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Question: deflation good or bad for the majotity of people
Good for the majority - 16 (88.9%)
Bad for the majority - 2 (11.1%)
Total Voters: 18

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Author Topic: Bitcoin deflationary? If yes..Good or Bad?  (Read 4054 times)
qwerty555
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August 10, 2014, 05:35:01 AM
Last edit: August 10, 2014, 08:33:28 AM by qwerty555
 #1

Many in the community believe bitcoin is deflationary..so

1 Is it really and to what extent if it is?

2 Is that a good thing or a bad?

I currently lean toward it being good for the population and not so good for the rich 5 %ish.( who arguably can afford to lose some of their "ill gotten" wealth.. tax avoided/evaded)...That's ok with me Smiley

Here is the start of the debate..

deflation is BAD

http://www.investopedia.com/financial-edge/0311/the-dangers-of-deflation.aspx


Possible Effects
There are many reasons to be concerned about a prolonged deflationary period, even without an event as devastating as the Great Depression:

1. Demand for goods decreases since consumers delay purchases, expecting lower prices in the future. This compounds itself as prices drop further in response to decreasing demand.


 But they will buy what they need immediately and what they desire eventually so is not net consumption of all needed goods eventually the same? The only effect I can see here is that it slows things down and restricts wasteful un-necessary spending to a degree..isnt that good?

2. Consumers expect to earn less, and will protect assets rather than spend them. Since 70% of the U.S. economy is consumer-driven, this would have a negative effect on GDP.

Its ok to earn less in nominal terms if your buying power increases accordingly ?? Negative GDP may not be so bad If basic food and utility cost inflation to the least well off is stopped and their standard of living actually rises as a result? Full employment is a more important issue.

3. Bank lending drops since borrowing money makes less sense in regards to the real cost. This is because the loan would be paid back with money that is worth more than it is now.


Time for the Banks, who due to their Govt license and central bank favoritism have the monopolistic opportunity to create money and profit from "thin air" for the wealthy few at the expense of everyone else..to be reigned in ?


4. Deflation ensures that borrowers which loot to purchase assets lose since an asset becomes worth less in the future than when it was bought.


Loot to purchase?  Is looting good LOL?

5. The more indebted you are, the worse your condition since your salary will likely decline while your loan payments remain the same.


True..so lower interest rates for borrowing to even that out ?

6. During inflation, there is no upper limit on interest rates to control the inflation. During deflation, the lower limit is zero. Lenders won't lend for zero percent interest. At rates above zero, lenders make money but borrowers lose and won't borrow as much.


 we are already at a point of zero or almost zero interest rate..it doesn't seem to bother the Fed /Japan and Eurozone when it suits them  Borrowing should be sensible and limited..borrowing less is better for the public and worse for the banks..is that bad?


7. Corporate profits usually drop during a deflationary period, which could cause a corresponding decrease in stock prices. This has a ripple effect to consumers who rely on stock appreciation and dividends to supplement their incomes.

hahaha  it effects the few at the expense of the many this is obviously an argument put forward to protect the wealthiest. There would be an issue on 401's /pension plans which now depend on the stock market...ask a final salary based pensioned person if he thinks that was a good idea to remove that long standing practice LOL

http://wallstcheatsheet.com/stocks/how-many-americans-even-own-stocks.html/?a=viewall

8. Unemployment rises and wages decline as demand drops and companies struggle to make a profit. This has a compounding effect throughout the entire economy.

Unemployment rises IF the Govt and private enterprise do not fill the gap with other products and services...are they really that dumb or lazy.... but its more work and less profit ( which = working hard for what you gain..end of EASY money)? Again a decline in nominal wages can be offset by higher purchasing power  due to the lack of inflation..currently running at 20% + in 2014 for food and utilities which disproportionately affect the least well off majority


Deflation is not bad

http://www.zerohedge.com/news/2014-06-20/inflation-only-if-you-look-food-water-gas-electricity-and-everything-else

https://www.google.com.ph/search?q=inflation+in+2014&ie=utf-8&oe=utf-8&aq=t&rls=org.mozilla:en-US:official&client=firefox-a&channel=sb&gfe_rd=cr&ei=FwHnU87JL4ig8wfg9IGgDA#channel=sb&q=inflation+usa+in+2014+22%25&rls=org.mozilla:en-US:official

On the other side of the coin..which says there is little danger from deflation

http://www.zerohedge.com/news/2014-03-07/no-deflation-not-danger

http://www.zerohedge.com/news/2014-04-04/deflating-deflation-myth

http://www.zerohedge.com/news/2014-06-21/blaming-deflation

However, while swallowing Keynes' and Fisher's arguments central bankers are ignoring the law of the markets, commonly referred to as Say's Law. It states that we make things to buy things so you cannot divorce consumption from production, and money is just the temporary lubricant for the process.

so on balance I am currently pro deflation as a better option for PEOPLE than inflation but would wish to know others opinions.

