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That argument isn't true. Deflationary currency can destabilize governments, not the economy. Econonomies fail because they're run by incompetent governments, w

by Geee 5y ago

That argument isn't true. Deflationary currency can destabilize governments, not the economy. Econonomies fail because they're run by incompetent governments, who spend more than they can afford. Bitcoin is not guaranteed to be deflationary. It's deflationary when the economy is growing. It's inflationary when the economy is shrinking. Deflation will slow down economy, and inflation will accelerate economy. It's a stable self-correcting system, which would correct itself to match the average economic growth globally.

acdha 5y ago
Bitcoin is guaranteed to be deflationary as long as there’s a finite limit – if nothing else, lost keys would reduce the total over time. More importantly, the people hawking it _really_ want it to be deflationary because that effectively makes them landed gentry getting richer without any effort on their part. After a decade of that being integral to the sales pitch I would be extremely surprised to see any major holder support breaking the deflationary model.
- Geee 5y ago
  There isn't monetary deflation in bitcoin (expect for lost coins). As a global reserve currency, bitcoin would act as an "index fund of everything". Economy is expected to grow, but it's not guaranteed. Which means that there's always a non-zero risk associated to it. There's more risk on short time scales, and less risk on long time scales.
  - Taniwha 5y ago
    There will be if it's successful - 90% of the bitcoins ever mined have already been mined, for bitcoin to be useful at a long term world wide level it needs to store enough value even as the size of the world economy grows - if it can't them it will become a limit on economic growth much as gold became in the last century. So because the number of bitcoin is fixed to remain relevant bitcoin will need to continually deflate (ie increase in value) so that there's enough to represent the size of the economy
- lottin 5y ago
  No currency is guaranteed to be deflationary. You may guarantee that the currency supply will behave in a certain way (although even that is debatable), buy you cannot guarantee that the price level in terms of such a currency will continuously fall.
  - acdha 5y ago
    The fixed currency supply guarantees it: unless the economy is shrinking at the same rate, each BTC becomes more valuable over time and that’d cause purchase prices for goods to trend lower. This has been a key part of the sales pitch for a decade: buy now and it’ll be worth more later, guaranteed, but that’s not good for an economy since it heavily incentivizes holding onto anything you aren’t forced to spend. Since Bitcoin has no innate demand, that’s an especially dangerous cycle since almost everyone has alternatives.
    - lottin 5y ago
      > The fixed currency supply guarantees it No, it doesn't. Bitcoin can lose 50% of its value in a matter of hours, as recent experience shows, despite being in a limited supply.
      - imtringued 5y ago
        You're right a fixed supply isn't enough to guarantee it, you still need productivity growth and technological progress, something we've had for a long time. Given enough growth a 50% crash is nothing.
      - fladrif 5y ago
        So the only way bitcoin isn't deflationary is if demand for it continually goes down over time until it's irrelevant. If demand either goes up or stays the same, it will behave deflationary (wallets getting lost). This doesn't seem to be a good performance pattern for a currency.
- imtringued 5y ago
  >More importantly, the people hawking it _really_ want it to be deflationary because that effectively makes them landed gentry getting richer without any effort on their part. Yeah it is basically people getting screwed by increased wealth inequality and then as a response they don't think of a way to build a system without losers, instead they join a system where the old dynamic makes them the winners. The only difference is that you start from a clean slate from 2008 onwards.
  - ric2b 5y ago
    > as a response they don't think of a way to build a system without losers Which system is that?
noahadavis 5y ago
Does making governments less stable really not make economies less stable?
- atweiden 5y ago
  It would seem so, yes. But I disagree with the GP’s premise: claiming economies rise and fall based on monetary policy alone is like claiming the Roman empire fell because they debased their currency. It’s a contributory factor, but certainly not the only one. We’d need to assess the merit of anarcho-capitalism vs collectivist democracy to understand whether disempowering governments would in fact decrease economic stability.
  - imtringued 5y ago
    Yes there is a hole in the article. He didn't mention that Germany lost WW1. Every other nation suffered the same problems but they could get away from them without hyperinflation, Germany couldn't because increasing the monetary supply does not repair an economy. If one were to completely oversimplify everything the roman empire fell into the "war + debasement" bucket though but it also had a lot of other problems. They were actively fighting a war which meant they couldn't control the influx of barbarian refugees (huns drove them out) at their border. They then committed a grave mistake. They deported all barbarians and killed those who stayed. Some barbarians gathered near the border and formed a big army which then proceeded to plunder Rome. The problems didn't start with money, they got worse because of money.
- Geee 5y ago
  Governments that overspend or misallocate capital are a burden to the economy. With sound money, a badly managed country can go bankrupt because they can't print more money. It isn't the fault of the money, while this is the usual argument. It's just the nature of honest money. So, it results in destabilizing governments that are overspending, but stabilizing those that are not.
  - noahadavis 5y ago
    You don't see the side-effects of destabilizing a government as potentially disastrous for an economy? Governments and economies can have many different forms, but there are clear cases where destabilizing one will destabilize the other and ultimately lead to mass suffering for a period of time. Imagine what would happen if a government in a place like the Middle East or parts of Africa collapsed. History has shown that a new government often doesn't rise up from the ashes without lots of tears and bloodshed. What do you think happens to people's standards of living? How much of their time and money do you think it will take just to get back what they used to have?

by Geee 5y ago

acdha 5y ago

Bitcoin is guaranteed to be deflationary as long as there’s a finite limit – if nothing else, lost keys would reduce the total over time. More importantly, the people hawking it _really_ want it to be deflationary because that effectively makes them landed gentry getting richer without any effort on their part. After a decade of that being integral to the sales pitch I would be extremely surprised to see any major holder support breaking the deflationary model.

