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Gold also has a fatal flaw, there's only so much of it, building a currency based on gold (ie the US dollar on the gold standard) limits the size of the economy

Gold also has a fatal flaw, there's only so much of it, building a currency based on gold (ie the US dollar on the gold standard) limits the size of the economy, it can't grow if you can't pay for stuff - it's why we left the gold standard. Bitcoin by design only has a fixed number of coins available, eventually the miners will have mined them all. It has the same limitation that gold has and basing an economy on it will stunt its growth.

mixmastamyk 5y ago
Are you saying economies grow by inflating their currency?
- Taniwha 5y ago
  No, economies based on gold or bitcoin can ONLY grow by inflating their currency .... At the moment our economies grow because we can print more money ... and of course most national/reserve banks are careful to not print so much currency that inflation becomes an issue, just enough to cover the economic growth.
- barrkel 5y ago
  Growth of the economy without growth of the money supply leads to deflation, which harms consumption and investment, because hanging on to your money becomes competitive with actively doing something with it. A small amount of inflation is an incentive to find productive uses for capital. Deflation rewards a kind of rentier class who own capital but don't do anything with it.
  - tastyfreeze 5y ago
    Perpetuating the fear of deflation is the greatest feat the Fed has ever pulled off. Deflation is good. Every wage earner becomes more wealthy as their rate of pay buys more. Sticky wages arent a problem with deflationary money. Hell, at least half the complaints about the modern economy are the result of inflation. But, no, deflation would utterly destroy the economy.
    - lmm 5y ago
      > Every wage earner becomes more wealthy as their rate of pay buys more. Income is not the same as wealth. Savers become wealthier, debtors (such as anyone with a mortgage) lose wealth. > Sticky wages arent a problem with deflationary money. Um, what? Your last sentence was all about how deflationary money guarantees wage earners increasing pay in real terms. That makes the sticky wages problem much worse.
    - arcticbull 5y ago
      Wages have kept pace with inflation over the last decades. This means they earned more currency units over time. If we had 0% inflation, they would earn the same number of units. With deflation they would earn fewer units. If you want to change the amount of wealth low-income earners have, stop focusing on the units. This is not JPow's fault, it's a job for congress - it's social and fiscal policy not monetary policy. This is just a quixotic quest against the wrong opponent. If you want to help low-income folks, advocate for unions (so labor can push back against capital), advocate for wealth taxes, higher marginal taxes for the rich, minimum wage indexed to inflation, a strong social safety net and national zoning laws to stop metros from preventing adding enough housing supply to meet demand. Things that would help.
      - tastyfreeze 5y ago
        Wages have not kept pace with inflation at all. In real wealth terms everybody is poorer. https://www.forbes.com/sites/realspin/2013/10/09/measured-in-gold-the-story-of-american-wages-is-an-ugly-one/ https://www.forbes.com/sites/realspin/2013/10/09/measured-in...
        arcticbull 5y ago
        That was from 2013, and written from the perspective that gold represents “real” worth - some platonic ideal constant measure, but it doesn’t. It’s a deflationary non-productive asset whose value is speculative and usually varied with general fear of inflation. Inflation is benchmarked against CPI. This is goldbuggery and fringe economics. By the way; that’s from the Forbes opinion piece section, not Forbes proper. The author suggests you cannot measure inflation except by dividing by the spot price of gold. This is false, and why we have the CPI. [1] https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/ https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us...
  - sobani 5y ago
    When I look at the IT industry, I see deflation that has been going on for at least 50 years. Every year you can buy more computer for less money. Yet, people keep buying computers. Why? I would argue deflation has been the most significant driver of the IT industry in the last 30 years and in turn has been one of the greatest drivers of prosperity in that same period. As computers become cheaper, more people can afford more them and more value is added to society. On the other side you have inflation that kills savings. And since most people save with a goal in mind, not because it's fun and exciting, the higher the inflation, the longer they will have to save before they reach that goal.
    - imtringued 5y ago
      >Yet, people keep buying computers. Why? The majority of wealth is owned by the top 5%. Are they really spending a significant fraction of that wealth on computers? Deflation is never about what people buy, it's what they keep. >I would argue deflation has been the most significant driver of the IT industry in the last 30 years No it hasn't. The IT sector drives deflation and there is nothing wrong with productivity improvements. You just got cause and effect backwards. >and in turn has been one of the greatest drivers of prosperity in that same period. As computers become cheaper, more people can afford more them and more value is added to society. Inflation increases future incomes. If computers cost the same but you get higher salaries that's a good thing.
  - imtringued 5y ago
    Deflation is basically rent seeking with money. It's bad enough to have rent seeking with land, why make everything worse?
bufferoverflow 5y ago
That's nonsense. Bitcoin is not limited to whole coins. The total number of satoshis is crazy big, more than the dollars in the world. Bitcoin is limited by the block size and the lack of working L2 solutions (lightning is permanently broken). But other currencies, like BCH don't have that problem, and can easily represent the whole US economy.
- Taniwha 5y ago
  https://www.buybitcoinworldwide.com/how-many-bitcoins-are-there/ https://www.buybitcoinworldwide.com/how-many-bitcoins-are-th... 90% of all bitcoin ever have already been mined. If your solution to the limited number of bitcoins is rampant deflation you probably don't have a viable currency
  - bufferoverflow 5y ago
    Deflation is awesome. It's way better than inflation. It incentivizes you to not buy stupid junk that pollutes the world, you only buy the stuff you really need/want.
- jodrellblank 5y ago
  There's 3x10^21 gold atoms in every gram. You might have difficulty measuring out two atoms of gold to change hands, but that's dwarfed by the difficulty in measuring out two Satoshis - given that they aren't a physical thing at all. So, if you can keep track of it with Satoshis, why couldn't you keep track of it with gold atoms? That is, if your position is "Bitcoin isn't limited like gold because of Satoshis" then the same argument works equally well for gold with atoms, doesn't it? That is, gold can't represent the entire economy because nobody would pay so much for a gram of gold, but why would they then pay that much for a quanity of the even less physical Bitcoin?
  - bufferoverflow 5y ago
    Your argument doesn't work at all, because there's no difficulty counting satoshis.
mikedilger 5y ago
It doesn't limit the size of the economy. It incentivises saving over investing, since the value of the currency tends to increase as the economy grows. Modern fiat currency is designed to disincentivise savings and incentivise investing, in order to supercharge economic growth. A counter-position from the Austrian/Chicago school is that supercharging growth drives malinvestment, and they can't be entirely wrong about that - I've seen tons of dumb money flow into dodgy companies during tech booms.
- arcticbull 5y ago
  It incentivizes holding currency instead of making productive investments with your capital. Currency only has value when it moves, not lives under your grandma's mattress. Inflation incentivizes investment because you are going to lose 2% per annum if you don't. Fiat offers you the maximum flexibility because you can back your personal economy any way you want - if you want to back it with gold, just buy some. If you want to back it with crypto, bless your heart, buy some. This is a false narrative.
- imtringued 5y ago
  The current economic system is in trouble because people save too much damn money, that money has to go somewhere, anywhere, otherwise you get unemployment and underemployment. Interest rates are low because everyone is saving, nobody is borrowing, nobody is investing.
- api 5y ago
  Incentivizing investment is generally better from a national prosperity and power point of view in spite of the waste it creates. Wealth is a verb, not a noun. The wealth of nations is measured in how much they do, not how much they have. The US arguably defeated the USSR via looser monetary policy. China is now doing the same to the US.