Bitcoin being deflationary would be the start of this process and has been met with a lot of opposition .. Big Business,Banks and Governments will not want a deflationary environment..bonuses and pay for those in charge are directly impacted  fr a start..Smiley

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August 10, 2014, 07:32:17 AM
 #2

Deflationary is good because infationary is bad. Just printing more money into the system has disaterous consequences for those that use it but not much for the megarich and the people who control it (and they hold much wealth in other stuff such as properties and land so they'll be fine if it ever goes tits up any way).

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August 10, 2014, 01:05:23 PM
Last edit: August 10, 2014, 01:34:06 PM by Meuh6879
 #3

FIAT money litteraly EVAPORATE from my wallet (physical, i mean)
Inflation is and always will be VERY BAD.

But, for bankster, they can generate credit ... and insane benefice every year from nothing.
That why bitcoin will be change the world.
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August 10, 2014, 01:27:28 PM
 #4

Deflation is not a bad thing in the slightest if it's based on a currency that's got a limited supply, things become much cheaper all round and people don't need to work as hard to buy things they need, that goes for everyone. The Neo-Keynesian argument of "If you inflate the currency people will spend more" is totally flawed, the reason being is that inflation is forcing people to spend because the value of their currency is being destroyed and they have no choice and for some reason they think this is a good thing and quite honestly I think their arguments border or religious zealotry rather than being about any sort of mathematics.

With deflation as long as you don't have government interfering and price fixing everything becomes cheaper, one of the reason neo-keynesians I suspect seem to think that price falls are a bad thing for farmers etc. if because the profits they make will go down because of the system that they've created and the machinery they have to purchase etc. has gone up. They're trying to fix and mess with so much stuff out there that it's no wonder they haven't gotten anything right and everything is so fucked up.

It's a question of making a deflationary economy that the state and central banks can't mess with and yes, Bitcoin or at least an alternative to it could well be the answer, but with special interests like the shitty Bitcoin Foundation moving in and trying to take over everything I have my doubts it will be Bitcoin itself.
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August 10, 2014, 01:39:03 PM
 #5

Deflation is good, because the assets will be worth more money, but at the moment there is still a high number of new bitcoins getting in the market.

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August 10, 2014, 02:01:51 PM
 #6

Many in the community believe bitcoin is deflationary..so

1 Is it really and to what extent if it is?

I don't understand this question. The situation is quite clear. It has been visualized in this sticky thread: https://bitcointalk.org/index.php?topic=130619.0

So bitcoin offers a predictable monetary inflation rate that is diminishing over time. This monetary inflation is currently lower than the rate of adoption (and far into the future may be lower than the amount of lost coins) so the effect is deflationary.

2 Is that a good thing or a bad?

It depends on the perspective. If you are a debitor deflationary effects are bad, because the value of your debts keeps growing. If you are a creditor this effect works in your favor. I think overall deflation discourages loans and consumption of unnecessary goods. It encourages saving and preserves resources. Given the devastating effects of debt-bubbles that we have seen in recent years I think this is positive.

ya.ya.yo!

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August 10, 2014, 02:06:38 PM
 #7

Isn't bitcoin being deflationary one of it's highlights and selling points?
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August 10, 2014, 02:09:37 PM
 #8

Many in the community believe bitcoin is deflationary..so

1 Is it really and to what extent if it is?

I don't understand this question. The situation is quite clear. It has been visualized in this sticky thread: https://bitcointalk.org/index.php?topic=130619.0

So bitcoin offers a predictable monetary inflation rate that is diminishing over time. This monetary inflation is currently lower than the rate of adoption (and far into the future may be lower than the amount of lost coins) so the effect is deflationary.

2 Is that a good thing or a bad?

It depends on the perspective. If you are a debitor deflationary effects are bad, because the value of your debts keeps growing. If you are a creditor this effect works in your favor. I think overall deflation discourages loans and consumption of unnecessary goods. It encourages saving and preserves resources. Given the devastating effects of debt-bubbles that we have seen in recent years I think this is positive.

ya.ya.yo!

