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Long term I'm bearish because it's a deflationary asset. Deflationary value stores have a tendency to cause all sorts of social ills by encouraging hoarding. Th

Long term I'm bearish because it's a deflationary asset. Deflationary value stores have a tendency to cause all sorts of social ills by encouraging hoarding. There's a reasonable line of thought that observes that it's no coincidence that the end of the age of European colonialism coincided with the demise of the gold standard. More concretely: if crypto is deflationary, then its value works similarly to how an Amway or Herbalife membership's value does. You get rich by getting in first and then convincing others to join after you.

bombcar 4y ago
More importantly it's only "bitcoin" because it's the first; even if everything crypto takes off the world could collectively decide to use something else (Etherium being an obvious choice, but there could be others).
imtringued 4y ago
In my opinion mixing the functions of medium of exchange and store of value has caused untold amounts of needless suffering. You see 2% inflation is the middle ground. Rich people may want to save and increase their wealth but my mom just wants a job to pay rent and buy groceries, she has no grand ambitions to become super wealthy. When you mix the two functions into cash, one of the two is going to dominate the economy and with gold it was the rich, with fiat it is mostly average people because having a job is more important than maintaining purchasing power.
- ericmay 4y ago
  Maybe the issue is just that we no longer have a store of wealth that isn't tied to a speculative asset? Fiat currency is a fantastic currency - even terrorists who hate America use dollars. But it's a terrible store of wealth because it loses at least 2% of its value by intention (this fluctuates - just going off the stated Federal Reserve targets). I think this is where things like houses becoming collateralized assets start coming into the picture. You can buy stocks or index funds, but those can lose value and they're definitely not guaranteed to increase in value. Houses are a pretty "hard" asset in physical reality and with inflation basically they go up in value while also providing utility. And to buy a house you need fiat currency so they're somewhat liquid in that sense. So what do you do? Buy gold? Maybe. Bitcoin is another option similar in some ways to gold (in function at least). Other cryptocurrencies are assets in my view more similar to a stock with products or platforms behind them. I'm just not sure what to do. If you make cash inflation neutral or deflationary that sounds ideal, but how do you do that? And would people be likely to take risk in such an environment? Do we need to? Is it bad that we are encouraging the use of fiat currency by threatening to devalue it over time? I'm not sure.
  - saalweachter 4y ago
    > Maybe the issue is just that we no longer have a store of wealth that isn't tied to a speculative asset? You say speculative, I say productive. Is a non-productive store of value actually a thing which exists in nature? For most things, you can't store a thing itself: grain rots, chickens die, houses decay, iron rusts, water is fouled. If you want to have a thing in the future, you need a way to produce the thing: fields of grains, lineages of chickens, maintenance and construction of houses, refinement of iron, the purification of water. All investment in these future means of production is speculative; you have no guarantee the bet you made on how you will obtain a chicken in 20 years will play out.
    - ericmay 4y ago
      > You say speculative, I say productive. Oh I totally agree! Stocks in companies are absolutely productive assets. Though they are still speculative. I guess the first thought that comes to mind is well, so what? Does it make sense for individuals to plow money into the stock market even at all-time highs? Should you basically have to perform an investor level due diligence for buying these productive assets? Sometimes I think we are duped by the liquidity in ways we wouldn't be if we were deciding whether or not to buy a farm or a movie theater. > Is a non-productive store of value actually a thing which exists in nature? Gold is probably the closest we've ever gotten. Besides that I'm not sure. But then that begs the question I was responding to regarding savings for "regular people". Is it impossible to save money without buying into the stock market? Idk.
      - vel0city 4y ago
        Gold is still a speculative asset! You're speculating what it will be worth in the future. Its current value varies a good bit compared to other goods and dollars.
      - saalweachter 4y ago
        Gold famously doesn't decay, but why should I expect prices to remain constant in terms of gold? If I sell you a chicken today for 80 milligrams of gold, why would you be obligated to sell me an equivalent chicken for 80 milligrams of gold in twenty years? Gold isn't a perfect store or value, it's just a perfect store of gold.
ericmay 4y ago
> Long term I'm bearish because it's a deflationary asset. Deflationary value stores have a tendency to cause all sorts of social ills by encouraging hoarding. There's a reasonable line of thought that observes that it's no coincidence that the end of the age of European colonialism coincided with the demise of the gold standard. It's definitely an interesting theory - any particular articles or books you've read on the subject? I find the story of money fascinating. On the other hand, however, States are no longer constrained by how much gold they have. In the past you could wage war until you ran out of gold and then that was that - you couldn't print money out of thin air. Now you can just print money and at least up until some point (which we don't know yet) it works. I guess you could argue back to your first point that this is what caused wars - you needed to accumulate resources in order to have wealth so you'd start wars and take stuff. I think deflationary economies have bad attributes - like why take risks when you can do nothing and the value of your assets goes up? On the other hand, (and someone else mentioned something related to this) inflation literally destroys wealth so how can someone working a non-high paying job store wealth when the value of that wealth is destroyed at a minimum of 2% per year?
- vel0city 4y ago
  > inflation literally destroys wealth Inflation doesn't destroy wealth, inflation erodes the value of money. Wealth and money are two separate but related ideas. One shouldn't tie up the majority of their wealth in money, its non-productive. > how can someone working a non-high paying job store wealth when the value of that wealth is destroyed at a minimum of 2% per year? By investing in productive assets instead of holding pieces of paper under their mattress.
Geee 4y ago
That's a common fallacy. Hoarding, saving, preparing for the future is one of most fundamental human needs and the bedrock for a functioning economy and society. There's no fundamental economic principle which would indicate that an inflationary money would do any good to a society. It destroys savings, which is opposite of what is good for an individual and a society. Also, because you mentioned colonialism, read this to understand how colonialism and slave trade was enabled by inflation (counterfeit money): https://breedlove22.medium.com/masters-and-slaves-of-money-255ecc93404f https://breedlove22.medium.com/masters-and-slaves-of-money-2...
- lolc 4y ago
  Money isn't wealth. What you can get for it is. Hoarding casino chips does not prepare you for the future. It just makes the people running the casino richer with goods you traded for the chips. Oh you say, I can trade the chips with other people. Also the chips are numbered and we have an agreement to never accept a casino chip numbered over 1 trillion. Then we pay the casino one chip every time we trade. So the casino always has some chips to trade. The casino always wins. You're even paying their horrendous electricity bill.
  - Geee 4y ago
    Money allows optionality - instead of hoarding food and fuel, you can hoard money and buy the things you need in the future. If you know for sure that you need food and fuel, and hoard them in advance, they will rot and evaporate by the time you need them. Inflationary money is like rotting food, instead of canned food. It makes no sense at all to store your wealth in rotting and evaporating things.
    - lolc 4y ago
      How do you know people will want to trade fuel for casino chips in the future?
      - Geee 4y ago
        Well, you don't really know, but you can make certain assumptions. Money is like a social network with network effects, which means that people want to hoard casino chips which are most popular, and thus they also want to accept them in trade and reject everything else. This keeps them in the most popular economic network, and also keeps the casino chips valuable. However, if there's something wrong in the casino chips itself (like inflation), people start to switch to a better version of casino chips, and they can assume that everyone switches, sooner or later, to the best alternative available, with least issues and largest network. Network effects will keep the new casino chips valuable as long as there's no better alternative.

