Why wont Bitcoin have the same problems as the Gold/US Dollar crisis?

[BittBurger]

Was having a discussion with a family member who happens to be a Councilman in Australia at the moment.  Working his way up through the government at a very young age, and I believe he will be very successful.

He raised an issue that I didn't have a very good response for.  Can any of you give me some in-depth thoughts on this statement he made?

"I don't see how it will avoid the currency crisis issues faced by the Gold Standard era when the US dollar was pegged to the amount of gold mined.

Bitcoin is a very similar model, and would likely lead to a supply crisis, like Gold did"

Thanks all.

-B-

[Beliathon]

The first way I will address this question is by linking this important speech: Bitcoin vs. Political Power.

The second, and far less important way, is by saying this:

Gold is a physical asset. A supply crisis of a physical asset is what he was talking about. In no way does this problem apply to cryptocurrency.

Bitcoin is a digital asset that, unlike gold, is VERY highly divisible (.00001 BTC), instantly transmittable to anywhere in the world, and can in fact exist in more than one place in the world at the same time.

By sharing private keys with trusted friends anywhere in the world, you can essentially have a privately shared bank account. Couples in long distance relationships can do this right now, for free.

I believe Satoshi made the cap 21 million coins because there are approximately 7 billion humans on Earth. 7x3=21. People are thinking "oh there must be at least one BTC for each person", but that is wrong.

A Bitcoin is not like a gold nugget. A Bitcoin is a vault full of gold nuggets. A Satoshi is a gold nugget. People don't get that because at this moment Bitcoin is undervalued by about 9999(9?)%.

There is no supply crisis because every one of you has WAY MORE BITCOIN WEALTH than you think you do. The world just hasn't figured out how rich you are yet.

[beatljuice]

As Beliathon said it's divisible. Even further than a satoshi if need be, so there isn't a "lack" of ability to spend it.

I know a lot of people here don't like hearing this, but there are alt-coins. If it's too hard to get bitcoins other things will fill in the gap. One of the reasons there is a contraction in the economy when there is less money is because we're hooked on the idea that we have to do everything with our government issued currency. Once we break free of believing that everything has to go through one kind of currency we're free from the economy contracting because of a lack of fiat (or gold). We can trade with anything that's convenient, from goods we create ourselves to frequent flier miles. If I can't get any bitcoin I can trade goods and services. Currency should be thought of as a convenience not something that decides what we can and can't do.

[zimmah]

If it leads to a supply crisis that means the price of bitcoin would skyrocket.

What would happen after that remains a question.

[painlord2k]

The Gold Standard didn't have a supply crisis.
It had a inflation crisis, when governments printed receipts for more gold than they had in the coffers.
The governments, simply, engaged (like today) in massive counterfeiting and manipulation.

[twiifm]

The Gold Standard didn't have a supply crisis.
It had a inflation crisis, when governments printed receipts for more gold than they had in the coffers.
The governments, simply, engaged (like today) in massive counterfeiting and manipulation.

Thats same as a supply crisis.

Same thing when Greece couldnt print their own currency to pay debts because they use Euros

[kerafym]

Gold and USD do not have technology dependency.

People expecting the internet or mobile phone that will still function in the event that shtf will be surprise on how things actually work.

[r34tr783tr78]

This matter has been adressed several times, see: https://bitcointalk.org/index.php?topic=140793.0
Of course, bitcoin would mess with several aspects of the State if it was its main currency: monetary policy, because "printing" money would be impossible, the central bank would have to borrow bitcoins to luanch them into the economy.
Deflation would be a constant, with all the economic consequences it has.
Tax evasion would threat the very existence of the State. It would be necessary to control Internet access in much worst terms than in China, to avoid it.
People would dump fiat for bitcoin and that would aggravate fiat inflation and bitcoin deflation. People with savings in fiat would be ruined.