Geee 5y ago
There isn't monetary deflation in bitcoin (expect for lost coins). As a global reserve currency, bitcoin would act as an "index fund of everything". Economy is expected to grow, but it's not guaranteed. Which means that there's always a non-zero risk associated to it. There's more risk on short time scales, and less risk on long time scales.
- Taniwha 5y ago
  There will be if it's successful - 90% of the bitcoins ever mined have already been mined, for bitcoin to be useful at a long term world wide level it needs to store enough value even as the size of the world economy grows - if it can't them it will become a limit on economic growth much as gold became in the last century. So because the number of bitcoin is fixed to remain relevant bitcoin will need to continually deflate (ie increase in value) so that there's enough to represent the size of the economy
lottin 5y ago
No currency is guaranteed to be deflationary. You may guarantee that the currency supply will behave in a certain way (although even that is debatable), buy you cannot guarantee that the price level in terms of such a currency will continuously fall.
- acdha 5y ago
  The fixed currency supply guarantees it: unless the economy is shrinking at the same rate, each BTC becomes more valuable over time and that’d cause purchase prices for goods to trend lower. This has been a key part of the sales pitch for a decade: buy now and it’ll be worth more later, guaranteed, but that’s not good for an economy since it heavily incentivizes holding onto anything you aren’t forced to spend. Since Bitcoin has no innate demand, that’s an especially dangerous cycle since almost everyone has alternatives.
  - lottin 5y ago
    > The fixed currency supply guarantees it No, it doesn't. Bitcoin can lose 50% of its value in a matter of hours, as recent experience shows, despite being in a limited supply.
    - imtringued 5y ago
      You're right a fixed supply isn't enough to guarantee it, you still need productivity growth and technological progress, something we've had for a long time. Given enough growth a 50% crash is nothing.
    - fladrif 5y ago
      So the only way bitcoin isn't deflationary is if demand for it continually goes down over time until it's irrelevant. If demand either goes up or stays the same, it will behave deflationary (wallets getting lost). This doesn't seem to be a good performance pattern for a currency.
imtringued 5y ago
>More importantly, the people hawking it _really_ want it to be deflationary because that effectively makes them landed gentry getting richer without any effort on their part. Yeah it is basically people getting screwed by increased wealth inequality and then as a response they don't think of a way to build a system without losers, instead they join a system where the old dynamic makes them the winners. The only difference is that you start from a clean slate from 2008 onwards.
- ric2b 5y ago
  > as a response they don't think of a way to build a system without losers Which system is that?

noahadavis 5y ago

Does making governments less stable really not make economies less stable?

atweiden 5y ago
It would seem so, yes. But I disagree with the GP’s premise: claiming economies rise and fall based on monetary policy alone is like claiming the Roman empire fell because they debased their currency. It’s a contributory factor, but certainly not the only one. We’d need to assess the merit of anarcho-capitalism vs collectivist democracy to understand whether disempowering governments would in fact decrease economic stability.
- imtringued 5y ago
  Yes there is a hole in the article. He didn't mention that Germany lost WW1. Every other nation suffered the same problems but they could get away from them without hyperinflation, Germany couldn't because increasing the monetary supply does not repair an economy. If one were to completely oversimplify everything the roman empire fell into the "war + debasement" bucket though but it also had a lot of other problems. They were actively fighting a war which meant they couldn't control the influx of barbarian refugees (huns drove them out) at their border. They then committed a grave mistake. They deported all barbarians and killed those who stayed. Some barbarians gathered near the border and formed a big army which then proceeded to plunder Rome. The problems didn't start with money, they got worse because of money.
Geee 5y ago
Governments that overspend or misallocate capital are a burden to the economy. With sound money, a badly managed country can go bankrupt because they can't print more money. It isn't the fault of the money, while this is the usual argument. It's just the nature of honest money. So, it results in destabilizing governments that are overspending, but stabilizing those that are not.
- noahadavis 5y ago
  You don't see the side-effects of destabilizing a government as potentially disastrous for an economy? Governments and economies can have many different forms, but there are clear cases where destabilizing one will destabilize the other and ultimately lead to mass suffering for a period of time. Imagine what would happen if a government in a place like the Middle East or parts of Africa collapsed. History has shown that a new government often doesn't rise up from the ashes without lots of tears and bloodshed. What do you think happens to people's standards of living? How much of their time and money do you think it will take just to get back what they used to have?