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Why do people persist in the idea that a deliberately deflationary currency is a good idea. It might be a good investment, but as a currency, it doesn't promote

• homakov 9y ago
  The problem is not just deflation but uncontrolled issuance. Ie miners produce too much or too little coins to keep them stable.
  • sunshinerag 9y ago
    Is this for IOTA? As far as bitcoin is concerned the coin issuance is built into the protocol and there is no case of too much or too less.
• kybernetikos 9y ago
  There's a game theory problem which is that if you have a choice of cryptocurrencies at an early stage to play with, and you think they have a similar chance of success, it makes sense to invest in the cryptocurrencies with a limited supply. The fact that this will make them bad in the long run as a medium of exchange is not of interest to the early stage speculator.
  • victor106 9y ago
    > The crypto-currency crowd has this libertarian streak I wish they did. Unfortunately the buyers who owned bitcoin the past few years are all in just coz the price is growing up. They are not in bacause the believe in anything.
• Frogolocalypse 9y ago
  > it doesn't promote commerce and trade The problem is that our existing financial system probably had an intention of using inflation to encourage commerce and trade, but over the past 40 years, that focus shifted from using debt for the funding of productive enterprises to debt being used for the bidding up of fixed assets like houses, but also stocks. The only thing that mattered to this bidding process was capital growth. The solution to these bubbles wasn't to reign in debt creation, or to force the targeting of debt creation to productivity, but to simply increase it. Bubble after bubble after bubble, crisis after crisis after crisis. But not only that, a death in productive capacity, which is all too apparent to the middle-income demographic. Because of this irresponsibility of the finance world, crypto-currency technology was developed to allow people to park their productive gains in inflation resistant financial instruments. So in order to get these people to part with their inflation resistant instrument, you will have to convince them that you will give a better return than inflation, and that means by increasing productivity. You can no longer just create more debt, because the only thing that will do is increase the value of the deflationary asset, by decreasing the value of the inflationary one. That means if you want to survive as a national currency, you better start working on education and building productive capacity, because you'll no longer be able to fleece your populace whenever banking execs are looking to buy a new bentley.
  • cryptodogemoon 9y ago
    Fun fact: Bitcoin is designed as a hyperinflationary currency that begins to slow down inflation as more users join and time passes. Why? To control the supply early and exploit later speculators.
    • Frogolocalypse 9y ago
      > hyperinflationary I don't think you understand what this word means.
      • deleted 9y ago
        [deleted]
      • 9y ago
• Asdfbla 9y ago
  Making them deflationary is more of a political statement than anything else I think. The crypto-currency crowd has this libertarian streak and of course those people believe that inflation is the devil, used by governments and banks to rob productive businessmen of their hard earned money.
  • aceon48 9y ago
    and it's not? Inflation harms fixed wage earners and pensioners far worse than "businessmen"
    • cromwellian 9y ago
      Deflation also helps creditors and hurts those in debt, so it swings both ways. Often the Libertarian/Austrian-econ crowd posits a false choice between deflation and hyperinflation, both are bad, and ignores the third option which is an inflation rate that's non-zero, but low and stable.
• mbrock 9y ago
  If I want an Uber or a coffee, sure, I'll spend BTC. I could make more money by waiting, but I can't live without coffee or transportation. Why do you waste your dollars on coffee when you could invest them in a deflationary cryptoasset?
  • sDUGOBIUOBOIU 9y ago
    Same reason I don't put my money on the ponies. I have no experience at speculation and no confidence that I could do a good job of it. I'm pretty confident that every cryptocurrency bubble will burst in the near future, but I have no idea when this will happen and no confidence I will get my money out in time. And I have serious moral objections to all existing cryptocurrencies. I'm not going to support something I consider immensely harmful as a get-rich-quick scheme.
  • dnautics 9y ago
    Maybe it isn't the worst thing in the world to force people to think twice about opportunity costs before engaging in wanton spending?
• afpx 9y ago
  The deflationary aspect is the number one reason I’ve never bought into a crypto currency. I have serious ethical and moral issues that prevent me. In addition to hoarding, deflationary currencies (like gold) cause people to spend lots of money and effort trying to get other people to buy into them too. For me, it’s a very sad thing to watch unfold. It’s like when the ‘buy gold’ commercials started appearing on Fox News, and I saw my grandparents buying gold. If someone has to spend lots of time and money advertising how useful something is, it’s probably more useful to them than me.
  • y_u_no_rust 9y ago
    Yeah, I love the idea of not being beholden to card processors/paypal-type services when making payments online.. it's strange to think that those companies almost control all online commerce I do really dislike a lot of the other themes common in the cryptocurreny communities though especially when it comes to claiming the federal reserve has a noose around their necks.. like the new noose will be any better than the old one I am glad bitcoin popularized the non fungible peer-to-peer ledger thing and bringing the values of decentralization back to popular conversation
  • islanderfun 9y ago
    I'm very curious on your stance. Would be able to elaborate further?
    • afpx 9y ago
      See my comment above.
  • etr-strike 9y ago
    Yea, it’s better people just hoard houses to escape inflation.
  • tfha 9y ago
    The two issues are separate. Isn't there a lot of sound finical advise telling people to put money into the stock market? But isn't the stock market widely a greater fool game these days? Companies don't pay dividends anymore, voting rights are being reduced, and many companies are far too large to send a chance at being acquired. It would be a terrible deal if 90% of the population wasn't accumulating stock via a 401K
• DennisP 9y ago
  If it weren't for the fact that the U.S. charges capital gains tax on every little purchase, I'd happily spend my cryptocurrency and just replenish it as I go. Trading between currencies makes this a non-issue. Also, if you're really convinced a cryptocurrency will go up, your same argument suggests you should buy the cryptocurrency rather than spending dollars on anything else. If you're not doing that, it indicates you're not totally certain of the future after all, so you can just as well spend your cryptocurrency. There's also the macroeconomic effect of deflation to consider, but that's only an issue if there's only one currency. What we're actually getting is the competing private currencies advocated by Hayek. It doesn't matter so much if one currency deflates as long as the total money supply is sufficient.