bombcar 4y ago

More importantly it's only "bitcoin" because it's the first; even if everything crypto takes off the world could collectively decide to use something else (Etherium being an obvious choice, but there could be others).

imtringued 4y ago

In my opinion mixing the functions of medium of exchange and store of value has caused untold amounts of needless suffering. You see 2% inflation is the middle ground. Rich people may want to save and increase their wealth but my mom just wants a job to pay rent and buy groceries, she has no grand ambitions to become super wealthy. When you mix the two functions into cash, one of the two is going to dominate the economy and with gold it was the rich, with fiat it is mostly average people because having a job is more important than maintaining purchasing power.

ericmay 4y ago
Maybe the issue is just that we no longer have a store of wealth that isn't tied to a speculative asset? Fiat currency is a fantastic currency - even terrorists who hate America use dollars. But it's a terrible store of wealth because it loses at least 2% of its value by intention (this fluctuates - just going off the stated Federal Reserve targets). I think this is where things like houses becoming collateralized assets start coming into the picture. You can buy stocks or index funds, but those can lose value and they're definitely not guaranteed to increase in value. Houses are a pretty "hard" asset in physical reality and with inflation basically they go up in value while also providing utility. And to buy a house you need fiat currency so they're somewhat liquid in that sense. So what do you do? Buy gold? Maybe. Bitcoin is another option similar in some ways to gold (in function at least). Other cryptocurrencies are assets in my view more similar to a stock with products or platforms behind them. I'm just not sure what to do. If you make cash inflation neutral or deflationary that sounds ideal, but how do you do that? And would people be likely to take risk in such an environment? Do we need to? Is it bad that we are encouraging the use of fiat currency by threatening to devalue it over time? I'm not sure.
- saalweachter 4y ago
  > Maybe the issue is just that we no longer have a store of wealth that isn't tied to a speculative asset? You say speculative, I say productive. Is a non-productive store of value actually a thing which exists in nature? For most things, you can't store a thing itself: grain rots, chickens die, houses decay, iron rusts, water is fouled. If you want to have a thing in the future, you need a way to produce the thing: fields of grains, lineages of chickens, maintenance and construction of houses, refinement of iron, the purification of water. All investment in these future means of production is speculative; you have no guarantee the bet you made on how you will obtain a chicken in 20 years will play out.
  - ericmay 4y ago
    > You say speculative, I say productive. Oh I totally agree! Stocks in companies are absolutely productive assets. Though they are still speculative. I guess the first thought that comes to mind is well, so what? Does it make sense for individuals to plow money into the stock market even at all-time highs? Should you basically have to perform an investor level due diligence for buying these productive assets? Sometimes I think we are duped by the liquidity in ways we wouldn't be if we were deciding whether or not to buy a farm or a movie theater. > Is a non-productive store of value actually a thing which exists in nature? Gold is probably the closest we've ever gotten. Besides that I'm not sure. But then that begs the question I was responding to regarding savings for "regular people". Is it impossible to save money without buying into the stock market? Idk.
    - vel0city 4y ago
      Gold is still a speculative asset! You're speculating what it will be worth in the future. Its current value varies a good bit compared to other goods and dollars.
    - saalweachter 4y ago
      Gold famously doesn't decay, but why should I expect prices to remain constant in terms of gold? If I sell you a chicken today for 80 milligrams of gold, why would you be obligated to sell me an equivalent chicken for 80 milligrams of gold in twenty years? Gold isn't a perfect store or value, it's just a perfect store of gold.