mixmastamyk 5y ago

Are you saying economies grow by inflating their currency?

Taniwha 5y ago
No, economies based on gold or bitcoin can ONLY grow by inflating their currency .... At the moment our economies grow because we can print more money ... and of course most national/reserve banks are careful to not print so much currency that inflation becomes an issue, just enough to cover the economic growth.
barrkel 5y ago
Growth of the economy without growth of the money supply leads to deflation, which harms consumption and investment, because hanging on to your money becomes competitive with actively doing something with it. A small amount of inflation is an incentive to find productive uses for capital. Deflation rewards a kind of rentier class who own capital but don't do anything with it.
- tastyfreeze 5y ago
  Perpetuating the fear of deflation is the greatest feat the Fed has ever pulled off. Deflation is good. Every wage earner becomes more wealthy as their rate of pay buys more. Sticky wages arent a problem with deflationary money. Hell, at least half the complaints about the modern economy are the result of inflation. But, no, deflation would utterly destroy the economy.
  - lmm 5y ago
    > Every wage earner becomes more wealthy as their rate of pay buys more. Income is not the same as wealth. Savers become wealthier, debtors (such as anyone with a mortgage) lose wealth. > Sticky wages arent a problem with deflationary money. Um, what? Your last sentence was all about how deflationary money guarantees wage earners increasing pay in real terms. That makes the sticky wages problem much worse.
  - arcticbull 5y ago
    Wages have kept pace with inflation over the last decades. This means they earned more currency units over time. If we had 0% inflation, they would earn the same number of units. With deflation they would earn fewer units. If you want to change the amount of wealth low-income earners have, stop focusing on the units. This is not JPow's fault, it's a job for congress - it's social and fiscal policy not monetary policy. This is just a quixotic quest against the wrong opponent. If you want to help low-income folks, advocate for unions (so labor can push back against capital), advocate for wealth taxes, higher marginal taxes for the rich, minimum wage indexed to inflation, a strong social safety net and national zoning laws to stop metros from preventing adding enough housing supply to meet demand. Things that would help.
    - tastyfreeze 5y ago
      Wages have not kept pace with inflation at all. In real wealth terms everybody is poorer. https://www.forbes.com/sites/realspin/2013/10/09/measured-in-gold-the-story-of-american-wages-is-an-ugly-one/ https://www.forbes.com/sites/realspin/2013/10/09/measured-in...
      - arcticbull 5y ago
        That was from 2013, and written from the perspective that gold represents “real” worth - some platonic ideal constant measure, but it doesn’t. It’s a deflationary non-productive asset whose value is speculative and usually varied with general fear of inflation. Inflation is benchmarked against CPI. This is goldbuggery and fringe economics. By the way; that’s from the Forbes opinion piece section, not Forbes proper. The author suggests you cannot measure inflation except by dividing by the spot price of gold. This is false, and why we have the CPI. [1] https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/ https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us...
- sobani 5y ago
  When I look at the IT industry, I see deflation that has been going on for at least 50 years. Every year you can buy more computer for less money. Yet, people keep buying computers. Why? I would argue deflation has been the most significant driver of the IT industry in the last 30 years and in turn has been one of the greatest drivers of prosperity in that same period. As computers become cheaper, more people can afford more them and more value is added to society. On the other side you have inflation that kills savings. And since most people save with a goal in mind, not because it's fun and exciting, the higher the inflation, the longer they will have to save before they reach that goal.
  - imtringued 5y ago
    >Yet, people keep buying computers. Why? The majority of wealth is owned by the top 5%. Are they really spending a significant fraction of that wealth on computers? Deflation is never about what people buy, it's what they keep. >I would argue deflation has been the most significant driver of the IT industry in the last 30 years No it hasn't. The IT sector drives deflation and there is nothing wrong with productivity improvements. You just got cause and effect backwards. >and in turn has been one of the greatest drivers of prosperity in that same period. As computers become cheaper, more people can afford more them and more value is added to society. Inflation increases future incomes. If computers cost the same but you get higher salaries that's a good thing.
- imtringued 5y ago
  Deflation is basically rent seeking with money. It's bad enough to have rent seeking with land, why make everything worse?

