Am I misunderstanding this or?

[Matthew N. Wright]

Oh and another thing:  hoard or save, please explain the difference to me.  It seems to me that people use the work hoard when they want it to sound "bad" and save (or savings) when they want it to sound "good".  That is the only difference I can see between the two.

I suppose the action is identical and only the intention different.

Saving is done with the intent to spend at a later date. Hoarding seems to imply wanting to 'have it all' just out of pure greed.

[BurtW]

Oh and another thing:  hoard or save, please explain the difference to me.  It seems to me that people use the work word hoard when they want it to sound "bad" and save (or savings) when they want it to sound "good".  That is the only difference I can see between the two.

I suppose the action is identical and only the intention different.

Saving is done with the intent to spend at a later date. Hoarding seems to imply wanting to 'have it all' just out of pure greed.

I hate it when one of my spelling mistakes get quoted for all eternity.

[memvola]

If bitcoins are so valuable to you that you won't spend them near the market rate on stuff you want then you should buy more coins until they aren't so precious to you.

Exactly.

Also, as long as I can freely exchange BTC and EUR, regardless of what Bitcoin is worth today or my expectation of its worth tomorrow, if I want to buy an apple, it doesn't matter whether I buy it using BTC or EUR. Instead of keeping some of my money in EUR, I could keep it in BTC, but the value exchanged would be the same.

Let's say, in the ideal condition where I know BTC will be worth more tomorrow (and others don't -- otherwise it would be worth more now), and I can use both BTC and EUR to buy the same things, keeping EUR provides no advantage to me. Nor, using BTC would make me spend less. If this weren't true, then the mere existence of gold (or land, or BTC) would make the market stagnate.

I think the perceived problem is merely psychological. Or maybe the difference is a result of the fact that Bitcoin is not legal tender.

[RodeoX]

For me the answer has something to do with liquidity. Consider our earlier comparison to gold. Unlike gold I can turn my bitcoins into cash or merchandise in a few minutes.

[Technomage]

Have we not had these discussions like gazillion times? From the consumer point of view hoarding is never an option so I don't know where people come up with this. Yes, you can certainly hoard, but then you'd first of all starve and you'd also not be able to do anything else either. For example, you couldn't use a computer, because you'd instead hoard money. Or watch TV, because you wouldn't buy one. Is this rational behaviour? It isn't. In fact technology seems to develop at an accelerating rate and older technology gets cheap really fast, still people buy stuff like no tomorrow.

Loans and loan based investments is another issue, which is not a problem with Bitcoin either. Bitcoin's monetary model makes loans very expensive during economic growth which means that it's difficult for growth bubbles to form. We would have far less bubbles in general with the kind of monetary model Bitcoin uses, simply because sustaining a strong growth rate is much more difficult since it must be increasingly savings based as the growth rate increases (economic growth increases the value of money in a fixed supply model). I really recommend reading this particular article: http://mises.org/journals/qjae/pdf/qjae6_4_3.pdf

Finally I'd like to add that none of this has actually any relevance to Bitcoin at this point in time. Bitcoin is not used as an independent currency yet. What we're talking about is relevant perhaps next decade. Still I'm confident that Bitcoin's monetary policy could work quite fine even when used independently. It's a very interesting experiment, technically, socially and economically.

[Nesetalis]

I should point out, that very few people actually spend all the money they earn.
Spending as soon as you earn it, is stupid, pointless, and not thinking about the future.

But you do have to spend some of it, generally, or as some one else said, you will starve :p

[Stephen Gornick]

I should point out, that very few people actually spend all the money they earn.
Spending as soon as you earn it, is stupid, pointless, and not thinking about the future.

The percentages vary based on how the survey was performed, but the numbers range from 35% to 70% of all Americans live paycheck to paycheck.

 - http://www.nakedcapitalism.com/2011/10/one-third-of-americans-one-paycheck-away-from-homelessness.html
 - http://www.dsnews.com/articles/job-loss-could-put-one-in-three-homeowners-out-of-their-home-2011-09-30

[Nesetalis]

Ok, let me rephrase...
very few people SHOULD live paycheck to paycheck if they can help it

[memvola]

hoarding reduces the potential value that can get created in the first place.

Just to make clear, this argument is against the existence of such instruments, not just hoarding. If there is any instrument that will skyrocket, people will invest in them instead of investing in value-generating businesses.

So, (with your terminology) non-value-generating instruments should not deflate as a general rule?

In a low-friction world, that wouldn't make sense because rates would reflect this immediately and then people could get on with their businesses. If the increasing rate is a result of value-generation, then it would make sense to invest in these businesses instead of holding the currency itself.

On the other hand, I agree that there may be causes that make hoarding worthwhile. Maybe you have easier means of getting the item/currency/asset than the rest of the population, for a limited amount of time (e.g. hoarding of food items in famine). Maybe you know something they don't. This is analogous to the case of Bitcoin IMO. Bitcoin nerds (maybe rightfully) think they know something the rest of the population haven't discovered yet. This poses a chicken-and-egg problem though, which does also lead the price down, so how much sense it makes depends on what you know. If we really think the exchange rate of BTC will skyrocket, the Bitcoin-bashers are doing us a service by keeping the price low.

