6 ms·

> there is a tension between store of value and medium of exchange This tension only exists under Keynesian reasoning. It goes away when you use a theory that

> there is a tension between store of value and medium of exchange This tension only exists under Keynesian reasoning. It goes away when you use a theory that does a better job handling equilibria. The Keynesian claim is that if you have a deflationary medium of exchange, people won’t spend it. This isn’t actually true - the end result of a predictable deflationary asset (e.g. something with a fixed or essentially fixed supply) is similar to the situation we have now, but more efficient. Instead of having, say, 10% of your money in cash and 90% in spoos to avoid getting screwed by inflation, you can just keep 100% of your money in cash. You will have the same exposure to global capital growth, people too poor to have a brokerage account will have exposure to growth as well, and you don’t have to deal with converting between spoos and cash when you spend money.

jonahbenton 6y ago
Thank you, agree with that, and actually was not suggesting to stick with medium of exchange for technical considerations. More about product focus. The BTC people have the asset/inflation hedge thing nailed. Leave them to it. Disentangle the things that are money. Here, prices in the offset ecosystem are going to float because goods are exposed to/sources from the actual money ecosystem. There will be aspects of inflation, both colloquial and technical. It doesn't sound like they understand the claim anyway. Just let it go. Focus on liquidity, fraud, utilization, ergonomics. Get trains riding on those payment rails.
- centimeter 6y ago
  If there’s no compensating benefit that necessarily requires inflation, why would I (as a rational self-interested person) ever prefer to keep any of my holdings in an inflationary asset? If you can come up with a great inflationary payment system, someone should just copy it but make it deflationary, and it’s instantly better. (Unless there is actually some killer feature that requires inflation.)
  - jonahbenton 6y ago
    Well, I would argue credit is the compensating benefit- and killer feature- that historically goes hand in hand with inflation, and I would say it this way- credit is generally the mechanism by which assets are discovered and incorporated into the economy, thus "inflating" it (not the technical definition of inflation, of course) and benefitting all. Technical definitions of inflation are just various measures of changes of liquidity in the credit economy. Whether a deflationary payment system is instantly better, for me, that's a philosophical argument, between liquidity and value. Life is uncertain. Humans take risks, invest, speculate, even just work- they need liquidity to do so, and credit mechanisms and accounting provide a structured way to do so. I am interested in what Offset discovers, and think there is new value to be discovered in keeping a (necessarily inflationary) credit system separated from the rest of the financial world. Cheers.
    - centimeter 6y ago
      I think I need to clarify a bit - I'm distinguishing "endogenous" inflation (money printing) from "exogenous" inflation (credit), because credit has natural feedback mechanisms that make it less/not disruptive to pricing. The presence of credit denominated in some asset does not make the asset "inflationary", even if the effective supply can fluctuate. You can certainly have credit (and concomitant liquidity benefits) in a deflationary asset - this kind of lending happens millions of times every day when people acquire locate for a short sale in the securities market.
technotony 6y ago
It's less that they won't spend it, and more they won't invest it. As you point out if you can get exposure to global capital growth by keeping your money in cash you will do that. This starves the world of risk capital being invested in new projects, the net benefit of which is responsible for capital growth. So nobody invests and technological progress drives to a halt (well maybe governments invest in military technology ands whatso but net investment in risky tech drops).
- dpatru 6y ago
  I think your assertion that inflation (money printing) is necessary for inflation is wrong and certainly not obvious. Investment necessarily comes from savings. One must not eat some of this year’s corn so as to have next year’s seed. Whether state-forced savings through inflationary bank loans is better than voluntary private savings should be answerable by studying history. Was there better investment historically in countries where the state devalued money in favor of banks, or in countries where money was not devalued?
  - pjc50 6y ago
    > One must not eat some of this year’s corn so as to have next year’s seed Corn is a productive asset that generates more corn. Money is not, in and of itself, a productive asset. One of the essential insights of Keynes was that it was possible for real productive capacity (machinery and labour etc) to be idle simply due to lack of liquid money to flow through the system. This was why consumer credit was so crucial to kickstarting modern consumerist economies: like Ford paying workers so they could afford the products, injecting credit allowed consumers to buy items creating jobs to make products, which jobs then allowed consumers to pay off the loans. "Shortage of specie" has been a real economic problem at times; e.g. https://www.cambridge.org/core/journals/journal-of-economic-history/article/why-was-specie-scarce-in-colonial-economies-an-analysis-of-the-canadian-currency-17961830/23C23D97B868433A64E34DE4F99C0EDF https://www.cambridge.org/core/journals/journal-of-economic-...
- splintercell 6y ago
  But here's the issue in Keynesian thinking, all savings is investment, it's investment in money. Like any investment, it has a return (which comes from the increased value of money), and risk (if instead of increase value, the value of money is decreased).