• wyager 9y ago
  > I mean, if my cash is growing at 10%-1000%, but my Visa fee is 3%, and my inflated USD is 2% inflation, I'm gonna go with the fiat currency or Visa fee. Think really hard about what you’re saying here. You’re currently very clearly working off some broken heuristics and not anything remotely resembling a rational or economically sound approach. A couple rhetorical questions: Would you prefer to use e.g. Zimbabwe dollars instead of US dollars? After all, if the depreciation of the US dollar is beneficial somehow, surely the ZWD is even better. If this isn’t the case, please explain your criteria for optimal depreciation. Let’s say you kept 99% of your money in stocks. Expected growth is 10%/yr. Your car breaks down, and you don’t have enough cash to cover the damages. Are you going to sell some of your stocks? The dollar is good for cash because it’s fungible, divisible, easily transported, widely accepted, and a few other useful properties. The fact that it depreciates over time is incidental and only tolerated because it has so many other positive qualities. No one with an ounce of sense keeps a large position in dollars, however. If you can create an asset that has the beneficial properties of dollars (fungible, divisible, transportable, etc.) and doesn’t depreciate, there’s no rational reason to continue using the dollar.
  • cromwellian 9y ago
    Your argument has multiple fallacies. The first is an either-or fallacy, that your only choices are deflation, or hyper inflation, when most OECD countries have had fairly low stable inflation rates over the last two decades. Secondly, the idea that the response/benefit curve from monetary growth rate is linear, and therefore you can just extrapolate linearly that more is better. Our economy depends on a goldilocks region, where the extremes are bad, and the desirable area you want to inhabit is inbetween. When currency is deflationary, no one wants to spend money, and you face an economic stagnation from a huge pull back in spending, no different than the Paradox of Thrift. There's no need to even make a philosophical argument here, we have a century of empirical evidence that deflationary causes a spiral, hell, Japan has been stuck in a deflationary spiral for 20 years. Sure, eventually you have to eat, so you'll spend your BTC if the alternative is to starve, but is that how you see the economy being run? The only thing people spend money on are the absolute necessities? That's a very austere world, and once in which most people are unemployed because there's much lower demand for everything, except emergency car repair and basic necessities. Likewise, you don't want hyperinflation, because it makes planning for the future impossible, wipes out investment, and induces hoarding of real assets. But low levels of inflation, from 0-3%, do not cause such problems, and gently induce people to spend or invest money, rather than keep it under a mattress. For the same reason, something like a Land Value Tax is good because it induces people to stop hoarding land and not doing anything with it.
• tfha 9y ago
  I've never really accepted this argument. If your money is inflating, that's incentive to spend because you know it's losing value. That's a terrible reason to spend money. If your money is deflating, you are still going to spend it because there are things that you want to accomplish. Whether it's eating food, sustaining a hobby, or making a difference in the world, people will continue to spend a deflationary currency.
  • xenophon 9y ago
    Yes, but you'll still want those things in a month, or six months, or a year. Given the expectation that your real purchasing power will grow, and you'll be even to afford even more of that hobby if you wait, you'll decide not to transact now for many discretionary expenses. Unfortunately, this puts the store or vendor you would have transacted from in dire straits--and then they decide to consume less. Summed over an entire economy, this sort of behavior will reduce aggregate demand and the velocity of money enough to damage productivity and growth: it's called a "deflationary spiral."
    • dnautics 9y ago
      Summed over an entire economy, inflationary behavior will result in stealing from the poor and middle class to fund the wealthy and overconsumption and ecologic destruction.
  • simonbyrne 9y ago
    I think the point is more to do with savings: in a non-deflationary environment, you have the incentive to invest your savings in potentially productive use. In a deflationary environment the incentive is simply to hide your money under your mattress, which doesn't help anyone.
    • makomk 9y ago
      The trouble is, right now there seems to be a lot of savings sloshing around compared to the potentially productive uses they could be put to. So the price of every investment from houses to shares to made-up internet money is going through the roof as people look for somewhere, anywhere, they can put their money where it won't be eaten away by inflation.
• narrator 9y ago
  You could always switch to Dogecoin, which is similar to Bitcoin, but has very high inflation. You could even fork Bitcoin and make a Federal Reserve Board including yourself that could decide to issue more currency based on economic statistics. You could call it KeynesCoin. That's the great thing about Crypto. It's all open source, so do whatever you want.
• BLanen 9y ago
  Because it's literally impossible for people to rationally 'invest' in a inflationary currency. Therefore there is no incentive to make one popular.
  • vasilipupkin 9y ago
    Isn't Ethereum inflationary and popular ?
    • tromp 9y ago
      Yes, until they switch from proof of work to proof of stake. Which could take another year or two.
      • vasilipupkin 9y ago
        it won't stop being inflationary after they switch.
  • UncleMeat 9y ago
    If it is useful, then it does not need to have an inflating price. That people think the only reason why a cryptocurrency would ever be popular is if the price rises is a huge problem with the community.
• RIMR 9y ago
  There's really only three things people spend cryptocurrencies on. 1. Other cryptocurrencies 2. Fiat currencies & precious metals 3. Contraband