Agreed. Less debt is good news for everyone but the aristocracy.

A huge debt bubble is right around the corner in the form of student loans.  

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August 10, 2014, 02:17:22 PM
 #9

It totally depends what we want to do with bitcoin! If we intend to use it solely as a store of value, it is a very good thing, because we can be sure our wealth won't lose value by becoming artificially inflated. But as a currency, the typical caveats of a deflationary currency to apply. At the moment we can't be sure it's only deflationary, there are still a lot of coins being generated, but it gets less every 4 years or so. It now totally depends on the rate of new money coming in.

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August 10, 2014, 02:27:42 PM
 #10

Isn't bitcoin being deflationary one of it's highlights and selling points?

If it wants to be a 'real' or useful currency, being deflationary isn't such a good thing to be. The points mentioned in the initial post describe the disadvantages of deflationary currencies. It's great for people who want to see their investment appreciate in value, but not for people who want to use it in order to buy stuff!

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August 10, 2014, 03:26:40 PM
 #11

It is interesting that none of your 8 reasons why deflation is bad actually described something bad happening -- except #8, which is false.

Both inflation and deflation are "bad" because they cause inefficiencies in the economy. At the same level, neither is worse than the other.

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August 10, 2014, 03:30:31 PM
 #12

Isn't bitcoin being deflationary one of it's highlights and selling points?

If it wants to be a 'real' or useful currency, being deflationary isn't such a good thing to be. The points mentioned in the initial post describe the disadvantages of deflationary currencies. It's great for people who want to see their investment appreciate in value, but not for people who want to use it in order to buy stuff!

I don't see how it can't be a real currency. Who wants one that a central bank can ruin at any moment?
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August 10, 2014, 05:12:11 PM
 #13

Isn't bitcoin being deflationary one of it's highlights and selling points?

If it wants to be a 'real' or useful currency, being deflationary isn't such a good thing to be. The points mentioned in the initial post describe the disadvantages of deflationary currencies. It's great for people who want to see their investment appreciate in value, but not for people who want to use it in order to buy stuff!
If an economy is based on a deflationary currency then it would be a bad thing as people would have an incentive to not spend money when they need to buy something. This creates a situation when there is negative economic growth. If an economy has a secondary currency that is deflationary then this would not be an issue. 
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August 10, 2014, 05:16:50 PM
 #14

Isn't bitcoin being deflationary one of it's highlights and selling points?

If it wants to be a 'real' or useful currency, being deflationary isn't such a good thing to be. The points mentioned in the initial post describe the disadvantages of deflationary currencies. It's great for people who want to see their investment appreciate in value, but not for people who want to use it in order to buy stuff!
If an economy is based on a deflationary currency then it would be a bad thing as people would have an incentive to not spend money when they need to buy something. This creates a situation when there is negative economic growth. If an economy has a secondary currency that is deflationary then this would not be an issue. 

But people are spending it, though I reckon more people probably hoard it.
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August 10, 2014, 05:18:18 PM
 #15

Isn't bitcoin being deflationary one of it's highlights and selling points?

If it wants to be a 'real' or useful currency, being deflationary isn't such a good thing to be. The points mentioned in the initial post describe the disadvantages of deflationary currencies. It's great for people who want to see their investment appreciate in value, but not for people who want to use it in order to buy stuff!

I'm sorry, but are you a troll?

I'd rather not use my USD that are getting pumped out faster than paper. It really makes no sense, right? And your saying it's bad for buying?

Inflated currencies lose value quickly, and are lower in value. If your saying it's bad for buying, then, holy god.

And if it can't be a currency unless it's inflationary, how come it's recognized as a currency?
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August 10, 2014, 05:20:02 PM
Last edit: August 10, 2014, 06:30:11 PM by Lethn
 #16

Deflation is good, because the assets will be worth more money, but at the moment there is still a high number of new bitcoins getting in the market.

That's inflation forcing up the prices, deflation makes absolutely everything cheaper so people won't need to have assets rise in value in the first place, when a currency is deflationary it makes it easier to buy things because of this, inflation does the opposite.

It's all to do with the amount of currency actually in circulation when you have less it's usually worth more so it can buy more things, when you have something like paper which can be printed in infinite quantities then you get the Zimbabwe and Weimar Republic problem of having so many notes that you need tens of thousands of them to buy anything.

