3 ms·

I fundamentally disagree. The purpose of currency is to facilitate efficient trade. It is dangerous when currency is seen as an appreciating asset (deflation) a

I fundamentally disagree. The purpose of currency is to facilitate efficient trade. It is dangerous when currency is seen as an appreciating asset (deflation) as this will encourage hoarding (speculation) and discourage spending and investing.

euccastro 16y ago
This is aggravated, in the long run, by the fact that they intend to support/incentivate the people who run nodes by transaction fees. Another friction factor. It would be better to have small, fixed, predictable inflation, and pay the infrastructure with that (that is, with the newly generated money). It worked in ancient Egypt. There was a currency that was more or less a receipt on stored grain. That "money" lost value over time due to storage costs and loss to decay and rodents. That inflation stimulated trade. Currencies with so-called demurrage worked wonders in middle-century central Europe until they were banned. http://en.wikipedia.org/wiki/Demurrage_%28currency%29 http://en.wikipedia.org/wiki/Demurrage_%28currency%29 (I'm basically parroting Bernard Lietaer [which google for] here.)
danenania 16y ago
These are well-worn fallacies. First, falling prices do not cause hoarding--demand for goods will increase if anything. Mild deflation is actually the sign of a healthy economy, competition, and technological innovation. Just look at the consumer electronics industry. Why do people buy iPads when they know a cheaper and better one will come along in the next couple years? According to your theory, wouldn't they just sit on their money? The second fallacy is that 'hoarding' (long term saving, in other words) is a problem for an economy. It simply demonstrates a longer term time preference, which is actually necessary for larger and more complex uses of capital which can often take 10-20 years of investment and planning to pay off. It is axiomatic that the only purpose for hoarding cash is to eventually spend it. Trying to eliminate this 'problem' by confiscating wealth through inflation is both short-sighted and immoral.
- nerfhammer 16y ago
  Deflation is almost invariably a sign of economic distress. This can easily be observed historically. By the way the term I think you mean is "quantity demanded" with respect to price, "demand" is invariant to price. Under deflation average income decreases. It's not like everyone is suddenly richer. Your employer gets less money, and so has to pay you less, or lay off a portion of their workforce. The price of labor is a price like any other. Assuming a fixed money supply, hoarding currency will cause deflation. Hoarding currency takes money out of the money supply. Saving by making investments is different; the money is still participating in the economy. Deflation discourages investment in useful activity. If you can earn a 5% rate of return just for already having money, why bother with a investment could return 5% or less?
  - danenania 16y ago
    America had steady deflation during a period of massive economic expansion in the late 1800s. Deflation is only a sign of distress historically when preceded by government-induced monetary expansion. A boom causes a bust. Wages are sticky so moderate deflation strongly benefits workers. Both wages and savings will gradually increase in purchasing power. Inflation punishes the lower classes disproportionately for the same reasons. It is the primary driver of income inequality in the world. That anyone has been convinced a massive counterfeiting scheme in their currency is doing them a favor is a monumental feat of propaganda.
    - nerfhammer 16y ago
      The deflationary periods in the 1800s correlate exactly with economic shocks during that time, especially the panic of 1837 and the Long Depression. If you think deflation is associated with growth you are simply wrong.
      - danenania 16y ago
        Wikipedia (emphasis mine): "The Great Deflation or the Great Sag refers to the period from 1870 until 1890 in which world prices of goods, materials and labor decreased.This had a negative effect on established industrial economies such as Great Britain while simultaneously allowing incredible growth in the United States which was just beginning to industrialize. Deflation has historically been more associated with recession, than growth, but this is one of the few sustained periods of deflationary growth in the history of the United States." http://en.wikipedia.org/wiki/The_Great_Deflation http://en.wikipedia.org/wiki/The_Great_Deflation This clearly refutes your statement: "Deflation is almost invariably a sign of economic distress." Perhaps deflation isn't traditionally associated with growth, but it clearly can be and has been in history. Note 'one of the few'. Deflationary growth isn't that rare of a phenomenon in history, though its rarity will be inversely proportional to the prevalence of central banking, monetary expansion, and economic authoritarianism. The market's had an uphill battle. In general, deflations associated with recessions will also be associated with reckless monetary expansion. Including this form of deflation in statistics can be misleading. Its cause is entirely different from the cause of gradual, moderate deflation as the natural result of an expanding economy with limited currency.

