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In that theoretical world that punishes savers by telling stories of deflation bogeymen, I'm sure. In the real world, I like beer, and when I want to buy a bee

In that theoretical world that punishes savers by telling stories of deflation bogeymen, I'm sure. In the real world, I like beer, and when I want to buy a beer, I buy a beer. Except now I can buy more beer, because my savings haven't been debased.

emodendroket 9y ago
A beer is one thing. Only a madman would take out a mortgage, auto loan, or large business loan denominated in a rapidly deflating currency.
- Frogolocalypse 9y ago
  > Only a madman would take out a mortgage Oh that's the crux of it alright. And why should someone take on debt for a fixed asset? Why exactly should a fixed asset increase in cost? Without debt to fuel that fixed-asset price increase, prices will again align with income, not the amount of debt people are capable of servicing. People will no longer acquire housing, leaving it empty, simply for the capital gain. Bitcoin is the reckoning for that fixed-asset debt bubble. > large business loan If they have a business plan that allows them to create capital by having income greater than expenses, people will invest in their business. If they are just going to sit on assets and expect inflation to take care of it, they won't.
  - emodendroket 9y ago
    Because a house I can live in now is worth more to me than a house I can maybe live in in 30 years? Even if you are unconcerned with mortgages, though, loans are the basis of most business operations; in a world where taking out loans doesn't make sense presumably we'd see a lot less economic activity and a lot more just sitting on money waiting for it to deflate. Unless you have some sort of alternate economy in mind (and I haven't met many Bitcoin guys who are planned-economy enthusiasts) switching to a deflationary model would be a complete economic disaster.
    - Frogolocalypse 9y ago
      I think bitcoin will finally separate the good debt from the bad debt. It is my personal belief ( as in i don't know of any formal theory ) that debt should only be incurred for the use of building a productive asset. That covers completely your business loans argument. In a deflationary currency, this encourages businesses to ensure that productivity increases will have greater returns than savings. Instead, our financial system has encouraged the acquisition of debt for fixed assets. The only thing this has done is bid up the price of those fixed debts with debt, and handed over the money for supporting that system to banks and their owners. In order to stimulate growth in such a system, the only way that you can function is to tax savings. That's what inflation is. What it forces people to do is to invest in increasingly risky assets, because of the loss of their purchasing power. Hence bubble after bubble after bubble. Crisis after crisis after crisis. Bitcoin will eventually stabilize to an ever appreciating value asset. But what it will allow you to do is save for a house. If you have a business proposal that encourages people to pay you for a good or service, people will invest their savings in it and take on that risk. Banks will instead move back to providing capital to businesses, using savings from people that are willing to invest. Businesses will again focus on productivity increases, because that's how you get access to capital. I also don't think it is going to be resisted quite as much as people think it will be. People still need to pay their taxes, and that is not going to stop. The main thing it is going to do is prick the bubble of consumer debt, and remove the banking middle-men from that space. That alone is a multi-trillion dollar industry, let alone the annuities that banks own and graft from, from those assets. Removing these people (i.e. banking debt suppliers) from positions of power, by strangling their access to capital, is a justification for bitcoin in its own right. Imagine a world in which banks didn't control governments. That's the way it is supposed to work i think. It is pure genius.
      - emodendroket 9y ago
        Frankly I think the outcomes of adopting Bitcoin as a legal currency would be wildly different from the picture you're painting.
        Frogolocalypse 9y ago
- wyager 9y ago
  The interest rates would be correspondingly different. Look up the no-arbitrage principle. It explains why all of these concerns are silly. If you can’t be bothered to do that, just know that the general premise is “it all works out”. In particular, the risk-adjusted deflationary returns are already priced in to the asset’s current price, so you can’t actually make any (time-discounted) expected money just from holding on to a deflationary asset. You can, on the other hand, lose money by holding on to dollars, but only because its utility from convenience sort of counteracts the deflationary loss of future value (up to some small amount of dollars, at which point you start thinking “I should buy stocks or something instead”).
  - Frogolocalypse 9y ago
    As long as those stocks are related to productive pursuits, I completely agree. Risk and reward. Stocks that are geared towards only capital growth through monetary inflation will do poorly. As they should.
  - emodendroket 9y ago
    > A situation in which all relevant assets are priced appropriately and there is no way for one's gains to outpace market gains without taking on more risk. Assuming an arbitrage-free condition is important in financial models, thought its existence is mainly theoretical. Perhaps more to the point, we live in a world where governments can stimulate investment in stocks by manipulating the interest rates of bonds and maintaining steady inflation, and yet I am to believe that if, in effect, you could collect interest with zero risk by just holding your money, it wouldn't have any effect on the economy? Just as many people would be investing as in the current situation, where if you do that you're losing money? It seems hard to justify all the rhetoric about "war on savers" if that's the case. How does the no-arbitrage principle actually explain this away?

emodendroket 9y ago

A beer is one thing. Only a madman would take out a mortgage, auto loan, or large business loan denominated in a rapidly deflating currency.