Japan and Argentina are currently heading towards that stage as well, in Japan depending on where you go of course a detached house can cost ¥8,500,000 whereas if we're talking British pounds it will be something like £50,000.
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August 10, 2014, 07:19:30 PM
 #17

Deflation is good, because the assets will be worth more money, but at the moment there is still a high number of new bitcoins getting in the market.

You have that exactly backwards. Deflation causes (or is, depending on how you define it) falling prices.

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August 11, 2014, 04:54:59 AM
 #18

Isn't bitcoin being deflationary one of it's highlights and selling points?

If it wants to be a 'real' or useful currency, being deflationary isn't such a good thing to be. The points mentioned in the initial post describe the disadvantages of deflationary currencies. It's great for people who want to see their investment appreciate in value, but not for people who want to use it in order to buy stuff!
If an economy is based on a deflationary currency then it would be a bad thing as people would have an incentive to not spend money when they need to buy something. This creates a situation when there is negative economic growth. If an economy has a secondary currency that is deflationary then this would not be an issue. 

But people are spending it, though I reckon more people probably hoard it.
There are a lot of people who are hoarding bitcoin. I think the number of people who are doing this has gone down somewhat this year as we have not seen the extraordinary returns this year as we have sen in the past, but there are still a lot of people who are doing this.
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August 11, 2014, 05:08:54 AM
 #19

First: let clear if you talking about monetary or price inflation:

https://bitcointalk.org/index.php?topic=140793.0


Bitcoin by itself is not deflationary in any sense. Now there are around 3600 new coins mined every day, so Bitcoin no has monetary inflation, and so it will be until 2140 or so.

Also Bitcoin has no price deflation, because the price can go down too, like happened this year and years before.

Bitcoin only prevents EXCESSIVE and ARBITRARY monetary inflation, and nothing more.

For me it is good, because we need something to counter the all might central banks and they stupid decisions that I have no control over, and most of the times don't benefit me.

 
 
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August 11, 2014, 08:11:26 AM
 #20


How could deflationary on Bitcoin?

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August 11, 2014, 08:58:49 AM
 #21

First: let clear if you talking about monetary or price inflation:

https://bitcointalk.org/index.php?topic=140793.0


Bitcoin by itself is not deflationary in any sense. Now there are around 3600 new coins mined every day, so Bitcoin no has monetary inflation, and so it will be until 2140 or so.

Also Bitcoin has no price deflation, because the price can go down too, like happened this year and years before.

Bitcoin only prevents EXCESSIVE and ARBITRARY monetary inflation, and nothing more.

For me it is good, because we need something to counter the all might central banks and they stupid decisions that I have no control over, and most of the times don't benefit me.

 
 

It is price deflation that I refer to.

This was posted in Feb 2013 when bitcoin was approx $25 / coin...how much price deflation has occurred since then ? Smiley

https://bitcointalk.org/index.php?topic=140793.0

.Price-Deflation is what you are used to hearing about in Bitcoin. That term is used to describe the prices of goods/services as they decrease, because the value of Bitcoin goes up.

Price-Inflation is the opposite. When prices of goods/services increase because the value of Bitcoin goes down.

So, when dealing with Price-Inflation or Deflation, there is an inverse relationship of price and value, in regard to goods/services and Bitcoin.

Example: As the Bitcoin price goes from $10 to $20, the prices of goods/services goes down from 20BTC to 10BTC. As the Bitcoin price goes from $20 to $10, the prices of goods/services goes from 10BTC to 20BTC!


However having seen some of the posts....excesses to either will be damaging, although currently deflation for Fiat may be preferred for a while to counter act the awful ( real) inflation figures and particularly food/ utilities inflation this year.. Ultimately a stable price with little or no deflation or inflation is what should be aimed for ..but I would suggest after the current excessive inflation has been off set by some deflation..


http://www.bankofengland.co.uk/archive/Documents/historicpubs/qb/1994/qb940201.pdf

Indeed prices have risen more
quickly in the last 50 years than in any similar period since
1694; the index of prices tripled between 1694 and 1948,
but has risen almost 20-fold since.
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August 11, 2014, 09:05:54 AM
 #22

Isn't bitcoin being deflationary one of it's highlights and selling points?