euccastro 16y ago

This is aggravated, in the long run, by the fact that they intend to support/incentivate the people who run nodes by transaction fees. Another friction factor. It would be better to have small, fixed, predictable inflation, and pay the infrastructure with that (that is, with the newly generated money). It worked in ancient Egypt. There was a currency that was more or less a receipt on stored grain. That "money" lost value over time due to storage costs and loss to decay and rodents. That inflation stimulated trade. Currencies with so-called demurrage worked wonders in middle-century central Europe until they were banned. http://en.wikipedia.org/wiki/Demurrage_%28currency%29 http://en.wikipedia.org/wiki/Demurrage_%28currency%29 (I'm basically parroting Bernard Lietaer [which google for] here.)

danenania 16y ago

These are well-worn fallacies. First, falling prices do not cause hoarding--demand for goods will increase if anything. Mild deflation is actually the sign of a healthy economy, competition, and technological innovation. Just look at the consumer electronics industry. Why do people buy iPads when they know a cheaper and better one will come along in the next couple years? According to your theory, wouldn't they just sit on their money? The second fallacy is that 'hoarding' (long term saving, in other words) is a problem for an economy. It simply demonstrates a longer term time preference, which is actually necessary for larger and more complex uses of capital which can often take 10-20 years of investment and planning to pay off. It is axiomatic that the only purpose for hoarding cash is to eventually spend it. Trying to eliminate this 'problem' by confiscating wealth through inflation is both short-sighted and immoral.

nerfhammer 16y ago
Deflation is almost invariably a sign of economic distress. This can easily be observed historically. By the way the term I think you mean is "quantity demanded" with respect to price, "demand" is invariant to price. Under deflation average income decreases. It's not like everyone is suddenly richer. Your employer gets less money, and so has to pay you less, or lay off a portion of their workforce. The price of labor is a price like any other. Assuming a fixed money supply, hoarding currency will cause deflation. Hoarding currency takes money out of the money supply. Saving by making investments is different; the money is still participating in the economy. Deflation discourages investment in useful activity. If you can earn a 5% rate of return just for already having money, why bother with a investment could return 5% or less?
- danenania 16y ago
  America had steady deflation during a period of massive economic expansion in the late 1800s. Deflation is only a sign of distress historically when preceded by government-induced monetary expansion. A boom causes a bust. Wages are sticky so moderate deflation strongly benefits workers. Both wages and savings will gradually increase in purchasing power. Inflation punishes the lower classes disproportionately for the same reasons. It is the primary driver of income inequality in the world. That anyone has been convinced a massive counterfeiting scheme in their currency is doing them a favor is a monumental feat of propaganda.
  - nerfhammer 16y ago
    The deflationary periods in the 1800s correlate exactly with economic shocks during that time, especially the panic of 1837 and the Long Depression. If you think deflation is associated with growth you are simply wrong.
    - danenania 16y ago
      Wikipedia (emphasis mine): "The Great Deflation or the Great Sag refers to the period from 1870 until 1890 in which world prices of goods, materials and labor decreased.This had a negative effect on established industrial economies such as Great Britain while simultaneously allowing incredible growth in the United States which was just beginning to industrialize. Deflation has historically been more associated with recession, than growth, but this is one of the few sustained periods of deflationary growth in the history of the United States." http://en.wikipedia.org/wiki/The_Great_Deflation http://en.wikipedia.org/wiki/The_Great_Deflation This clearly refutes your statement: "Deflation is almost invariably a sign of economic distress." Perhaps deflation isn't traditionally associated with growth, but it clearly can be and has been in history. Note 'one of the few'. Deflationary growth isn't that rare of a phenomenon in history, though its rarity will be inversely proportional to the prevalence of central banking, monetary expansion, and economic authoritarianism. The market's had an uphill battle. In general, deflations associated with recessions will also be associated with reckless monetary expansion. Including this form of deflation in statistics can be misleading. Its cause is entirely different from the cause of gradual, moderate deflation as the natural result of an expanding economy with limited currency.