Am I misunderstanding this or?

[Etlase2]

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

What is with this attitude among bitcoin users? It almost feels like an indoctrination.

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.

Some people. Anyone who makes a statement regarding economics that says "All people do this" is in for a bruising. Many, many people save via investments. This means they have stuff they want LATER rather than NOW. Like a good retirement plan. Of course there are always the needs that take precedence like food and shelter. It isn't the needs or the lack thereof that could potentially cause a deflationary spiral or just a general sluggishness to the bitcoin economy, it is the wants. But in bitcoin, the long-term wants can often be satisfied just by holding currency instead of actually investing. This, in turn, further reduces the liquidity and further increases the value of bitcoins. If the balance of the long-term wants changes vs. the short-term wants/needs, you can have lots of deflation and inflation and economic turmoil every time it seesaws.

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.

Although I feel like a broken record, I will link this site again since it explains this misinformation so well: http://austrianeconomics.wikia.com/wiki/Deflation

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 you'll get more than that $2.50 in the future.  (Or, more likely, will replenish for the bitcoins from the stash that was used to buy the mobile refill card.)

Unfortunately this example is disconnected from reality until bitcoin is pervasive in an economy. Instead, exchanges will be the ones more than making up for that $2.50 discount as well as bank transferring fees. If you want businesses to do business in bitcoins, they're eventually going to need bitcoin loans. Bitcoin loans will always be inherently dangerous for both the lender and the borrower because of the volatility. More people using bitcoin in actual commerce will not lower volatility, it will increase it as bitcoins become more and more scarce. How many decades will it take for bitcoin to be pervasive? How many massive economic swings will bitcoin have on periods of decades?

With this system of money having almost half of all the coins to ever be produced already produced, a banking cartel must either pop up among the early adopters and start giving out bitcoin loans, or we will see more bubbles and bursts like last year, turning away any self-respecting businessmen and heavily delaying any real adoption. This is my opinion, but feel free to call it absurd in your opinion.

[1714852356]

1714852356

[Cluster2k]

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?

It's an interesting question that I have in the past grappled with.  I sold mined bitcoins for between $7 and $24 in 2011.  At the time this forum was full of proclamations that bitcoin's value would continue to soar.  One post claimed if the price of a BTC wasn't $100 by the end of 2011 he would be "amazed".  Yet, I sold anyway, knowing full well that there is a limited supply of bitcoins.

The key point here is, new bitcoins can become scarce.  But scarce things aren't valuable if lots of people don't want them.  I can sign my name to a drawing.  There's only one in the world.  Yet it's not automatically worth a million dollars because no one wants it.  Same with bitcoin.  Its value will only go up if many more people want to use it, regardless of its designed scarcity.

[Etlase2]

Oh waaaahhh... Says he who keeps using the dreaded "deflationary spiral" boogieman, even though he knows that it relies on a flawed theory that all people (or at least an overwhelming majority) base their personal valuation of bitcoin on recent moves in the exchange rate. Surely the mere existence of people like AnonymousBat makes it less likely that 'everyone' will naively invest in a herd-like manner and thus create another bubble?

If you actually take the time to read and digest what I wrote.. It doesn't have to be 'everyone' doing anything. It is the balance getting upset that causes problems. The balance can be anything between saving/spending/hoarding/investing, but it is the change in those factors that matter. Upsetting that balance is something that financial minds have been instigating for centuries now. Why everyone is so gung-ho to run headfirst into a system of money with ultimate financial control laying with those who hold the most coins is beyond me.

"Personal valuation" is a red herring because it matters not what you think you're worth, it matters what the economy thinks you're worth. If your argument eventually boils down to "it's a better version of gold", then that's fine, but you don't see people trading gold for short-term needs. And while bitcoin may be convenient in the transactional sense, it is, like gold, not so in the financial sense to trade it over something that will depreciate. Since it is unlikely for the reasons in my last post that any significant portion of an economy will ever get paid in bitcoins, the exchange and transactional costs of bitcoin will remain rather high and probably provide little appreciable benefit over credit cards.

If you can't work the whole system through bitcoins, it is always going to be measured by its exchange rate. If you try to work the whole system through bitcoin, you are going to get cycles of massive deflation followed by inflationary sell offs (or spending sprees; or better yet, new loans!). That is bitcoin's only means of expanding its economy in any manner other than the utmost crawl.