Frogolocalypse 9y ago
> Only a madman would take out a mortgage Oh that's the crux of it alright. And why should someone take on debt for a fixed asset? Why exactly should a fixed asset increase in cost? Without debt to fuel that fixed-asset price increase, prices will again align with income, not the amount of debt people are capable of servicing. People will no longer acquire housing, leaving it empty, simply for the capital gain. Bitcoin is the reckoning for that fixed-asset debt bubble. > large business loan If they have a business plan that allows them to create capital by having income greater than expenses, people will invest in their business. If they are just going to sit on assets and expect inflation to take care of it, they won't.
- emodendroket 9y ago
  Because a house I can live in now is worth more to me than a house I can maybe live in in 30 years? Even if you are unconcerned with mortgages, though, loans are the basis of most business operations; in a world where taking out loans doesn't make sense presumably we'd see a lot less economic activity and a lot more just sitting on money waiting for it to deflate. Unless you have some sort of alternate economy in mind (and I haven't met many Bitcoin guys who are planned-economy enthusiasts) switching to a deflationary model would be a complete economic disaster.
  - Frogolocalypse 9y ago
    I think bitcoin will finally separate the good debt from the bad debt. It is my personal belief ( as in i don't know of any formal theory ) that debt should only be incurred for the use of building a productive asset. That covers completely your business loans argument. In a deflationary currency, this encourages businesses to ensure that productivity increases will have greater returns than savings. Instead, our financial system has encouraged the acquisition of debt for fixed assets. The only thing this has done is bid up the price of those fixed debts with debt, and handed over the money for supporting that system to banks and their owners. In order to stimulate growth in such a system, the only way that you can function is to tax savings. That's what inflation is. What it forces people to do is to invest in increasingly risky assets, because of the loss of their purchasing power. Hence bubble after bubble after bubble. Crisis after crisis after crisis. Bitcoin will eventually stabilize to an ever appreciating value asset. But what it will allow you to do is save for a house. If you have a business proposal that encourages people to pay you for a good or service, people will invest their savings in it and take on that risk. Banks will instead move back to providing capital to businesses, using savings from people that are willing to invest. Businesses will again focus on productivity increases, because that's how you get access to capital. I also don't think it is going to be resisted quite as much as people think it will be. People still need to pay their taxes, and that is not going to stop. The main thing it is going to do is prick the bubble of consumer debt, and remove the banking middle-men from that space. That alone is a multi-trillion dollar industry, let alone the annuities that banks own and graft from, from those assets. Removing these people (i.e. banking debt suppliers) from positions of power, by strangling their access to capital, is a justification for bitcoin in its own right. Imagine a world in which banks didn't control governments. That's the way it is supposed to work i think. It is pure genius.
    - emodendroket 9y ago
      Frankly I think the outcomes of adopting Bitcoin as a legal currency would be wildly different from the picture you're painting.
      - Frogolocalypse 9y ago
wyager 9y ago
The interest rates would be correspondingly different. Look up the no-arbitrage principle. It explains why all of these concerns are silly. If you can’t be bothered to do that, just know that the general premise is “it all works out”. In particular, the risk-adjusted deflationary returns are already priced in to the asset’s current price, so you can’t actually make any (time-discounted) expected money just from holding on to a deflationary asset. You can, on the other hand, lose money by holding on to dollars, but only because its utility from convenience sort of counteracts the deflationary loss of future value (up to some small amount of dollars, at which point you start thinking “I should buy stocks or something instead”).
- Frogolocalypse 9y ago
  As long as those stocks are related to productive pursuits, I completely agree. Risk and reward. Stocks that are geared towards only capital growth through monetary inflation will do poorly. As they should.
- emodendroket 9y ago
  > A situation in which all relevant assets are priced appropriately and there is no way for one's gains to outpace market gains without taking on more risk. Assuming an arbitrage-free condition is important in financial models, thought its existence is mainly theoretical. Perhaps more to the point, we live in a world where governments can stimulate investment in stocks by manipulating the interest rates of bonds and maintaining steady inflation, and yet I am to believe that if, in effect, you could collect interest with zero risk by just holding your money, it wouldn't have any effect on the economy? Just as many people would be investing as in the current situation, where if you do that you're losing money? It seems hard to justify all the rhetoric about "war on savers" if that's the case. How does the no-arbitrage principle actually explain this away?