Bitcoin Forum
March 30, 2024, 01:50:35 AM *
News: Latest Bitcoin Core release: 26.0 [Torrent]
 
   Home   Help Search Login Register More  
Pages: [1]
  Print  
Author Topic: Currencies need to be deflationary (fixed quantity or fixed wage). Here's why.  (Read 841 times)
theonewhowaskazu (OP)
Sr. Member
****
Offline Offline

Activity: 448
Merit: 250


View Profile
July 14, 2014, 06:39:25 AM
 #1

1. Everybody should be aware that money is a form of deferred consumption, or another way of putting it, a form of debt. Money isn't any good by itself. You need to buy something with it. You're investing you're time to earn it, the products and services you sold to get it go out into the economy. You get nothing back but for money.

2. Time value of money is a misnomer. It should be "time value of utility." A computer you built and sold for currency thus had a timevalue. But you didn't use that time value, you gave it up. Instead, you got money.

3. Money needs to compensate you for that time value you sacrificed to the economy at large. True money naturally does this through deflation. As the economy you "lent" your product to increases it's production, so does your currency increase in value.

Etc... etc... thus deflationary currencies are not only benign, but also make a great deal of economic sense.

Advertised sites are not endorsed by the Bitcoin Forum. They may be unsafe, untrustworthy, or illegal in your jurisdiction.
Tron
Full Member
***
Offline Offline

Activity: 588
Merit: 107


View Profile
July 14, 2014, 07:07:38 AM
 #2

I'd agree with you that a deflationary currency is good thing, in contrast to a currency that is being printed to incentivize spending.

The term 'time value of money' is still a useful term for a no-risk interest rate.  It simply measures the amount you (or anyone else) would require to part with their control of their savings.  The utility, as you pointed out, would be derived by the borrower as they put the money to work, perhaps building and selling a computer to pay back the original loan plus interest and still keep a profit.   The other component of interest is the risk premium to compensate for a possible default.

theonewhowaskazu (OP)
Sr. Member
****
Offline Offline

Activity: 448
Merit: 250


View Profile
July 14, 2014, 08:33:07 AM
 #3

The term 'time value of money' is still a useful term for a no-risk interest rate.  It simply measures the amount you (or anyone else) would require to part with their control of their savings.  The utility, as you pointed out, would be derived by the borrower as they put the money to work, perhaps building and selling a computer to pay back the original loan plus interest and still keep a profit.   The other component of interest is the risk premium to compensate for a possible default.

indeed. However. It implies that money is special in terms of having a time value. Any resource (or in economists terms, "utility") has a time value associated with it. You therefore need to be earning interest on your currency itself, without relending it at all, since you're already got 1 layer of debt beneath you, the layer inherently I'm bedded in the currency itself.

Pages: [1]
  Print  
 
Jump to:  

Powered by MySQL Powered by PHP Powered by SMF 1.1.19 | SMF © 2006-2009, Simple Machines Valid XHTML 1.0! Valid CSS!