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No, that is not at all the argument. The argument is that you cannot have an economy run on a deflationary currency, which bitcoin is. An effective economy requ
by jbrun 9y ago
No, that is not at all the argument. The argument is that you cannot have an economy run on a deflationary currency, which bitcoin is. An effective economy requires a bit of inflation and the ability to issue new money when necessary for socio-political reasons. Crypto currencies are a cult, though the underlying tech is interesting.
- quincunx 9y agoWhile I understand the desire to have 2% inflation across the economy, wouldn't the individual parties prefer to hold their cash in a deflationary currency? Put differently and going fast forward; how can you have a mildly inflating currency (eg. EUR) when there's a deflationary currency (eg. BTC) as a viable alternative around? Would you propose we prohibit crypto currencies? (What would you propose?)
- jbrun 9y agoCrypto currencies can exist for those who want them, I don't see any reason to block them beyond ponzi scheme and marketing issues - similar to stock issues. So probably they need some regulation to not defraud unwitting people. Bitcoin is not an alternative to Euros. That is the whole point. If you switched all euros to bitcoins and asked people to trade those, the economy would collapse as no one would want to trade their bitcoins because mathematically, they increase in value due to the limited issuance of them. Without modest inflation, the economy cannot grow as no one would spend money for investment purposes.
- marcosdumay 9y agoWell, inflationary currencies have the natural tendency of displacing deflationary ones out of the market. Not the other way around. It takes a lot of inflation to reverse that relationship.
- mcguire 9y ago"While I understand the desire to have 2% inflation across the economy, wouldn't the individual parties prefer to hold their cash in a deflationary currency?" Typically, they'd prefer not to hold currency; they'd prefer to make an investment that gives a supra-inflationary return. This is, in general, good for the economy and the society. "Put differently and going fast forward; how can you have a mildly inflating currency (eg. EUR) when there's a deflationary currency (eg. BTC) as a viable alternative around?" I dunno, why isn't everyone parking their money in gold?
- dragonwriter 9y ago> wouldn't the individual parties prefer to hold their cash in a deflationary currency? Net (currency-denominated) creditors would. Net (currency-denominated) debtors would prefer inflation-adjusted currency. Those whose significant assets and obligations are not currency-denominated (e.g., who own mines or are committed to deliver commodities) don't really care, directly.
- Asdfbla 9y agoI don't disagree, but I suppose on a technical side it's possible to allow inflation in a cryptocurrency. The rate could possibly also be determined via some distributed consensus approach, though this again would likely not be particularly democratic without some central instance to keep track of voting identities (else you have to use stuff like proof-of-work which definitely isn't democratic in the least).
- miketery 9y agoWhat if they fork it? I agree with your main point though.
- jbrun 9y agoYou are just delaying the problem, not actually fixing it and who forks and when? Unless you change the way crypto currencies are made and allow for unlimited creation of new money, it cannot work as a general purpose currency.
- moduspol 9y agoEven that raises interesting questions, though. That only works as long as people choose or are de-facto forced into using the state currency. What if enough people would rather have their money increase in value than allow others in power to deflate it for "necessary socio-political reasons?"
- jbrun 9y agoThen you would not have an economy.
- urza 9y agoThen the author does not understand how cryptocurrencies work. There is nothing preventing to have inclationary currency, and indeed many such exists.
- jbrun 9y agoIsn't bitcoin limited in the number of coins that can be issued?