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Inflation is a desirable feature in a currency. A currency should be a medium of exchange. Deflation encourages people to hold currency rather than exchange it.

hndamien 8y ago
I don't find it at all desirable that some people have the right to devalue my holdings. It is farcical to think that people would hold the medium of exchange forever if it kept increasing in value because at some point they would either have so much that they would prefer to convert (some of) it into material wealth or chase something with a higher rate of return. Alternatively they would have so little that they would have no choice but to convert it to survive. You cannot eat the medium of exchange.
- asynchrony 8y ago
  Please don't take this the wrong way, but you sound financially illiterate. Cash is not meant to be held long term. It's meant to be spent or invested. That's how the economy continues to grow.
  - acct1771 8y ago
    Define "economy growing", all the way to the end.
    - asynchrony 8y ago
      You can replace "grow" with "function" if you prefer.
      - acct1771 8y ago
        No, I'm going to hold you to the original word, because, if you look around - that's what's happening. Our population grows. Our footprint grows. Our consumption and waste grow. Nobody, besides those highest, benefit from this style of function.
        asynchrony 8y ago
        Yes, human civilization has been doing this for quite a long time. I'm not really sure what your point is relative to inflation.
        acct1771 8y ago
        Maybe the "economy" continuing to rally is not a good thing, for, yknow, society?
        asynchrony 8y ago
        There must some ironic meaning of "economy" that I'm not aware of. Societies have gone through many recessions and depressions. Is that what you're advocating?
  - ibeckermayer 8y ago
    Says the guy that blatantly apes business school propaganda...
  - tomhoward 8y ago
    > you sound financially illiterate That's not really something that can be taken as anything other than an insult. On HN we like points to be made without personal swipes. Aside from making this place a more pleasant place to be, points are often more persuasive that way.
    - asynchrony 8y ago
      I was just trying to be direct. What would be a more polite way to say that?
      - tomhoward 8y ago
        You can just deliver the counterpoint, explanaining how you think the parent was mistaken, without the personal insult. “The key point this comment fails to recognise is [useful new info]” might work well.
        hndamien 8y ago
        Thanks Tom, I felt bad making the retort as well as I like HN to be a happy place. For the record, I am majored in finance, mathematics and cryptography well before these things were linked. I discussed Bitcoin with Hal Varian in 2011 and staked our differing positions. It may be too early to call, but Bitcoin seems quite successful so far, and has served me well. I prefer not to rely on my credentials to make a point about economics since this is a logical fallacy.
  - hndamien 8y ago
    Don't take this the wrong way, but you sound illiterate since you clearly don't understand the words I wrote in context "medium" and "exchange". The statement "You can't eat the medium of exchange" implies that it is to be spent.
    - asynchrony 8y ago
      There already many ways to exchange cash for assets that are likely to appreciate in value (gold, real estate, equities, bitcoin). Won’t a depreciating asset like cash always make for better incentives to participate in trade than an appreciating one? Please explain the advantages you see in the simplest terms you can.
      - hndamien 8y ago
        The features that make cash good as a medium of exchange are not appreciation or depreciation, but all of the other features of divisibility, fungibility, transferability, common acceptance etc. A good medium of exchange need to be valued such that it can be reliably exchanged. Ideally you don't want it going up too fast nor down two fast, but stable enough to make trade. It just happens that Bitcoin is/ was very small relative to the global economy. It also has the benefit that it can't be debased, which makes it a better money - even for trade as well as saving. I just wouldn't consider it "investing" despite the fact it still has room to grow as a currency. It still needs much more work on the fungibility side.
        asynchrony 8y ago
        If the primary medium of exchange is an inflating currency then possessors are incentivized to exchange it. If debt is owed in a deflating currency than the burden of all debts will only grow. Could you address these points rather than simply dismiss them as irrelevant?
        hndamien 8y ago
        Please note that I haven't dismissed any point you have made despite your initial dismissal of me. To your point, is a currency is inflating then you are incentivised to not hold it. But who has the right to benefit from the inflation of the supply? How do you fairly determine that? Often inflation is conflated with the rise in prices rather than strictly the inflation of supply, so strictly referring to the latter - inflation occurs, while at the same time economic growth is also occurring, so it isn't 100% clear that the incentive scheme for devaluing a currency will work as it must balance against this growth. Even if it is not balanced, and successfully devalues for your incentive, what is the appropriate rate? Is VEF too much, USD just enough? Wouldn't it make more sense to just have a fixed/known rate of currency supply - eg Bitcoin - decreases to 0, Monero decreases to small. The problem isn't so much the inflation, it is the unpredictable nature of the debasement and the fairness of who benefits from it. A currency doesn't need to incentivise people to spend it so long as it can always be available as a medium. Infinite divisibility ensures this. Having the medium be a universal standard measure as a unit of account by virtue of being a stable and accessible medium is also essential. Bitcoin achieves this. As for debt burdens growing, this is not always true. If I take a low interest BTC loan for mining equipment and have measured my risk and profit correctly I should be able to pay it off since I am working in this currency. If I borrow USD to start a Venezuelan corner store, I might be in for a bad time.