In the ideal situation where everyone has clear access to the same information and same trading opportunities, the above wouldn't be a problem. Bitcoin makes this more possible, not less. Doesn't matter how scarce it is or how it's generated IMHO. Transparency removes friction, which reduces the incentive to hoard.

[memvola]

I was basically saying that by speculating, I'd have less money to meaningfully invest at the same time. And based on that logic, I guess I was equating hoarding with speculation.

Makes sense actually. Thanks for clarifying.

[hashman]

...they know bitcoins are becoming scarce (wich equals to more value) while time passes?

They don't know that, because it's false.
Bitcoins are being created to the tune of 1 fresh one every 12 seconds or so. 
--> They are becoming less scarce. 

May, 2012 

[molecular]

Because the majority are not really into bitcoins and don't want to undertake any complicated investing proces with bitcoins.
They just bought bitcoins with only one reason. It's gonna get scarce and the value will rise. They see it as a long term investment.

funny, I thought you were going to say: "They just bought bitcoins with only one reason. To buy gardening supplies from silkraod. They see it as a means of exchange"
[/quote]

I acquired the bulk of my coins in the hope they would rise in value (not USD-value, but use-value). Whenever I'm about to spend some, I just buy some more using fiat for that purpose and keep the ones I already have.

[johnyj]

I'm willing to spend 30% of my BTC income forever, if that income is steady and sustainable

The biggest problem that no one use BTC is because they do not have BTC income directly, if companies start to give out BTC as salary, then it will make some sense

[bigbeninlondon]

Why would the majority of the people that have bitcoins spend them if they know bitcoins are becoming scarce (wich equals to more value) while time passes?
And to get the value of bitcoin raising you need a running economy right?
Doesn't these two things conflict with each other or am I misunderstanding something here?

Thanks for enlighting.

-Grouver-

Replace "bitcoin" with "gold" and you might be able to answer that yourself.

Or "electronics".  Every day a new gadget is coming out.  Why buy a computer now when you can wait and buy one later that's faster for the same price or cheaper for the same speed?  Deflation isn't always bad, despite what the Keynesians want you to think.

[hazek]

Why would the majority of the people that have bitcoins spend them if they know bitcoins are becoming scarce (wich equals to more value) while time passes?

Why would the majority of people buy new computers if they can wait half a year and get a significant discount?

EDIT: lol now that I actually read the thread I see several other people pointing out this exact same example 

[hazek]

To say it simple.
How many people are selling there gold now?
Not alot I guess, since its a long term investment for the most right?
Why do they not sell there gold? Cause they believe its getting worth more in the near future right?

Doens't Bitcoin have the same thing right now?
Also, lets not forget that alot of people bought high when Bitcoin price was at its peak or above $10 and don't want to sell low.
They can just hoard it and wait till it gets high again some time around 2020.

I'm selling some of my stash whenever I need more fiat to pay the bills.

[Seal]

Why spend today if I can spend the half of the ammount for the same thing tommorow?

Why buy my groceries today with my $10 when I can buy them next year, with interest I'll have $10.40!

Answer? I need to eat today.

[paraipan]

Why spend today if I can spend the half of the ammount for the same thing tommorow?

Why buy my groceries today with my $10 when I can buy them next year, with interest I'll have $10.40!

Answer? I need to eat today.

anyone's in for a snack ?

[AnonymousBat]

News flash to Keynesians:

There is no guarantee that Bitcoins will be worth more in the future, but even if they are worth more, people prefer to have stuff they want NOW rather than LATER.

For example, I know that in six months, I can get a better and cheaper computer for less money than I can today, so why do I buy one today? BECAUSE I WANT IT NOW.

The fact that there is exchange of currency proves this whole theory false, because the theory is there would be no exchange if everyone thinks the currency will go up in value, yet if you look at the market place, there are transactions being made.

This theory is absurd and false, can we focus on real stuff now? Thanks.

[Stephen Gornick]

News flash to Keynesians:

There is no guarantee that Bitcoins will be worth more in the future, but even if they are worth more, people prefer to have stuff they want NOW rather than LATER.

Then consider this as well:

Let's say you pay a $100 monthly Pay As You Go refill charge to T-Mobile.

Will you pay $100 to T-Mobile using your credit card or will you pay $97.50 worth of bitcoins?
 - http://bitmit.net/en/trade/i/2793-100-t-mobile-usa-prepaid-wireless-airtime-refill/description

One reason T-Mobile charges $100 for that is they are losing $2.75 to the merchant fees (Visa/MC/AmEx).  So they charge you $100 but they only get $97.25.

They do offer a discount to wholesale resellers, but those resellers too pay merchant payment card fees so they don't offer for sale below $100 either.  Especially after considering the extent of the problem they have with chargeback fraud.

But there remains the BTC equivalent of $97.50 for buyiing from Tangible Cryptography (through BitMit)

So even if Bitcoins might appreciate in value in the future, a rational person is going to take advantage of the $2.50 discount today rather than hope to gain more than that $2.50 in the future from speculating.  (Or, more likely, will replenish for the bitcoins from the stash that was used to buy the mobile refill card.)