surveillance? Continued deprivation of wealth for the majority of the population? Do you think that it is just a historical coincidence that we have extremely high taxes and high monetary inflation? The system is designed to prevent you from making big achievements, it is not designed to enable people to make huge jumps in wealth and status. This does not mean that it does not happen, but it is designed to keep the majority "in check". If anything, we are collecting way too much in taxes all around the world but most of it is being stolen and spent inefficiently. This includes the countries that rank the best in corruption indexes.

I have some insights into Europe as I know Germany quite well (having lived there several years). Yes, the Bitcoin adoption there is probably currently not strong enough for an important politician to take Bitcoiners into account and to block restrictive regulations. On the other hand, there is a strong appreciation for cash in Europe (except Scandinavia), and that will make it impossible for any "Orwellian surveillance" of payments to gain any popular support. If a politician in Germany for example promises to abolish cash and replace it by CBDC, he will lose his election without doubts.

(By the way, the European CBDC idea is more of a competitor to VISA/Mastercard and PayPal as European companies until now were unable to create a relevant payment system and so a lot of debit card and PayPal fees flow into the US every day. I honestly am more worried about surveillance in Europe when it comes to things like social media, where the EU with the pretext of combatting CSAM wanted to implement mandatory device scanning for media for WhatsApp and similar messaging apps. Fortunately for now they failed, but now they're going for "KYC" on social media exploiting fears about kids becoming addicted to TikTok ... , at least I read they plan this in France)</OT>

I don't agree with this analysis at all. I am quite pessimistic about these things, because we have to place them in the context in which they are happening. Of course there is an actual benefit here to be had by not having to rely on VISA/Mastercard and having lower fees, but this is not the reason why this is being done -- it is the reason through which the idea is being sold. There is a war on privacy and freedom going on in Europe, and because of this I can't assume that their intentions are honest or benevolent. Here is my forecast on what will happen with this infrastructure and the CBDC:
Step 1) Zero fee, sold as competitor or solution to some problems but keep alternatives available.
Step 2) The solution becomes widely used and the most popular one, slowly start attacking alternatives.
Step 3) (Optional) Introduce fees on both sides to start earning money.
Step 4) Make the solution mandatory.
Step 5) Introduce a social credit score based on the data generated by this system.

This might sound like a conspiracy theory to those that are afraid to face the truths of our reality, but this is exactly how I would do something like this. This is how they have always been implementing surveillance and extreme control measures, taking a small step at a time but never reverting anything. As you can see also with threats, once you introduce laws to battle some threats there never comes a time where they abolish such laws. 

Lastly, you have to understand that a government mandated solution can never be the same as one that is done by a 3rd party in the legal sense. In the case of a solution that is owned by the government, they have all the data on you right away. In the case of VISA/Mastercard, they need a court order to get it (even if it is a shady and corrupt one with basically auto-approval like FISA courts). There is a distinction regardless of who fails to see it.

Anyway my remarks were about a society where Bitcoin would have already advanced a bit more both as a means of payment as as a store of value (to save). The scenario I was discussing here is: a significant Bitcoin adoption which starts to have effects like a deflation (like more incentives to save) for their users and a growing merchant network, and beginning to affect the economy as a whole. We're talking thus at least about 20-30% adoption, more than in the US (~15%) today, and thus the effect on election dynamics would be even stronger than in the Trump/Harris election.

There is plenty of adoption to go before we have a chance to see how that would play out. The US is probably leading with adoption in the developed world, so there is even more to go with other countries..

I get your point, but I would say that this is slightly still too optimistic for me. Do you really believe that we have already completely gotten away from the bullshit and lies from Keynesian economics? Was it not Keynes that argued that even spending for war efforts was great for the economy, as in any spending is good?

You can easily debunk that with a very simple thought experiment: What if instead of spending for costs of war you provide goods for the same value to every citizen?

You tell those that have the power and those that teach the future generations in dogmatic universities that it is easily debunked, not me. 

For example, I had seen a Putin fanboi here in the forum argue that "Putin's war is good for Russia, because the Russian companies will then rebuild the destroyed homes and roads in Ukraine and make a lot of profit!". But what if they simply built the same homes and roads without any war? You'd solve the housing crisis and improve transportation a lot 

IQ measures are averages after all, we are generally clueless just how dumb a person with IQ of 80 or even 90 is.

