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There are natural limitations to how much people will save: * When you're dead all your savings are worthless (to you), so your likely to spend most of them be

by tibbe 15y ago

There are natural limitations to how much people will save: * When you're dead all your savings are worthless (to you), so your likely to spend most of them before then. * Some consumption cannot be postponed: you need food, a roof over your head, transportation, etc. * Time has value. For example, if you wait another 6 months the same amount of money (bitcoin or not) will buy you a better computer. This is likely to hold true in the foreseeable future. Still people do but computers (and phones, etc). * There's opportunity cost: even if your savings increase in value over time, investing them in something could increase them even more.

po 15y ago
When you're dead all your savings are worthless (to you), so your likely to spend most of them before then. If that were true, why would there be so much debate around the estate tax? Warren Buffet is a rarity. Most people want to pass money down through generations rather than spend it as they near the end of their lives. Taxes on inheritance encourages spending and charitable giving. Some consumption cannot be postponed: you need food, a roof over your head, transportation, etc. Given. Probably not enough to avoid depression though. Time has value. For example, if you wait another 6 months the same amount of money (bitcoin or not) will buy you a better computer. This is likely to hold true in the foreseeable future. Still people do but computers (and phones, etc) You seem to be arguing for deflation. Given that I can wait and get a better computer there's even less incentive to spend it today. I remember a study that showed for a computationally intense problem (many years) you could finish sooner by waiting part of the time and buying a faster computer. That's even less incentive to move money around. There's opportunity cost: even if your savings increase in value over time, investing them in something could increase them even more. Not if the economy is depressed. In sum, the natural limitations you site - even if they worked - are not enough to avoid depression. A small bit of inflation is a good thing. Think of a dollar/bitcoin/whatever as a unit of work and inflation as 'urgency'. :-)
- reedlaw 15y ago
  You seem to suggest in all these cases that spending is inherently good. Estate tax = incentive to give away. Inflation = incentive to buy now. I understand this is one of the core concepts of Keynesian economics. But there exists an alternative school of thought that posits that inflation causes volatile business cycles and central banks are inefficient at allocating resources. Success of a bitcoin-based economy would seem to support the correctness of this Austrian school of economics. We shall have to wait and see.
  - po 15y ago
    True, I do believe that money flowing from one person to the next (i.e. spending) encourages progress and opportunity. I think those are (on balance) good things. I think it's good to have some convection in the pool. I don't want a central bank to 'allocate resources' but I don't mind when Wall St. closes due to panic selling or the market closes when someone blows up a skyscraper while everyone figures out wtf that means. I think sports are better with referees. Kill-the-man-with-the-ball is only fun for the biggest guy. Football is a better game. What we have right now is great but I also don't think Bitcoin is going in the right direction. If you think bitcoin will be less volatile than the overall economy now think about how much easier it would be to corner a market in BTC than USD. Think about how easy it will be to buy off a politician. I don't think democracy can survive under bitcoin.
  - 3am 15y ago
    That doesn't have the slightest thing to do with Keynesian economics.
    - mikey_p 15y ago
      The concept of hoarding in the original article and in this thread is fundamentally identical to a liquidity trap.
rmc 15y ago
your likely to spend most of them before then. This does not happen that much in human behaviour. Just look at all the people who inherit wealth. If what you said was the most common approach, they would be rare. even if your savings increase in value over time, investing them in something could increase them even more. Depends. Over the last year bitcoin has seen a ~20,000% return rate. If bitcoin gets uberpopular (i.e. each coin is worth ~ US$2m) within 20 years, then BitCoin would have a return rate of ~ 85% per year consistantly for the next 20 years. There is practically nothing else with that close an return rate, so the only financially sound course is to hoard your BitCoins, not invest them

by tibbe 15y ago

po 15y ago

When you're dead all your savings are worthless (to you), so your likely to spend most of them before then. If that were true, why would there be so much debate around the estate tax? Warren Buffet is a rarity. Most people want to pass money down through generations rather than spend it as they near the end of their lives. Taxes on inheritance encourages spending and charitable giving. Some consumption cannot be postponed: you need food, a roof over your head, transportation, etc. Given. Probably not enough to avoid depression though. Time has value. For example, if you wait another 6 months the same amount of money (bitcoin or not) will buy you a better computer. This is likely to hold true in the foreseeable future. Still people do but computers (and phones, etc) You seem to be arguing for deflation. Given that I can wait and get a better computer there's even less incentive to spend it today. I remember a study that showed for a computationally intense problem (many years) you could finish sooner by waiting part of the time and buying a faster computer. That's even less incentive to move money around. There's opportunity cost: even if your savings increase in value over time, investing them in something could increase them even more. Not if the economy is depressed. In sum, the natural limitations you site - even if they worked - are not enough to avoid depression. A small bit of inflation is a good thing. Think of a dollar/bitcoin/whatever as a unit of work and inflation as 'urgency'. :-)

reedlaw 15y ago
You seem to suggest in all these cases that spending is inherently good. Estate tax = incentive to give away. Inflation = incentive to buy now. I understand this is one of the core concepts of Keynesian economics. But there exists an alternative school of thought that posits that inflation causes volatile business cycles and central banks are inefficient at allocating resources. Success of a bitcoin-based economy would seem to support the correctness of this Austrian school of economics. We shall have to wait and see.
- po 15y ago
  True, I do believe that money flowing from one person to the next (i.e. spending) encourages progress and opportunity. I think those are (on balance) good things. I think it's good to have some convection in the pool. I don't want a central bank to 'allocate resources' but I don't mind when Wall St. closes due to panic selling or the market closes when someone blows up a skyscraper while everyone figures out wtf that means. I think sports are better with referees. Kill-the-man-with-the-ball is only fun for the biggest guy. Football is a better game. What we have right now is great but I also don't think Bitcoin is going in the right direction. If you think bitcoin will be less volatile than the overall economy now think about how much easier it would be to corner a market in BTC than USD. Think about how easy it will be to buy off a politician. I don't think democracy can survive under bitcoin.
- 3am 15y ago
  That doesn't have the slightest thing to do with Keynesian economics.
  - mikey_p 15y ago
    The concept of hoarding in the original article and in this thread is fundamentally identical to a liquidity trap.

rmc 15y ago

your likely to spend most of them before then. This does not happen that much in human behaviour. Just look at all the people who inherit wealth. If what you said was the most common approach, they would be rare. even if your savings increase in value over time, investing them in something could increase them even more. Depends. Over the last year bitcoin has seen a ~20,000% return rate. If bitcoin gets uberpopular (i.e. each coin is worth ~ US$2m) within 20 years, then BitCoin would have a return rate of ~ 85% per year consistantly for the next 20 years. There is practically nothing else with that close an return rate, so the only financially sound course is to hoard your BitCoins, not invest them