[TaunSew]

The Gold Standard didn't have a supply crisis.
It had a inflation crisis, when governmeday) in massive counterfeiting and manipulation.
nts printed receipts for more gold than they had in the coffers.
The governments, simply, engaged (like to

Not only that but the mining rate was not fixed.  Where it is progressively harder to mine Bitcoin, or the PoS coins where there is no mining, the amount of gold mined was unpredictable and this resulted in periods of severe deflation and inflation.

http://en.wikipedia.org/wiki/The_General_Crisis

[STT]

Deflation as such is not a negative just like inflation doesnt have to be.   ITs the volatility in supply that would cause most trouble and/or excess, so 30% inflation has occured in the West and it led to poor economies.

Deflation is not depression or even recession.   Growth can occur while a money supply contracts.     Ditto the inverse, a country can suffer losses even while inflation raises prices, the value of earnings can drop.    Since we have had inflation since the federal reserve came about, this is the most familiar scenario but both are possible

As Beliathon said it's divisible. Even further than a satoshi if need be, so there isn't a "lack" of ability to spend it.

Gold is massively divisible.   All the way down to a dollar, you can get a stamp of leaf gold.  It will blow away in the wind, its not useful for anything really.  They put it on cakes and eat it.  In theory you could trade this, some company is producing plastic casing /notes for minute gold such as this.    And they'll sell 1 dollars worth for 5 or 10 I presume hence btc is far more practical in small amounts but either works as obviously a token coin with trace amounts of gold can be used etc


BTC is very determined to give regular production.       All that bother with difficulty is for regular supply rather then the normal model gold has which is capitalist driven mining activity.   The avoidance of leverage also stops the fractional reserve liquidity issues, except for fraud / centralised off blockchain issuance of which people should be more cautious as we saw with gox

[twiifm]

Can you give a historical example where growth occurred while money supply contracted?

From this Wikipedia page all examples of deflation led to economic slumps or liquidity trap.

Seems to me deflation is harmful

[Ron~Popeil]

The 21 million supply confuses a lot of people. The divisibility of the unit of measurement is infinite and if necessary in the future the developers can even add coins by adding a proof of stake function if it becomes necessary. 

[twiifm]

The 21 million supply confuses a lot of people. The divisibility of the unit of measurement is infinite and if necessary in the future the developers can even add coins by adding a proof of stake function if it becomes necessary.  

Not really because half has already been mined.  So if the early adopters hoard the supply, it forces future generations to share less of pie

[Ron~Popeil]

The 21 million supply confuses a lot of people. The divisibility of the unit of measurement is infinite and if necessary in the future the developers can even add coins by adding a proof of stake function if it becomes necessary.  

Not really because half has already been mined.  So if the early adopters hoard the supply, it forces future generations to share less of pie

Infinitely divisible means we can use the currency in as small a unit of measure as needed. The smallest one currently is the satoshi. Divide the 21 million by that number first for your starting point. There is plenty of room for expansion.

[twiifm]

The 21 million supply confuses a lot of people. The divisibility of the unit of measurement is infinite and if necessary in the future the developers can even add coins by adding a proof of stake function if it becomes necessary.  

Not really because half has already been mined.  So if the early adopters hoard the supply, it forces future generations to share less of pie

Infinitely divisible means we can use the currency in as small a unit of measure as needed. The smallest one currently is the satoshi. Divide the 21 million by that number first for your starting point. There is plenty of room for expansion.

I know what it means but its not practical.  Much better to have supply that can be expanded knowing for certainty that population and ecomic activity will expand.  Why do you think we left Bretton Woods.  OPs friend is correct, elasticity is a necessity for modern money.  

[Zarathustra]

Was having a discussion with a family member who happens to be a Councilman in Australia at the moment.  Working his way up through the government at a very young age, and I believe he will be very successful.

He raised an issue that I didn't have a very good response for.  Can any of you give me some in-depth thoughts on this statement he made?

"I don't see how it will avoid the currency crisis issues faced by the Gold Standard era when the US dollar was pegged to the amount of gold mined.

Bitcoin is a very similar model, and would likely lead to a supply crisis, like Gold did"

Thanks all.