Imagine some very grim scenario. Let's say that the US does not care about human rights at all or any war laws. They obliterate Venezuela and its people on a massive scale, something similar to what Israel is doing but just on a larger scale. They capture oil worth $10 - $20 trillion, among other resources. Can you be really sure that this scenario would not be economically profitable?

That would tank the oil price So no, while I won't analyze that in detail here, its still unlikely to be profitable, taking into account all costs. And if the US get too cruel, then they risk even getting sanctioned or boycotted (rare earths!). China doesn't really need the US market anymore.

Nice one.  Please do entertain my scenarios though without trying to find some details by which to dismiss it on -- I am trying to give ideas on some possibilities and outcomes where this may be true, without investing time to figure out a completely realistic scenario that is based on data (e.g., starting with the actual value of the resources that could be seized and making a warfare cost analysis which would be too much work and out of scope here). In my view, there are definitely situations in which a war is going to be profitable. That does not mean that it won't come with a lot of chaos and problems, but even if the end result is +1$ it is profitable. Venezuela has a lot of people, but Greenland is a simpler example. It can realistically be taken over by the US in single day of war. Sure it is technically owned by Denmark, but who cares? What are they going to do about it? The US stands to lose a lot from such a venture, but the EU will lose even more. Who are they going to partner with if the lose the US?  I wonder what is the value of all the resources that can be gained from a Greenland annexation. Furthermore, there is a lot of value in geopolitical positioning but that is much harder to quantify. I am sure that some analysts are actively running scenarios of profitability of warfare for the government. I would be really surprised if there weren't.

Think also about some other alternative world scenarios here. Things may happen for which the alliance between the US and EU weakens or completely collapses first. In that case, even less would be stopping the US from simply taking Greenland. It is a lot of area but the population is low and defenses are practically non existent. The world is complex, many combinations of events and unforeseen circumstances are possible.

Furthermore, I would like to highlight the current situation between the EU and Russia. The sanctions have objectively probably hurt the EU much more than they have Russia. Thing could only be properly evaluated were the same sanctions in place and were Russia not fighting an actual war. If we to subtract war expenditures and wealth destruction (and probably also we have to subtract the effects of sanctions of other countries to be able to compare what happens to each side respectively when 1 sanctions the other), everything that I see points out that the EU hurt itself more with this. The economic situation in the EU is terrible, with many industries suffering across many countries. Just don't try to get this data from the main news sites, practically all of them in the EU are corrupt (ironically they accuse the media over there, wherever over there is, of being a propaganda machine). Look at industry output, real wage development figures over decades and more. The same could be true in many future conflicts. While globalization tends to make losses interconnected, that does not mean that one side won't hurt itself much more by sanctioning the other. Therefore, there is both an incentive to not wage war but also not to impose sanctions if there is war!

That said, we've good a long way to go with education, awareness and the money printer. As long as there is a money printer, and as long as it is not those that wage that suffer the consequences directly nothing is certain.

I doubt we need the money printer for that. Alternatively we can discuss deflationary scenarios, like here

IMO the main problem for the deflationary scenario with a deflationary currency (like Bitcoin) competing with fiat is the conflict of forces:

- on one hand, Gresham's law: the deflationary currency has a lower circulation rate, so companies exclusively taking Bitcoin will have less sales,
- but on the other hand, and this is specific to Bitcoin, the merchant advantage to not depend on any electronic payment system with fees, and later (in a Bitcoin lower-volatility scenario) to be able to use the funds directly for treasury and be able to benefit from long term growth, without having to invest it into risky assets like stocks.
- and in addition, also only if Bitcoin lowers its volatility, the advantage for "common people" to count with a currency they can use both for payments and for saving, they could get discounts at merchants, and even become conscient about the possible advantages if they restrict consumerism a bit.

As the first force only applies to companies exclusively taking Bitcoin, this will be a very rare case, so the most likely case is that they will take both fiat and Bitcoin. And this could evolve into the "ideal" configuration for merchants, and later also for customers if they get discounts. So I think there's a good chance that the pro-Bitcoin and thus the pro-deflationary forces are stronger.