[JoelKatz]

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 you could wait and get a better computer for less is already built into the prices you pay for computers. This fact makes a computer worth less, and as a result, someone has to charge less to get you to buy one. What people forget is that future value and future changes, to the extent they are predictable, are already baked into today's market. That's why when a company announces an increase in earnings, but it's less than expected, their stock price drops.

[realnowhereman]

Let's remember that price is the indicator that explains the balance point in any economic situation.

As price increases the hoarders make more and more profit... until...  they make the decision to maybe spend a little of that profit to improve their lives.  At which point the hoarders who are driving the price up become spenders who are driving the price down.

Aggregate that over all people with all their individual opinions and the market eventually finds a price where the hoarders' upward pressure on price equals the spenders' downward pressure on price.

That is to say: there is no problem.  The price of bitcoins will adjust until price inflation and deflation are in balance according the the preference of the market.

[Technomage]

But in bitcoin, the long-term wants can often be satisfied just by holding currency instead of actually investing. This, in turn, further reduces the liquidity and further increases the value of bitcoins. If the balance of the long-term wants changes vs. the short-term wants/needs, you can have lots of deflation and inflation and economic turmoil every time it seesaws.

BS. Holding currency does not "further reduce" or "further increase" anything, this the default situation with a currency that stores value better. It would only "further" anything if people hold more coins than they usually hold. The other thing that is BS is the fact that in a large economy it won't cause swings anywhere regardless of how the short term wants/needs change. The wants/needs might change in a single market but a single market is not enough to significantly affect the entire Bitcoin economy.

This means that even though there are changes in needs/wants, the overall picture does not suddenly change anywhere. In fact the economic "turmoil" would be much less relevant in a Bitcoin-type economy. We would have less growth, less bubbles, less crashes. It would be boring in many respects but the economy would be much more sound. We would have real growth and real growth alone, not growth boosted by keeping cheap credit available at all times.

Bitcoin loans will always be inherently dangerous for both the lender and the borrower because of the volatility. More people using bitcoin in actual commerce will not lower volatility, it will increase it as bitcoins become more and more scarce. How many decades will it take for bitcoin to be pervasive? How many massive economic swings will bitcoin have on periods of decades?

With this system of money having almost half of all the coins to ever be produced already produced, a banking cartel must either pop up among the early adopters and start giving out bitcoin loans, or we will see more bubbles and bursts like last year, turning away any self-respecting businessmen and heavily delaying any real adoption. This is my opinion, but feel free to call it absurd in your opinion.

I'll do it for him: this is absurd. Nobody knows if Bitcoin will explode or not, grow or not. People will keep selling, in fact they will sell more the higher the price is. Have you not seen the Bitcoin market in the last 6 months? It is getting more liquidity. It is much more stable, much more mature. It is this liquidity that will make things better. It's still likely that we will experience more bubbles in the future but the overall stability will only increase with further growth and increased liquidity.

So far, to this date, Bitcoin adoption and Bitcoin growth is not phased by the volatility. It's growing, getting more serious, getting more liquidity, slowly but surely. Everything Etlase2 is talking about is empirically proven wrong by Bitcoin each and every single day. The single most important reason why Bitcoin-enthusiasts usually sidestep this whole issue is because it HAS NO MERIT. I will worry about this whole "issue" if it ever becomes an issue, meanwhile Bitcoin is doing quite fine just like this.

[Technomage]

It's an interesting question that I have in the past grappled with.  I sold mined bitcoins for between $7 and $24 in 2011.  At the time this forum was full of proclamations that bitcoin's value would continue to soar.  One post claimed if the price of a BTC wasn't $100 by the end of 2011 he would be "amazed".  Yet, I sold anyway, knowing full well that there is a limited supply of bitcoins.

The key point here is, new bitcoins can become scarce.  But scarce things aren't valuable if lots of people don't want them.  I can sign my name to a drawing.  There's only one in the world.  Yet it's not automatically worth a million dollars because no one wants it.  Same with bitcoin.  Its value will only go up if many more people want to use it, regardless of its designed scarcity.