jonahbenton 6y ago

Thank you, agree with that, and actually was not suggesting to stick with medium of exchange for technical considerations. More about product focus. The BTC people have the asset/inflation hedge thing nailed. Leave them to it. Disentangle the things that are money. Here, prices in the offset ecosystem are going to float because goods are exposed to/sources from the actual money ecosystem. There will be aspects of inflation, both colloquial and technical. It doesn't sound like they understand the claim anyway. Just let it go. Focus on liquidity, fraud, utilization, ergonomics. Get trains riding on those payment rails.

centimeter 6y ago
If there’s no compensating benefit that necessarily requires inflation, why would I (as a rational self-interested person) ever prefer to keep any of my holdings in an inflationary asset? If you can come up with a great inflationary payment system, someone should just copy it but make it deflationary, and it’s instantly better. (Unless there is actually some killer feature that requires inflation.)
- jonahbenton 6y ago
  Well, I would argue credit is the compensating benefit- and killer feature- that historically goes hand in hand with inflation, and I would say it this way- credit is generally the mechanism by which assets are discovered and incorporated into the economy, thus "inflating" it (not the technical definition of inflation, of course) and benefitting all. Technical definitions of inflation are just various measures of changes of liquidity in the credit economy. Whether a deflationary payment system is instantly better, for me, that's a philosophical argument, between liquidity and value. Life is uncertain. Humans take risks, invest, speculate, even just work- they need liquidity to do so, and credit mechanisms and accounting provide a structured way to do so. I am interested in what Offset discovers, and think there is new value to be discovered in keeping a (necessarily inflationary) credit system separated from the rest of the financial world. Cheers.
  - centimeter 6y ago
    I think I need to clarify a bit - I'm distinguishing "endogenous" inflation (money printing) from "exogenous" inflation (credit), because credit has natural feedback mechanisms that make it less/not disruptive to pricing. The presence of credit denominated in some asset does not make the asset "inflationary", even if the effective supply can fluctuate. You can certainly have credit (and concomitant liquidity benefits) in a deflationary asset - this kind of lending happens millions of times every day when people acquire locate for a short sale in the securities market.

technotony 6y ago

It's less that they won't spend it, and more they won't invest it. As you point out if you can get exposure to global capital growth by keeping your money in cash you will do that. This starves the world of risk capital being invested in new projects, the net benefit of which is responsible for capital growth. So nobody invests and technological progress drives to a halt (well maybe governments invest in military technology ands whatso but net investment in risky tech drops).

dpatru 6y ago
I think your assertion that inflation (money printing) is necessary for inflation is wrong and certainly not obvious. Investment necessarily comes from savings. One must not eat some of this year’s corn so as to have next year’s seed. Whether state-forced savings through inflationary bank loans is better than voluntary private savings should be answerable by studying history. Was there better investment historically in countries where the state devalued money in favor of banks, or in countries where money was not devalued?
- pjc50 6y ago
  > One must not eat some of this year’s corn so as to have next year’s seed Corn is a productive asset that generates more corn. Money is not, in and of itself, a productive asset. One of the essential insights of Keynes was that it was possible for real productive capacity (machinery and labour etc) to be idle simply due to lack of liquid money to flow through the system. This was why consumer credit was so crucial to kickstarting modern consumerist economies: like Ford paying workers so they could afford the products, injecting credit allowed consumers to buy items creating jobs to make products, which jobs then allowed consumers to pay off the loans. "Shortage of specie" has been a real economic problem at times; e.g. https://www.cambridge.org/core/journals/journal-of-economic-history/article/why-was-specie-scarce-in-colonial-economies-an-analysis-of-the-canadian-currency-17961830/23C23D97B868433A64E34DE4F99C0EDF https://www.cambridge.org/core/journals/journal-of-economic-...
splintercell 6y ago
But here's the issue in Keynesian thinking, all savings is investment, it's investment in money. Like any investment, it has a return (which comes from the increased value of money), and risk (if instead of increase value, the value of money is decreased).