6 ms·

For salaries people would certainly have to adjust, but I think it is more likely that payments would remain in a fiat currency to remove that psychological hur

For salaries people would certainly have to adjust, but I think it is more likely that payments would remain in a fiat currency to remove that psychological hurdle. I can see that it may not be such a large burden though even if people were accepting payment in BTC and then revising downward based on increasing purchasing power. Pensions and government payments would not start with commitments in a deflationary currency, and as a result, any commitments made there would be done with full appreciation of the realities of a deflationary money standard. This just means tighter credit and better fiduciary responsibility. Consumption decreasing is a misnomer, as people are still required to live. Delayed gratification is generally a win, as it is today, and the economy doesn't tank. If it is saved or invested, it works out the same. Saved you reduce supply which benefits all other savers, who are technically getting a paper rate of return. If they can invest this with expectation of a greater rate of return (by creating value faster than that of saving) then they should do this. With enough saved funds, the risk tolerance increases. There is nno reason that doing this with money you don't have makes the scenario any better. And the super-rich will benefit from being rich. This is not news. What is news is that they won't also benefit from seigniorage and the Lindy effect. I'd call that a win.

trashtester 8y ago
If salaries remain in the fiat currency, I suppose pensions and other government payments would, too, right? In that case, it seems to me that the fiat currency remains the primary measure of value, standard for deferred payment and probably medium of exchange, right? If it does, then Bitcoin would remain an optional part of the economy. As long as Bitcoins are not required in order to make transactions, and as long as deferred payments are not made in Bitcoin, it lacks protection against sudden surges in volatility (that may ultimately take the prize to absolute 0). But let's assume for the sake of argument that somehow Bitcoins can reach a steady state of increasing in purchasing power by 2% per year or more. The first thing that would happen, would be that government bonds would have to do the same, or none would buy them. This would have an immediate effect on the US economy, since the US is not likely to be able to pay such a high real interest rate while maintaining the current deficit. Since you tend to argue in favor of the interests of savers, I suppose you are willing to force the government to cut expenses or increase taxes to make up for the difference, and let's assume that BC are not made illegal for this reason. (It would probably trigger a 1929 style depression, but that could pass.) Next is the problem of decreased consumption. While I agree that decreasing consumption is a virtue for most individuals, the problem when aggregate demand goes away, is that fewer people are required to work to create the goods that people consume. As people earn less money from salaries, this further reduces the ability to consume (demand) and drives deflation even further. This leads to a downward spiral that can ultimately end in famine. People can only be "required" to live if they actually can buy food. Also, this will come on top of the reduced public spending described in the previous paragraph. Even middle class people with some savings may be affected by this, by being unable to find work. Even if the savings increase in value somewhat, most people only have enough for a limited time without income. Taxes will plummet due to reduced employment, and the government, now without the ability to run at a deficit, will not be able to pay for welfare programs. Food stamps may not be available. Meanwhile, the purchasing power of the super rich will be safe, as well as possibly the small group of people that is needed to produce the goods that the super rich consume. Until the revolution comes. All caused by having an asset type with a guaranteed profit attached available.

trashtester 8y ago

If salaries remain in the fiat currency, I suppose pensions and other government payments would, too, right? In that case, it seems to me that the fiat currency remains the primary measure of value, standard for deferred payment and probably medium of exchange, right? If it does, then Bitcoin would remain an optional part of the economy. As long as Bitcoins are not required in order to make transactions, and as long as deferred payments are not made in Bitcoin, it lacks protection against sudden surges in volatility (that may ultimately take the prize to absolute 0). But let's assume for the sake of argument that somehow Bitcoins can reach a steady state of increasing in purchasing power by 2% per year or more. The first thing that would happen, would be that government bonds would have to do the same, or none would buy them. This would have an immediate effect on the US economy, since the US is not likely to be able to pay such a high real interest rate while maintaining the current deficit. Since you tend to argue in favor of the interests of savers, I suppose you are willing to force the government to cut expenses or increase taxes to make up for the difference, and let's assume that BC are not made illegal for this reason. (It would probably trigger a 1929 style depression, but that could pass.) Next is the problem of decreased consumption. While I agree that decreasing consumption is a virtue for most individuals, the problem when aggregate demand goes away, is that fewer people are required to work to create the goods that people consume. As people earn less money from salaries, this further reduces the ability to consume (demand) and drives deflation even further. This leads to a downward spiral that can ultimately end in famine. People can only be "required" to live if they actually can buy food. Also, this will come on top of the reduced public spending described in the previous paragraph. Even middle class people with some savings may be affected by this, by being unable to find work. Even if the savings increase in value somewhat, most people only have enough for a limited time without income. Taxes will plummet due to reduced employment, and the government, now without the ability to run at a deficit, will not be able to pay for welfare programs. Food stamps may not be available. Meanwhile, the purchasing power of the super rich will be safe, as well as possibly the small group of people that is needed to produce the goods that the super rich consume. Until the revolution comes. All caused by having an asset type with a guaranteed profit attached available.