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If bitcoin achieved (a big if) wide adoption, it would be like keeping all your money in an index fund whenever you're not actively spending it. Its value would

by blfr 9y ago

If bitcoin achieved (a big if) wide adoption, it would be like keeping all your money in an index fund whenever you're not actively spending it. Its value would follow the growing economy.

altcognito 9y ago
Except deflation instead of inflation. Instead of sticky wages you'll be pressured to drop your hourly rates. Borrowing money would increase the cost of the loan, depending on the rate of value increase, you're looking at negative interest rates. Everything about deflation makes zero sense.
- PKop 9y ago
  You've identified who suffers and who benefits from the reversing of value positions caused by deflation vs inflation. But you haven't explained why its "worse"? So borrowers are disadvantaged compared to lenders (savers). And wage earners are in a better position relative to wage payers.. ? That's what I take away from your statement. But, one's ability to buy things seems to be improved... Should we want an inflationary economy more college-tuition, healthcare-cost-like... or computing & software-like? Continually falling prices for all things computing related have done wonders for that industry no? Would consumers be better or worse off having to spend less on food clothing housing energy? Would they have more or less disposable income with flat or falling prices? Ok now assume increases in those costs... better or worse off? More or less disposable income?
  - ffwd 9y ago
    > But, one's ability to buy things seems to be improved... It's only improved if there is a lot of investment and new / more products coming out. deflationary currency promotes holding on to your money so that it goes up in value, but if everyone does that there will be less products / services and the value of the currency will ultimately go down. If currency has some inflation, then it's used as a transaction currency so that you want goods rather than currency, so the product becomes the important thing. If you have too much inflation however you get way too much money for the amount of products, so you want stable inflation.
    - PKop 9y ago
      Won't interest rates be low if everyone is saving? Won't there be more investible cash because a lower percentage of one's wages is devoted to commodities, and essentials? As well, there is less of an incentive to stockpile or "get ahead" of future price increases. So.. more left over to invest? Does expectation of future flat or lower prices give you confidence to plan a vacation, invest extra money, etc.. or would you prefer to worry about food, gas, and other prices going up in the future? (along with your sticky wages making your real wage go down) In fact, I 100% agree that savings and investment are key to future growth, technology and the whole enchilada. Which is why I don't support stealth tax of inflation, or of governments debasing the currency and stealing wealth from citizens.
alextheparrot 9y ago
Can you clarify why this is the case? This seems to just describe inflation as if it is a net gain, meaning you wouldn't actually realize gains because the aggregate of goods you buy would increase proportionally.
tveita 9y ago
> it would be like keeping all your money in an index fund whenever you're not actively spending it But without even the pretense of funding businesses and actually participating in the economy. Your money can grow on hot air and wishes alone! Why don't we give all people some bitcoin, so everyone can grow richer and richer without doing anything.
- criddell 9y ago
  There's plenty of hot air and wishes behind regular currency as well. I have a plan to double the US GDP in one year: 1. I'll pay you $1 million to sing a song for me. 2. You pay somebody else $1 million to sing a song for you. 3. Continue doing this for n turns. 4. The last person pays me $1 million to sing them a song. The US GDP is around $20 trillion. That means we only need to set n to 20 million and we now have a $40 trillion economy.
  - yoz-y 9y ago
    Wouldn't somebody somewhere in this kind of transaction have to pay the VAT, thus rendering this impossible?
    - cnnsucks 9y ago
      The premise itself is fiction. The P in GDP doesn't stand for exchange or transaction. It stands for "Product." It measures the net amount of new wealth, not how many times existing wealth is transferred among parties. If I sing you a song and you pay me $1 million dollars and this process continues back and forth, the net amount of value when we stop is still $1 million and the net change to GDP is zero. People indulge a lot of strange and wrong ideas about economics and, not surprisingly, those bad ideas are typically well aligned with their preferred world views.
      - criddell 9y ago
        Services are also part of GDP. If I pay you to sing, that's part of GDP.

by blfr 9y ago

If bitcoin achieved (a big if) wide adoption, it would be like keeping all your money in an index fund whenever you're not actively spending it. Its value would follow the growing economy.

altcognito 9y ago

Except deflation instead of inflation. Instead of sticky wages you'll be pressured to drop your hourly rates. Borrowing money would increase the cost of the loan, depending on the rate of value increase, you're looking at negative interest rates. Everything about deflation makes zero sense.