Gresham's law: I do agree that a deflationary currency would have a lower circulation rate and also that exclusive Bitcoin acceptance would reduce short-term and even medium-term sales. Is that so bad though or is it merely a reflection of just how valuable Bitcoin is compared to an inflationary currency? Right now we only have some cases where we can draw from real world data from but they are not going to be that accurate for what we have here -- places where 2 fiat currencies co-exist or co-existed, and where one was preferred over the other for some reasons. However, both were inflationary by design. I don't think we have any case where there was a inflationary currency competing with a deflationary one? It is possible that we would see similar behavior, but nevertheless it should be pointed out that the chance exists that things would play out somewhat differently.

Merchant advantage: Yes, but I would say that the really beneficial advantages only really matter to a subset of merchants. Sure, lower fees are always good but stuff like censorship resistance is not what most people need or value. We value it, and it should be valued but we are speaking about the practical situation of the average merchant. Not that many have issues where they really do need that feature, and therefore not many would derive real benefit from it. I think that growth benefits and treasury would be more important for the average business but after volatility drops as you have indicated.

Overall, a lot of scenarios depend on reduced volatility, widespread adoption and maturity. Only once all of these are checked can we actually evaluate what is going on and how much benefit is being derived. Until then we are more in the theoretical area, or in terms of practice in the risky area. I mean, I would advise business owners to invest a bit of their profits in Bitcoin already. The risk is higher, but what about it? A small allocation can, at worst, do minimal harm.

The most obvious example is the increase in fuel prices some time ago and any increase or adjustment in fuel prices will definitely have a direct impact on public protests,
political pressure and some defensive response from the government because the impact will be felt directly by the public even though they theoretically do not understand what is behind the policy.

Fuel price driven protests are indeed an excellent example that unpopular government decisions can put their power in danger. And yes, as you write, that can also be the case if Bitcoin is restricted.

What have these protests actually accomplished? Can you give me recent examples where they led to really lasting changes rather than a simple shift in the leading political party? I am doubtful of the current capabilities of the average human to protest anything that is worth defending, but I'm happy to be proven wrong on this. When I talk about "worth defending" I am referring to freedoms and rights which when taken away do not necessarily have instantaneous tangible negative effects, such as would be the case if food was taken away from people. To be honest, in the current world that we live in I believe more people would riot if you took away McDonald's or Instagram than if you took away some of their important freedoms or human rights (Bitcoin included). 

[Ambatman]

Don't fully understand the sentence, in particular the latter part. Can you clarify/reformulate?

What I meant is it's easier to pump money in the economy than removing them from circulation
Fiscal policy like tax can be used but
As the supply reduces many would rather keep than spend
Which may start giving Fiat more value than its supposed or was envisioned to have.

Even if there is a minimal profit, ask people: would you sacrifice even one of your loved ones for that?

Do they send any of their loved ones to war? No they don't.

I have some insights into Europe as I know Germany quite well (having lived there several years). Yes, the Bitcoin adoption there is probably currently not strong enough for an important politician to take Bitcoiners into account and to block restrictive regulations. On the other hand, there is a strong appreciation for cash in Europe (except Scandinavia), and that will make it impossible for any "Orwellian surveillance" of payments to gain any popular support.

There was a news some months or a year or two ago can't really recall
About Spain placing a restriction on the amount of cash that can be held or withdrawn
Why? Because Cash is king when it comes to privacy and for sometime we can see that the EU don't mix with privacy.

If a politician in Germany for example promises to abolish cash and replace it by CBDC, he will lose his election without doubts

This is one thing I love about the country but change that are subtle or look like a compromise are dangerous
Currently EU are placing a limit to $10K for cash transaction from 2027
https://www.coneo.hr/blog/news/germany-and-austria-against-prohibition-of-cash-payment/
But Germany and Austria are currently against it.
Many would consider it not too radical so the push back may be little
Once they get comfy they can make a thousand dollar the standard.
The narrative is working on Bitcoin where many see it first as digital Gold thanks to the government PR
They never shared about it been decentralized or control it grants..


I know there's no limit in holding cash for now