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The problem is that governments define what they accept for tax payments, but the value of that (fiat currency) is being eroded by governments themselves. What

The problem is that governments define what they accept for tax payments, but the value of that (fiat currency) is being eroded by governments themselves. Whatever other people would accept as payment for their services and products might well be Bitcoin, and there's nothing wrong with that.

bunderbunder 15y ago
There's a popular metaphor in economics, of a rising tide that lifts all boats. Expansion of the money supply is a force that both causes and allows the tide to rise. If it's expanding fast enough to cause a reasonable level of inflation, then it causes the tide to rise by encouraging economic productivity: If money only loses value by being stuffed under a mattress, then there's an incentive to use it by investing or spending it instead. This spurs job growth, velocity, and generally increases the GDP and ultimately helps everyone to become more wealthy. Even without that, though, the money supply needs to expand apace of economic expansion, otherwise you end up with deflation: If an increasing number of people are competing for a static quantity of currency, so the value of the currency keeps going up due to simple supply and demand. That creates a strong disincentive to participate in the economy. Why would you spend any more money than you absolutely have to in the present, if you know that the money will keep becoming more valuable for as long as you're willing to patiently wait? BTC, by eschewing a central authority with the power to (hopefully intelligently) control the money supply in response to economic realities, and choosing to use an fixed, artificially-selected growth curve instead, has almost certainly doomed itself. It can only work if the expansion of the BTC economy closely mirrors the expansion of the BTC money supply. If its popularity rises faster than the money supply grows, the result is economic gridlock due to deflation. And on the other side of things, if BTC adoption now falls very far behind that set curve, then it's going to run into an inflationary meltdown not entirely unlike the sort that many of its fans naively believe can only be caused by a government. TL;DR: Just because a bad driver might cause a wreck does not imply that cars would be better without steering wheels.
- white_devil 15y ago
  There's way too much theorizing/waxing-poetic online about how economics supposedly works that may or may not have a basis in reality and/or actual understanding of economics. I'm not really qualified to "call nonsense" on things, but I don't think you're in a position to just lay down the law either. Anyway, if there's a fixed supply of Bitcoins, then yes, it seems that one unit's value would keep increasing. But wouldn't it then be possible to use increasingly small fractions of a Bitcoin as necessary?

bunderbunder 15y ago

There's a popular metaphor in economics, of a rising tide that lifts all boats. Expansion of the money supply is a force that both causes and allows the tide to rise. If it's expanding fast enough to cause a reasonable level of inflation, then it causes the tide to rise by encouraging economic productivity: If money only loses value by being stuffed under a mattress, then there's an incentive to use it by investing or spending it instead. This spurs job growth, velocity, and generally increases the GDP and ultimately helps everyone to become more wealthy. Even without that, though, the money supply needs to expand apace of economic expansion, otherwise you end up with deflation: If an increasing number of people are competing for a static quantity of currency, so the value of the currency keeps going up due to simple supply and demand. That creates a strong disincentive to participate in the economy. Why would you spend any more money than you absolutely have to in the present, if you know that the money will keep becoming more valuable for as long as you're willing to patiently wait? BTC, by eschewing a central authority with the power to (hopefully intelligently) control the money supply in response to economic realities, and choosing to use an fixed, artificially-selected growth curve instead, has almost certainly doomed itself. It can only work if the expansion of the BTC economy closely mirrors the expansion of the BTC money supply. If its popularity rises faster than the money supply grows, the result is economic gridlock due to deflation. And on the other side of things, if BTC adoption now falls very far behind that set curve, then it's going to run into an inflationary meltdown not entirely unlike the sort that many of its fans naively believe can only be caused by a government. TL;DR: Just because a bad driver might cause a wreck does not imply that cars would be better without steering wheels.

white_devil 15y ago
There's way too much theorizing/waxing-poetic online about how economics supposedly works that may or may not have a basis in reality and/or actual understanding of economics. I'm not really qualified to "call nonsense" on things, but I don't think you're in a position to just lay down the law either. Anyway, if there's a fixed supply of Bitcoins, then yes, it seems that one unit's value would keep increasing. But wouldn't it then be possible to use increasingly small fractions of a Bitcoin as necessary?