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> inflation literally means the value of traditional assets and commodities goes up. No, the value of assets doesn’t change - the price goes up.

PragmaticPulp 6y ago
Value goes up in dollar terms, which is the same as price going up.
- Ancapistani 6y ago
  This makes no sense. Price in dollars (or any other currency) is a proxy for value, but not the same thing. A loaf of bread has the same value whether it costs $1, $5, or $0.05.
  - axiosgunnar 6y ago
    A bread that costs 10 USD would take a worker earning 10USD/hour an hour to earn. Surely a bread that requires the worker to work only 5 minutes has a lower value than a bread that requires 2h or labor?
    - Ancapistani 6y ago
      Of course, but neither inflation nor deflation occur in a vacuum. Barring a major increase in productivity, a single commodity doesn’t fall 95% in price without wages falling at the same time.
  - PragmaticPulp 6y ago
    That’s the point. If your house is worth $100,000 one year and the equivalent house costs $105,000 next year, inflation is 5% in the cost of housing. The absolute value is the same (assuming all things equal). The price in dollar terms is higher. The point is that Bitcoin advocates try to imply that Bitcoin is the only place to put cash that is safe from inflation. Meanwhile, investing in nearly any asset or stock will hedge against inflation. I regret using phrasing that invited pedantic debates about terminology. Only distracts from the point.
    - Ancapistani 6y ago
      For what it’s worth, while I am a proponent of Bitcoin (and other cryptocurrencies), I’m not really interested in starting a flame war on HN :) I also don’t take any issue with your assertion that the vast majority of “investors” in Bitcoin aren’t interested with the mechanics of the protocol or in the economic possibilities - they’re interested in the price going up, and the majority of them don’t dive any deeper than to see that it has continued to do so. > The point is that Bitcoin advocates try to imply that Bitcoin is the only place to put cash that is safe from inflation. Meanwhile, investing in nearly any asset or stock will hedge against inflation. This strikes me as a bit of a straw man, though I’m very much aware that there are definitely some people like this. They’re disproportionately loud to be sure. Neither inflation nor deflation are a good thing for the economy overall. In the US, the purpose of the Federal Reserve system is to limit and - to the extent that it is possible - control both. Consider for the sake of this conversation that there are three classes of people: “savers”, who keep a substantial part of their wealth in liquid assets (like USD), “borrowers”, who owe debts denominated in USD, and “lenders”, who are owed debts denominated in USD. Inflation hurts savers. The “cash in their mattress” is worth less, and they are therefore encouraged to participate in the overall economy. It hurts lenders, who see the future value of the debts owed to them decrease due to the decrease in failure of the USD. It helps borrowers, because the value of their debts are decreased in comparison to the value of their work. Deflation helps savers and lenders, and hurts borrowers. The big problem here - and from this point forward I’m speaking of my inferences, not from facts - is that both inflation and deflation harm economic mobility. In an inflationary environment, lenders don’t want to loan money because they money they get back in the future will be worth less. To offset that, interest rates and lending requirements rise, which cuts the poor off from access to capital. In a deflationary environment, money is expected to be worth more in the future, so borderline investments have to produce a larger expected return in order to “beat” deflation. Periods of stability are therefore what we should seek, in order to maximize access to capital for those most in need of it (the poor). Bitcoin is mildly inflationary now, but is more than offset by adoption/speculation. At some point in the future, when mining rewards taper into nothing and mining is incentivized only by transaction fees, Bitcoin will become mildly (but consistently) deflationary. This assumes adoption and speculation is fully saturated by then. I don’t know if Bitcoin itself will ever get there, but I’m reasonably confident that some cryptocurrency will. From a larger economic perspective, that’s what I want to see from the cryptocurrency world. I could speak all day about the anti-state/pro-individual-freedom aspects, but from a purely economic perspective, I strongly prefer the rapid feedback of fixed-supply (but infinitely divisible) currencies (in the form of boom/bust cycles).

PragmaticPulp 6y ago

Value goes up in dollar terms, which is the same as price going up.

Ancapistani 6y ago
This makes no sense. Price in dollars (or any other currency) is a proxy for value, but not the same thing. A loaf of bread has the same value whether it costs $1, $5, or $0.05.
- axiosgunnar 6y ago
  A bread that costs 10 USD would take a worker earning 10USD/hour an hour to earn. Surely a bread that requires the worker to work only 5 minutes has a lower value than a bread that requires 2h or labor?
  - Ancapistani 6y ago
    Of course, but neither inflation nor deflation occur in a vacuum. Barring a major increase in productivity, a single commodity doesn’t fall 95% in price without wages falling at the same time.
- PragmaticPulp 6y ago
  That’s the point. If your house is worth $100,000 one year and the equivalent house costs $105,000 next year, inflation is 5% in the cost of housing. The absolute value is the same (assuming all things equal). The price in dollar terms is higher. The point is that Bitcoin advocates try to imply that Bitcoin is the only place to put cash that is safe from inflation. Meanwhile, investing in nearly any asset or stock will hedge against inflation. I regret using phrasing that invited pedantic debates about terminology. Only distracts from the point.
  - Ancapistani 6y ago
    For what it’s worth, while I am a proponent of Bitcoin (and other cryptocurrencies), I’m not really interested in starting a flame war on HN :) I also don’t take any issue with your assertion that the vast majority of “investors” in Bitcoin aren’t interested with the mechanics of the protocol or in the economic possibilities - they’re interested in the price going up, and the majority of them don’t dive any deeper than to see that it has continued to do so. > The point is that Bitcoin advocates try to imply that Bitcoin is the only place to put cash that is safe from inflation. Meanwhile, investing in nearly any asset or stock will hedge against inflation. This strikes me as a bit of a straw man, though I’m very much aware that there are definitely some people like this. They’re disproportionately loud to be sure. Neither inflation nor deflation are a good thing for the economy overall. In the US, the purpose of the Federal Reserve system is to limit and - to the extent that it is possible - control both. Consider for the sake of this conversation that there are three classes of people: “savers”, who keep a substantial part of their wealth in liquid assets (like USD), “borrowers”, who owe debts denominated in USD, and “lenders”, who are owed debts denominated in USD. Inflation hurts savers. The “cash in their mattress” is worth less, and they are therefore encouraged to participate in the overall economy. It hurts lenders, who see the future value of the debts owed to them decrease due to the decrease in failure of the USD. It helps borrowers, because the value of their debts are decreased in comparison to the value of their work. Deflation helps savers and lenders, and hurts borrowers. The big problem here - and from this point forward I’m speaking of my inferences, not from facts - is that both inflation and deflation harm economic mobility. In an inflationary environment, lenders don’t want to loan money because they money they get back in the future will be worth less. To offset that, interest rates and lending requirements rise, which cuts the poor off from access to capital. In a deflationary environment, money is expected to be worth more in the future, so borderline investments have to produce a larger expected return in order to “beat” deflation. Periods of stability are therefore what we should seek, in order to maximize access to capital for those most in need of it (the poor). Bitcoin is mildly inflationary now, but is more than offset by adoption/speculation. At some point in the future, when mining rewards taper into nothing and mining is incentivized only by transaction fees, Bitcoin will become mildly (but consistently) deflationary. This assumes adoption and speculation is fully saturated by then. I don’t know if Bitcoin itself will ever get there, but I’m reasonably confident that some cryptocurrency will. From a larger economic perspective, that’s what I want to see from the cryptocurrency world. I could speak all day about the anti-state/pro-individual-freedom aspects, but from a purely economic perspective, I strongly prefer the rapid feedback of fixed-supply (but infinitely divisible) currencies (in the form of boom/bust cycles).