Indeed Etlase2's argument lacks any thought on the DEMAND of bitcoins. He is talking about the supply only. The fact of the matter is that if the demand for bitcoins is decreasing at a higher rate than the supply decreases (through increased hoarding), there will be in fact inflation, not deflation. Once the hoarders realize this problem they will start getting rid of their coins with a cheaper price, making the coins available and cheaper again which will again increase the demand for coins.

The same goes for loans basically. In a growing economy where demand for coins is increasing, hoarding will undoubtedly increase. Loans will get more expensive. Investing gets more difficult unless the investment is good enough. Most investments would be savings based. This in turn would decrease the growth of the economy and lead to a decrease in the DEMAND for coins. Which would in turn decrease hoarding and that would lead to a decrease in the price of bitcoins. In reality it doesn't go like this though, this implies that there would be wild swings all over the place. That is not true, the market would in fact be at an equilibrium a very high percentage of the time.

Most likely it would lead to an economy with a lower growth rate than traditional economies but at the same time we would have 1000 times less issues with debt. Debt bubbles would not happen and there would be less government/corporate/individual debt problems. Also it would be JUST. With justice I mean that people who save money won't be punished for it at the expense of entities that live on cheap credit. In a free market it's highly unlikely that people would want to hold money that melts while you have it, if there is a convenient alternative. Bitcoin provides this convenient alternative.

[Etlase2]

It would only "further" anything if people hold more coins than they usually hold.

I did say "If the balance of the long-term wants changes vs. the short-term wants/needs" and further explained it in the later post.

The other thing that is BS is the fact that in a large economy it won't cause swings anywhere regardless of how the short term wants/needs change.

How is it again that bitcoin has solved every economic problem known to man again? "Swings have never happened in large economies... DERP"

We would have less growth, less bubbles, less crashes. It would be boring in many respects but the economy would be much more sound. We would have real growth and real growth alone, not growth boosted by keeping cheap credit available at all times.

Right in about 12 years when almost all the bitcoins are mined, businesses will have only high-interest credit available to expand the bitcoin economy. The economy that won't be expanding. While it's one thing to argue that inflationary currency may cause runaway growth and the business cycle, bitcoin will hinder the growth process every step of the way. Since the majority of bitcoin "growth" would actually just be existing economies adopting bitcoin, these existing economies must somehow be convinced that borrowing bitcoins is the way forward. Borrow the currency that is easier to pay back as time goes on, or borrow the currency that is harder to pay back as time goes on. Hrmm.

I'll do it for him: this is absurd. Nobody knows if Bitcoin will explode or not, grow or not. People will keep selling, in fact they will sell more the higher the price is. Have you not seen the Bitcoin market in the last 6 months? It is getting more liquidity. It is much more stable, much more mature. It is this liquidity that will make things better. It's still likely that we will experience more bubbles in the future but the overall stability will only increase with further growth and increased liquidity.

Wowee 6 whole months where bitcoin only doubled and a half in value just after exponentially growing and catastrophically falling. Looks stable to me! And broseph, the point I am making is if bitcoin starts growing, not when. Imagine if walmart were to put in bitcoin checkouts and accept BTC for everything and in fact at a reduced price. Assume they just stored all revenue for a year, $400 billion or so. How many coins are for sale on the market right now? 1% maybe? I can't get on mtgoxlive to check for sure. Let's just say they're all for sale, $400 b/10m = 8,000x the value of today's bitcoin. If only 1% are ever available for sale, it could be 800,000x. And that is just one big business.

So far, to this date, Bitcoin adoption and Bitcoin growth is not phased by the volatility. It's growing, getting more serious, getting more liquidity, slowly but surely. Everything Etlase2 is talking about is empirically proven wrong by Bitcoin each and every single day. The single most important reason why Bitcoin-enthusiasts usually sidestep this whole issue is because it HAS NO MERIT. I will worry about this whole "issue" if it ever becomes an issue, meanwhile Bitcoin is doing quite fine just like this.

"So far, to this date, Bitcoin adoption and Bitcoin growth is not phased by the volatility." This sounds like a statement that requires facts. Where are you getting your bitcoin adoption numbers and where are you getting the opinion that non-adopters are unphased by the volatility? The issue has plenty of merit, bitcoin-enthusiasts sidestep it because the issue is ugly. Instead you'd rather kick the can like so many politicians do with the world's debt. Good show, works on suckers. Maybe if enough people say it has no merit others will believe it to be true.