-B-

Bitcoin (and Crypto in general) is not a tool to expand the society/economy (collectivism) even more. It is a tool to destroy the society (patriarchy). It's a tool to bring back anarchy, a world with those self-sufficient communities, which had been destroyed 10'000 years ago.

[Raystonn]

The 21 million supply confuses a lot of people. The divisibility of the unit of measurement is infinite and if necessary in the future the developers can even add coins by adding a proof of stake function if it becomes necessary.  

Not really because half has already been mined.  So if the early adopters hoard the supply, it forces future generations to share less of pie

Infinitely divisible means we can use the currency in as small a unit of measure as needed. The smallest one currently is the satoshi. Divide the 21 million by that number first for your starting point. There is plenty of room for expansion.

I know what it means but its not practical.  Much better to have supply that can be expanded knowing for certainty that population and ecomic activity will expand.  Why do you think we left Bretton Woods.  OPs friend is correct, elasticity is a necessity for modern money.  

No, elasticity of money is a necessity for Statism and Socialism.  Individual Rights begins with the right to hold private property without the State, or anyone else, taking it or devaluing it.  A currency that slowly devalues is a currency that slowly steals your property.  It is a way to tax the people without their realization.  It is an affront to anyone believing in individual liberty and the absolute right to hold private property.

[twiifm]

The 21 million supply confuses a lot of people. The divisibility of the unit of measurement is infinite and if necessary in the future the developers can even add coins by adding a proof of stake function if it becomes necessary.  

Not really because half has already been mined.  So if the early adopters hoard the supply, it forces future generations to share less of pie

Infinitely divisible means we can use the currency in as small a unit of measure as needed. The smallest one currently is the satoshi. Divide the 21 million by that number first for your starting point. There is plenty of room for expansion.

I know what it means but its not practical.  Much better to have supply that can be expanded knowing for certainty that population and ecomic activity will expand.  Why do you think we left Bretton Woods.  OPs friend is correct, elasticity is a necessity for modern money.  

No, elasticity of money is a necessity for Statism and Socialism.  Individual Rights begins with the right to hold private property without the State, or anyone else, taking it or devaluing it.  A currency that slowly devalues is a currency that slowly steals your property.  It is a way to tax the people without their realization.  It is an affront to anyone believing in individual liberty and the absolute right to hold private property.

So destroy everything and start over?  What would happen if ECB didn't print money to restructure Greece's loan.  Tough shit?

You talk you as if you live on a deserted island disconnected from the rest of civilization

[Raystonn]

So destroy everything and start over?  What would happen if ECB didn't print money to restructure Greece's loan.  Tough shit?

You talk you as if you live on a deserted island disconnected from the rest of civilization

On the contrary, inflation of fiat destroys wealth.  A non-inflationary currency preserves it.

Greece created its problem through overspending and monetization of debt.  It was an incredibly stupid decision to enter into the EU knowing they would be unable to monetize their debt.  One of these happened: a) They didn't realize they were spending more than their took in with taxes, b) They didn't realize they couldn't monetize their debt after joining the EU, or c) Those in power knew and wanted to use this to stop monetization of debt.  The real answer is almost certainly (c), initiated by those who held large amount of currency and no longer wanted to support the masses with inflation of their holdings.

[minor-transgression]

@OP - Rome had a fixed money supply (gold and silver) between 27BC and, approximately, 4AD.
There were issues in the long term: the price of grain fell because a) the supply increased and
b) realpolitik of bread and circuses; the legions daily pay remained static while purchasing power
increased, (pensions are somewhat complicated here.)
Theoretically, interest rates should have gone to zero, but didn't otherwise banks would have
gone bust as in the reign of Tiberius.

Also worth bearing in mind is the unsuitability of pure gold as a coinage. It is too soft, hence
the need for a near substitiute.

Hence when people point to particular problems with a gold standard, they are, by definition,
being selective, as others have pointed out on this thread. There are problems with
cryptocurrencies and the medium to long term economy that are significantly greater than
those associated with a "gold" standard.