hndamien 8y ago

I don't find it at all desirable that some people have the right to devalue my holdings. It is farcical to think that people would hold the medium of exchange forever if it kept increasing in value because at some point they would either have so much that they would prefer to convert (some of) it into material wealth or chase something with a higher rate of return. Alternatively they would have so little that they would have no choice but to convert it to survive. You cannot eat the medium of exchange.

asynchrony 8y ago
Please don't take this the wrong way, but you sound financially illiterate. Cash is not meant to be held long term. It's meant to be spent or invested. That's how the economy continues to grow.
- acct1771 8y ago
  Define "economy growing", all the way to the end.
  - asynchrony 8y ago
    You can replace "grow" with "function" if you prefer.
    - acct1771 8y ago
      No, I'm going to hold you to the original word, because, if you look around - that's what's happening. Our population grows. Our footprint grows. Our consumption and waste grow. Nobody, besides those highest, benefit from this style of function.
      - asynchrony 8y ago
        Yes, human civilization has been doing this for quite a long time. I'm not really sure what your point is relative to inflation.
        acct1771 8y ago
        Maybe the "economy" continuing to rally is not a good thing, for, yknow, society?
        asynchrony 8y ago
        There must some ironic meaning of "economy" that I'm not aware of. Societies have gone through many recessions and depressions. Is that what you're advocating?
- ibeckermayer 8y ago
  Says the guy that blatantly apes business school propaganda...
- tomhoward 8y ago
  > you sound financially illiterate That's not really something that can be taken as anything other than an insult. On HN we like points to be made without personal swipes. Aside from making this place a more pleasant place to be, points are often more persuasive that way.
  - asynchrony 8y ago
    I was just trying to be direct. What would be a more polite way to say that?
    - tomhoward 8y ago
      You can just deliver the counterpoint, explanaining how you think the parent was mistaken, without the personal insult. “The key point this comment fails to recognise is [useful new info]” might work well.
      - hndamien 8y ago
        Thanks Tom, I felt bad making the retort as well as I like HN to be a happy place. For the record, I am majored in finance, mathematics and cryptography well before these things were linked. I discussed Bitcoin with Hal Varian in 2011 and staked our differing positions. It may be too early to call, but Bitcoin seems quite successful so far, and has served me well. I prefer not to rely on my credentials to make a point about economics since this is a logical fallacy.
- hndamien 8y ago
  Don't take this the wrong way, but you sound illiterate since you clearly don't understand the words I wrote in context "medium" and "exchange". The statement "You can't eat the medium of exchange" implies that it is to be spent.
  - asynchrony 8y ago
    There already many ways to exchange cash for assets that are likely to appreciate in value (gold, real estate, equities, bitcoin). Won’t a depreciating asset like cash always make for better incentives to participate in trade than an appreciating one? Please explain the advantages you see in the simplest terms you can.
    - hndamien 8y ago
      The features that make cash good as a medium of exchange are not appreciation or depreciation, but all of the other features of divisibility, fungibility, transferability, common acceptance etc. A good medium of exchange need to be valued such that it can be reliably exchanged. Ideally you don't want it going up too fast nor down two fast, but stable enough to make trade. It just happens that Bitcoin is/ was very small relative to the global economy. It also has the benefit that it can't be debased, which makes it a better money - even for trade as well as saving. I just wouldn't consider it "investing" despite the fact it still has room to grow as a currency. It still needs much more work on the fungibility side.
      - asynchrony 8y ago
        If the primary medium of exchange is an inflating currency then possessors are incentivized to exchange it. If debt is owed in a deflating currency than the burden of all debts will only grow. Could you address these points rather than simply dismiss them as irrelevant?
        hndamien 8y ago
        Please note that I haven't dismissed any point you have made despite your initial dismissal of me. To your point, is a currency is inflating then you are incentivised to not hold it. But who has the right to benefit from the inflation of the supply? How do you fairly determine that? Often inflation is conflated with the rise in prices rather than strictly the inflation of supply, so strictly referring to the latter - inflation occurs, while at the same time economic growth is also occurring, so it isn't 100% clear that the incentive scheme for devaluing a currency will work as it must balance against this growth. Even if it is not balanced, and successfully devalues for your incentive, what is the appropriate rate? Is VEF too much, USD just enough? Wouldn't it make more sense to just have a fixed/known rate of currency supply - eg Bitcoin - decreases to 0, Monero decreases to small. The problem isn't so much the inflation, it is the unpredictable nature of the debasement and the fairness of who benefits from it. A currency doesn't need to incentivise people to spend it so long as it can always be available as a medium. Infinite divisibility ensures this. Having the medium be a universal standard measure as a unit of account by virtue of being a stable and accessible medium is also essential. Bitcoin achieves this. As for debt burdens growing, this is not always true. If I take a low interest BTC loan for mining equipment and have measured my risk and profit correctly I should be able to pay it off since I am working in this currency. If I borrow USD to start a Venezuelan corner store, I might be in for a bad time.