[hazek]

Isn't it awesome how it absolutely doesn't matter how wrong Etlase2 beliefs about economics are to how Bitcoin functions? I just can't wait till we are like 5-10years down the road when this experiment single-handedly puts to rest all these fallacious theories people who'd like to control other people always promote as the economic truth..

Oh how sweet the last laugh is going to be.  

[Etlase2]

lol as if I've tried to promote anything as economic truth. Am I sitting here expounding upon the benefits of an inflationary currency? No. I'm just telling you that deflation is fucking mental. I'm not trying to control anyone. I don't sticky threads that tell people not to question, nor do I make non-arguments in the same vein. You know, like telling somebody they're wrong but having nothing but at best a quote from the surely unbiased wiki rather than a single, intelligent thought of his own.

[hazek]

I'm just telling you that deflation is fucking mental. I'm not trying to control anyone.

And the Bitcoin experiment will show that it's not and that in fact it's you who is mental for continuing to use what we all showed to you were fallacies as evidence for your ridiculous theories.

Awesome right?

[JoelKatz]

Don't worry about it, since predictable, long-term deflation of bitcoins is essentially impossible. Predictable, long-term deflation of bitcoins would mean that at some point, rational people would rather have 100 bitcoins next year than 100 bitcoins today. But 100 bitcoins today *includes* the ability to have 100 bitcoins next year. So it cannot possibly be worth less.

Whatever the value of 100 bitcoins today is, it necessarily includes almost all of the present, expected value of 100 bitcoins next year.

To the precise extent expected deflation makes a person want to horde bitcoins to gain the benefit of that deflation, it precisely equally makes other people want to induce that person to part with those bitcoins, so that the other person can obtain that same benefit.

"My bitcoins are going up in value, so I don't want to part with them" is perfectly met with "Your bitcoins are going up in value, so I'll give you more to get them from you". It cancels out. (Not perfectly, of course, but to a first approximation.)

*Unpredictable* deflation, however, is very bad. But then, almost anything unpredictable is bad for an economy.

[Etlase2]

And the Bitcoin experiment will show that it's not and that in fact it's you who is mental for continuing to use what we all showed to you were fallacies as evidence for your ridiculous theories.

Awesome right?

So let me get this straight: to prove my opinion to be based on fallacy, we have to wait for the bitcoin experiment to do something or act in a way in the future that we do not yet know will happen.
Ergo, we need to predict the future to possibly prove me wrong, and that is the best argument you've got. Got it.

Struggling with unpredictable and hard to understand money-printing?
Bitcoin fixes that scourge.

ROFL want to run that "greater number of zeros" whatsit by me again?

Bankers*:

every economic problem known to man

* footnote: not solved by bitcoin

Don't worry about it, since predictable, long-term deflation of bitcoins is essentially impossible.

...

*Unpredictable* deflation, however, is very bad. But then, almost anything unpredictable is bad for an economy.

I agree with both statements!

[hazek]

And the Bitcoin experiment will show that it's not and that in fact it's you who is mental for continuing to use what we all showed to you were fallacies as evidence for your ridiculous theories.

Awesome right?

So let me get this straight: to prove my opinion to be based on fallacy, we have to wait for the bitcoin experiment to do something or act in a way in the future that we do not yet know will happen.
Ergo, we need to predict the future to possibly prove me wrong, and that is the best argument you've got. Got it.

No you didn't get it unfortunately. In case your memory is that of a gold fish, not just me but most of us in this thread have already presented several indirect arguments with historical empirical evidence as perfectly valid counterarguments to your theories about Bitcoin's future which to a rational person would suffice to disprove it. The only thing we will unfortunately have to wait for about Bitcoin's future by definition is direct proof - a head on collision with reality - which with delusional people like yourself seem to be the only thing that will shut you up.