If it wants to be a 'real' or useful currency, being deflationary isn't such a good thing to be. The points mentioned in the initial post describe the disadvantages of deflationary currencies. It's great for people who want to see their investment appreciate in value, but not for people who want to use it in order to buy stuff!
If an economy is based on a deflationary currency then it would be a bad thing as people would have an incentive to not spend money when they need to buy something. This creates a situation when there is negative economic growth. If an economy has a secondary currency that is deflationary then this would not be an issue. 

Control question: Why would anybody offer to sell anything at all in the current inflationary environment, when they can get more by holding the things and selling them next year?


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qwerty555
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August 11, 2014, 09:15:03 AM
Last edit: August 11, 2014, 09:32:24 AM by qwerty555
 #23

Isn't bitcoin being deflationary one of it's highlights and selling points?

If it wants to be a 'real' or useful currency, being deflationary isn't such a good thing to be. The points mentioned in the initial post describe the disadvantages of deflationary currencies. It's great for people who want to see their investment appreciate in value, but not for people who want to use it in order to buy stuff!
If an economy is based on a deflationary currency then it would be a bad thing as people would have an incentive to not spend money when they need to buy something. This creates a situation when there is negative economic growth. If an economy has a secondary currency that is deflationary then this would not be an issue.  

Control question: Why would anybody offer to sell anything at all in the current inflationary environment, when they can get more by holding the things and selling them next year?



in reality people sell all the time no matter what the environment..depending on their specific circumstances..merchants will sell coin received due to cash flow requirements/ regulatory requirements or they may not yet be bitcoin converted people..

Others may be forced to sell for immediate needs or they are not definitely sure that the market will push ahead in their time frame or they sell in the hope to buy back cheaper on a future dip.

when sellers are in short supply ..that's the time for the next push up.  and this is very pronounced in bitcin due to the relatively very limited supply. This can be inferred from the May 17th  daily volume of only $19M at around $450 / bitcoin and the low volumes leading up to that low before the sudden upswing to $650 by June 6th and a volume of $179 M on May 24th at $550  where lots of sellers were suddenly found after the price rose

http://www.quandl.com/BCHAIN/ETRVU-Bitcoin-Estimated-Transaction-Volume-USD
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August 11, 2014, 12:17:15 PM
Last edit: August 11, 2014, 05:59:35 PM by TippingPoint
 #24

Deflationary Bitcoin is the alternative to inflationary fiat currency.

Bitcoin deflation inforced by cryptography.  Fiat inflation fueled by politicians seeking votes and continued power.
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August 11, 2014, 12:51:41 PM
 #25

Only time will tell what will happen in the future. I think its is good that bitcoin have tendencies to deflate. Standard currencies can only inflate as far as I can tell and that is not positive at all...
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August 11, 2014, 12:57:27 PM
 #26

Only time will tell what will happen in the future. I think its is good that bitcoin have tendencies to deflate. Standard currencies can only inflate as far as I can tell and that is not positive at all...

This is exactly what I was going to say. I think bitcoin will be a good experiment to wheter it is good or bad or not. Interesting to watch for sure.
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August 17, 2014, 12:57:21 PM
 #27

Isn't bitcoin being deflationary one of it's highlights and selling points?

If it wants to be a 'real' or useful currency, being deflationary isn't such a good thing to be. The points mentioned in the initial post describe the disadvantages of deflationary currencies. It's great for people who want to see their investment appreciate in value, but not for people who want to use it in order to buy stuff!
If an economy is based on a deflationary currency then it would be a bad thing as people would have an incentive to not spend money when they need to buy something. This creates a situation when there is negative economic growth. If an economy has a secondary currency that is deflationary then this would not be an issue. 

Control question: Why would anybody offer to sell anything at all in the current inflationary environment, when they can get more by holding the things and selling them next year?

Because most people don't live off bitcoins mined/bought at 1 dollar ? The farmer can't hold his tomatoes or peaches, either he sells them or they're worth nothing. He can hold grain though, and this has caused famines.

What is needed is neither inflation or deflation, both are bad. But the main problem isn't even there, it's in things like development, growth, way of life, etc. What do we want to achieve, what can the environment sustain, what will happen when all the Asians and Africans will be able to buy a car and an iPhone, etc.

I don't think Bitcoin is much help in this matter.

Most of you seem to be hailing from the US, so I will describe what's happening here in the Eurozone where deflation is upon us, thanks in part to a strong Euro : no economic growth and high unemployment. Good or bad, you decide, but it is what it is.
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