bufferoverflow 5y ago

That's nonsense. Bitcoin is not limited to whole coins. The total number of satoshis is crazy big, more than the dollars in the world. Bitcoin is limited by the block size and the lack of working L2 solutions (lightning is permanently broken). But other currencies, like BCH don't have that problem, and can easily represent the whole US economy.

Taniwha 5y ago
https://www.buybitcoinworldwide.com/how-many-bitcoins-are-there/ https://www.buybitcoinworldwide.com/how-many-bitcoins-are-th... 90% of all bitcoin ever have already been mined. If your solution to the limited number of bitcoins is rampant deflation you probably don't have a viable currency
- bufferoverflow 5y ago
  Deflation is awesome. It's way better than inflation. It incentivizes you to not buy stupid junk that pollutes the world, you only buy the stuff you really need/want.
jodrellblank 5y ago
There's 3x10^21 gold atoms in every gram. You might have difficulty measuring out two atoms of gold to change hands, but that's dwarfed by the difficulty in measuring out two Satoshis - given that they aren't a physical thing at all. So, if you can keep track of it with Satoshis, why couldn't you keep track of it with gold atoms? That is, if your position is "Bitcoin isn't limited like gold because of Satoshis" then the same argument works equally well for gold with atoms, doesn't it? That is, gold can't represent the entire economy because nobody would pay so much for a gram of gold, but why would they then pay that much for a quanity of the even less physical Bitcoin?
- bufferoverflow 5y ago
  Your argument doesn't work at all, because there's no difficulty counting satoshis.

mikedilger 5y ago

It doesn't limit the size of the economy. It incentivises saving over investing, since the value of the currency tends to increase as the economy grows. Modern fiat currency is designed to disincentivise savings and incentivise investing, in order to supercharge economic growth. A counter-position from the Austrian/Chicago school is that supercharging growth drives malinvestment, and they can't be entirely wrong about that - I've seen tons of dumb money flow into dodgy companies during tech booms.

arcticbull 5y ago
It incentivizes holding currency instead of making productive investments with your capital. Currency only has value when it moves, not lives under your grandma's mattress. Inflation incentivizes investment because you are going to lose 2% per annum if you don't. Fiat offers you the maximum flexibility because you can back your personal economy any way you want - if you want to back it with gold, just buy some. If you want to back it with crypto, bless your heart, buy some. This is a false narrative.
imtringued 5y ago
The current economic system is in trouble because people save too much damn money, that money has to go somewhere, anywhere, otherwise you get unemployment and underemployment. Interest rates are low because everyone is saving, nobody is borrowing, nobody is investing.
api 5y ago
Incentivizing investment is generally better from a national prosperity and power point of view in spite of the waste it creates. Wealth is a verb, not a noun. The wealth of nations is measured in how much they do, not how much they have. The US arguably defeated the USSR via looser monetary policy. China is now doing the same to the US.