[Etlase2]

No you didn't get it unfortunately. In case your memory is that of a gold fish, not just me but most of us in this thread have already presented several indirect arguments with historical empirical evidence as perfectly valid counterarguments to your theories about Bitcoin's future which to a rational person would suffice to disprove it. The only thing we will unfortunately have to wait for about Bitcoin's future by definition is direct proof - a head on collision with reality - which with delusional people like yourself seem to be the only thing that will shut you up.

Can I get your source on historical empirical evidence used in this thread? Just a link or a quote please. And you yourself called bitcoin an experiment.

From wikipedia:

An experiment is a methodical trial and error procedure carried out with the goal of verifying, falsifying, or establishing the validity of a hypothesis.

How exactly can you be so cocksure about bitcoin's future when the experiment has barely begun? Are you simply a fraud? Because there is simply no other explanation for one who claims to know the outcome of an experiment before that experiment is finished. Nobody in the pro-bitcoin camp can even agree on what the hypothesis is exactly as far as I can tell. Some say it will replace all currency, some say it will just be a store of value, some say it will replace MC/Visa. It is obviously not a simple experiment, nor has one like it been done before, so any "historical empirical evidence" you come up with is misguided at best, fraudulent at worst. However, the real historical evidence in the price volatility of bitcoins should add some credibility to what I say, but of course you will dismiss it for some bumbling reason or another.

Totally. It must've been somebody else educating you the first time round, but I'll do my best.

The question was an ironic retort to your statement that understanding how fiat money is created is difficult.

[hazek]

No you didn't get it unfortunately. In case your memory is that of a gold fish, not just me but most of us in this thread have already presented several indirect arguments with historical empirical evidence as perfectly valid counterarguments to your theories about Bitcoin's future which to a rational person would suffice to disprove it. The only thing we will unfortunately have to wait for about Bitcoin's future by definition is direct proof - a head on collision with reality - which with delusional people like yourself seem to be the only thing that will shut you up.

Can I get your source on historical empirical evidence used in this thread?

For example just walk into any computer store you can find and ask them how much the stuff they are selling today cost a year ago and if that makes it impossible to run their business at a profit.

p.s.: You may repeat this experiment how many times you want.

[Etlase2]

For example just walk into any computer store you can find and ask them how much the stuff they are selling today cost a year ago and if that makes it impossible to run their business at a profit.

Sorry buddy, but you are Provably Inaccurate. http://austrianeconomics.wikia.com/wiki/Deflation

Deflation can cause a fall in prices. But calling falling prices "deflation" is a profound confusion between prosperity and depression. There are two distinct causes of generally falling prices. The leading cause of falling prices is economic progress, whose essential feature is an increasing production and supply of goods and services, which operates to make prices fall. The other is a decrease in the quantity of money and or volume of spending in the economic system. Falling prices is the only effect that they have in common. They differ profoundly with respect to their other effects.

And importantly:

Falling prices caused by increased production do not reduce the general or average rate of profit in the economic system and do not make debt repayment more difficult.

These are two completely separate concepts of price deflation and they are too often confused around here for the benefit of the pro-bitcoin argument. Additionally, the argument that the same stuff today is a lot cheaper than it was a year ago is a reverse-CPI-like trick to make it look like a deflation-friendly argument. The "average" computer price stays fairly level on a year to year basis, but the equipment that you get for that money improves every year. You can wait several years for the equipment you want to become second-rate and cheap, but by then you will have yourself a second-rate and cheap computer.

So no, this argument does nothing to address the question of how bitcoin's fixed money supply will affect a global economy that is likely to adopt it in spurts rather than a smooth, easy pace over centuries and how this might detrimentally affect almost everyone using it.

[hazek]

For example just walk into any computer store you can find and ask them how much the stuff they are selling today cost a year ago and if that makes it impossible to run their business at a profit.

Sorry buddy, but you are Provably Inaccurate.

See? Only the empirical evidence of the Bitcoin experiment will shut you and your delusions up so I'm not even going to bother refuting the fallacies you list..

[Etlase2]

My concerns are delusions but your clairvoyance is infallible and you give up on refuting anything because that means you'd have to, somewhere, actually make an argument.

Take note of the typical pro-bitcoin "argument", lurkers.

[hazek]

You still don't get it do you? I DON'T HAVE TO DO ANYTHING. The Bitcoin experiment will disprove your fallacies for me. 

All we need is time.