ericmay 4y ago

> Long term I'm bearish because it's a deflationary asset. Deflationary value stores have a tendency to cause all sorts of social ills by encouraging hoarding. There's a reasonable line of thought that observes that it's no coincidence that the end of the age of European colonialism coincided with the demise of the gold standard. It's definitely an interesting theory - any particular articles or books you've read on the subject? I find the story of money fascinating. On the other hand, however, States are no longer constrained by how much gold they have. In the past you could wage war until you ran out of gold and then that was that - you couldn't print money out of thin air. Now you can just print money and at least up until some point (which we don't know yet) it works. I guess you could argue back to your first point that this is what caused wars - you needed to accumulate resources in order to have wealth so you'd start wars and take stuff. I think deflationary economies have bad attributes - like why take risks when you can do nothing and the value of your assets goes up? On the other hand, (and someone else mentioned something related to this) inflation literally destroys wealth so how can someone working a non-high paying job store wealth when the value of that wealth is destroyed at a minimum of 2% per year?

vel0city 4y ago
> inflation literally destroys wealth Inflation doesn't destroy wealth, inflation erodes the value of money. Wealth and money are two separate but related ideas. One shouldn't tie up the majority of their wealth in money, its non-productive. > how can someone working a non-high paying job store wealth when the value of that wealth is destroyed at a minimum of 2% per year? By investing in productive assets instead of holding pieces of paper under their mattress.

Geee 4y ago

That's a common fallacy. Hoarding, saving, preparing for the future is one of most fundamental human needs and the bedrock for a functioning economy and society. There's no fundamental economic principle which would indicate that an inflationary money would do any good to a society. It destroys savings, which is opposite of what is good for an individual and a society. Also, because you mentioned colonialism, read this to understand how colonialism and slave trade was enabled by inflation (counterfeit money): https://breedlove22.medium.com/masters-and-slaves-of-money-255ecc93404f https://breedlove22.medium.com/masters-and-slaves-of-money-2...

lolc 4y ago
Money isn't wealth. What you can get for it is. Hoarding casino chips does not prepare you for the future. It just makes the people running the casino richer with goods you traded for the chips. Oh you say, I can trade the chips with other people. Also the chips are numbered and we have an agreement to never accept a casino chip numbered over 1 trillion. Then we pay the casino one chip every time we trade. So the casino always has some chips to trade. The casino always wins. You're even paying their horrendous electricity bill.
- Geee 4y ago
  Money allows optionality - instead of hoarding food and fuel, you can hoard money and buy the things you need in the future. If you know for sure that you need food and fuel, and hoard them in advance, they will rot and evaporate by the time you need them. Inflationary money is like rotting food, instead of canned food. It makes no sense at all to store your wealth in rotting and evaporating things.
  - lolc 4y ago
    How do you know people will want to trade fuel for casino chips in the future?
    - Geee 4y ago
      Well, you don't really know, but you can make certain assumptions. Money is like a social network with network effects, which means that people want to hoard casino chips which are most popular, and thus they also want to accept them in trade and reject everything else. This keeps them in the most popular economic network, and also keeps the casino chips valuable. However, if there's something wrong in the casino chips itself (like inflation), people start to switch to a better version of casino chips, and they can assume that everyone switches, sooner or later, to the best alternative available, with least issues and largest network. Network effects will keep the new casino chips valuable as long as there's no better alternative.