PKop 9y ago
You've identified who suffers and who benefits from the reversing of value positions caused by deflation vs inflation. But you haven't explained why its "worse"? So borrowers are disadvantaged compared to lenders (savers). And wage earners are in a better position relative to wage payers.. ? That's what I take away from your statement. But, one's ability to buy things seems to be improved... Should we want an inflationary economy more college-tuition, healthcare-cost-like... or computing & software-like? Continually falling prices for all things computing related have done wonders for that industry no? Would consumers be better or worse off having to spend less on food clothing housing energy? Would they have more or less disposable income with flat or falling prices? Ok now assume increases in those costs... better or worse off? More or less disposable income?
- ffwd 9y ago
  > But, one's ability to buy things seems to be improved... It's only improved if there is a lot of investment and new / more products coming out. deflationary currency promotes holding on to your money so that it goes up in value, but if everyone does that there will be less products / services and the value of the currency will ultimately go down. If currency has some inflation, then it's used as a transaction currency so that you want goods rather than currency, so the product becomes the important thing. If you have too much inflation however you get way too much money for the amount of products, so you want stable inflation.
  - PKop 9y ago
    Won't interest rates be low if everyone is saving? Won't there be more investible cash because a lower percentage of one's wages is devoted to commodities, and essentials? As well, there is less of an incentive to stockpile or "get ahead" of future price increases. So.. more left over to invest? Does expectation of future flat or lower prices give you confidence to plan a vacation, invest extra money, etc.. or would you prefer to worry about food, gas, and other prices going up in the future? (along with your sticky wages making your real wage go down) In fact, I 100% agree that savings and investment are key to future growth, technology and the whole enchilada. Which is why I don't support stealth tax of inflation, or of governments debasing the currency and stealing wealth from citizens.

alextheparrot 9y ago

Can you clarify why this is the case? This seems to just describe inflation as if it is a net gain, meaning you wouldn't actually realize gains because the aggregate of goods you buy would increase proportionally.

tveita 9y ago

> it would be like keeping all your money in an index fund whenever you're not actively spending it But without even the pretense of funding businesses and actually participating in the economy. Your money can grow on hot air and wishes alone! Why don't we give all people some bitcoin, so everyone can grow richer and richer without doing anything.

criddell 9y ago
There's plenty of hot air and wishes behind regular currency as well. I have a plan to double the US GDP in one year: 1. I'll pay you $1 million to sing a song for me. 2. You pay somebody else $1 million to sing a song for you. 3. Continue doing this for n turns. 4. The last person pays me $1 million to sing them a song. The US GDP is around $20 trillion. That means we only need to set n to 20 million and we now have a $40 trillion economy.
- yoz-y 9y ago
  Wouldn't somebody somewhere in this kind of transaction have to pay the VAT, thus rendering this impossible?
  - cnnsucks 9y ago
    The premise itself is fiction. The P in GDP doesn't stand for exchange or transaction. It stands for "Product." It measures the net amount of new wealth, not how many times existing wealth is transferred among parties. If I sing you a song and you pay me $1 million dollars and this process continues back and forth, the net amount of value when we stop is still $1 million and the net change to GDP is zero. People indulge a lot of strange and wrong ideas about economics and, not surprisingly, those bad ideas are typically well aligned with their preferred world views.
    - criddell 9y ago
      Services are also part of GDP. If I pay you to sing, that's part of GDP.