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>If I could buy 1000 loaves of bread with 1BTC last year, but this year I can only buy 900 loaves with that same 1BTC, that's inflation. No, that's just an inc

>If I could buy 1000 loaves of bread with 1BTC last year, but this year I can only buy 900 loaves with that same 1BTC, that's inflation. No, that's just an increase in the price of bread. If all the inputs in making the bread were in BTC, then it would be inflation. If all of the inputs that went into making that bread were paid for in USD, and the relative price in BTC went up, that's called "currency risk". That's a completely different thing from inflation.

pishpash 4y ago
Currency is itself a financial good that is bought and sold, and has value. It's not divorced from other goods and is not special. You even have currency factories (banks) and competition. Also, any currency devaluing (which BTC is doing) is inflationary for an economy based in that currency.
- thawaya3113 4y ago
  It’s special in that it has a special purpose. Just like bread has a special purpose. And the purpose of a currency is to facilitate financial transactions. Which crypto is horrible at, because it cannot maintain a decent value at any point. Crypto is as good at being currency as iron is at being bread.
Deritio 4y ago
Wikipedias definition of inflation sounds exactly like op said and what I assume as well: 'In economics, inflation is a general increase in the prices of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reduction in the purchasing power of money.' I can afford less for the same unit of currency (Bitcoin) therefore I have inflation or deflation if I get more. And people claim that Bitcoin is inflation save due to a limit amount of bitcoins being produced (I read that multiple times) while this is just not true.
- celticninja 4y ago
  It's not really safe from inflation, more correctly it is deflationary by design. The limited supply means you can't dilute the existing value by creating more coins, as you can do with USD (or any fiat currency)
  - ketzu 4y ago
    The point of this discussion as I understand it is that the limited supply of bitcoin does not help with inflation in practice and, further, that monetary supply is not the only source of inflation to begin with. It is correct that bitcoin is designed with limited supply in mind, but that does not necesaarily stop inflation and definitely doesn't in practice because currency risk dominates the perceived value of bitcoin. As far as i remember, people often claimed that bitcoin protects against inflation, that statement has so many requirements attached so it doesn't matter in practice.
  - Deritio 4y ago
    People buy smaller and smaller denominations of Bitcoin then. Which means earlier you invest more your Bitcoin is worth. Until someone realizes that who ever was rich before is now loosing valur by investing in BTC too late and making early adopters rich. The question is only when this ruse gets so outbalanced that no one wants to invest anymore which will either lead to inflation or the big crypto burn.
- GoblinSlayer 4y ago
  Intuitively laymen really care about purchasing power, not its cause, they just use inflation as a short synonym for reduction of purchasing power, because inflation is often the cause of reduction of purchasing power, but I think they aren't really synonyms.
irjustin 4y ago
> No, that's just an increase in the price of bread. > Definition of inflation: a general increase in prices and fall in the purchasing value of money. It feels like you are jumping through hoops to avoid the definition of inflation. The parent comment's mention of bread is literal and figurative. When talking about inflation, "bread" a whole sector of goods. The specific mention of bread is to reference necessity - basic needs like food/shelter/clothing. Clearly the lines of inflation are fuzzy but if 'large enough' people's basic buying power decreases then you have inflation. With BTC, the parent comment is simply talking about being able to buy less with BTC because they can't go to someone who will give it to them for a lower price. Do that with enough goods and you've got inflation?
- celticninja 4y ago
  So you agree that BTC is money. ;) But I think parent commenter is correct. The bread price increases because of inflation of the USD denominated inputs. What you can buy with BTC changes because of changes in currency swap prices. In Zimbabwe during hyperinflation a dollar would buy you the same amount of e.g. bread because the goods inputs were priced in USD, but it would cost vastly more in Zimbabwe dollars on a day to day basis.
  - Nursie 4y ago
    Look up inflation as it is used by governments and economists, journalists and really everyone except internet 'Austrian' fans. It's a measure of the increase of prices compared to currency value. Currency supply change can be one of the forces which affect it, but it's far from the whole picture.
- daniel-cussen 4y ago
  No, if they decrease buying power because of pay cuts that's not inflation.
UncleMeat 4y ago
We measure inflation as the price of goods. People complain about inflation when the price of goods goes up.
tcmart14 4y ago
If it only happened to bread, sure. But at some point it has to be inflation if it ends up being across the board. So its not just bread, its bread, soda, car, houses, a computer, toilet paper, meat, etc. Sure, it may or may not fit the classical definition of inflation, but if it happens across the board, then functionally it is the same.

pishpash 4y ago

Currency is itself a financial good that is bought and sold, and has value. It's not divorced from other goods and is not special. You even have currency factories (banks) and competition. Also, any currency devaluing (which BTC is doing) is inflationary for an economy based in that currency.

thawaya3113 4y ago
It’s special in that it has a special purpose. Just like bread has a special purpose. And the purpose of a currency is to facilitate financial transactions. Which crypto is horrible at, because it cannot maintain a decent value at any point. Crypto is as good at being currency as iron is at being bread.

Deritio 4y ago

Wikipedias definition of inflation sounds exactly like op said and what I assume as well: 'In economics, inflation is a general increase in the prices of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reduction in the purchasing power of money.' I can afford less for the same unit of currency (Bitcoin) therefore I have inflation or deflation if I get more. And people claim that Bitcoin is inflation save due to a limit amount of bitcoins being produced (I read that multiple times) while this is just not true.

celticninja 4y ago
It's not really safe from inflation, more correctly it is deflationary by design. The limited supply means you can't dilute the existing value by creating more coins, as you can do with USD (or any fiat currency)
- ketzu 4y ago
  The point of this discussion as I understand it is that the limited supply of bitcoin does not help with inflation in practice and, further, that monetary supply is not the only source of inflation to begin with. It is correct that bitcoin is designed with limited supply in mind, but that does not necesaarily stop inflation and definitely doesn't in practice because currency risk dominates the perceived value of bitcoin. As far as i remember, people often claimed that bitcoin protects against inflation, that statement has so many requirements attached so it doesn't matter in practice.
- Deritio 4y ago
  People buy smaller and smaller denominations of Bitcoin then. Which means earlier you invest more your Bitcoin is worth. Until someone realizes that who ever was rich before is now loosing valur by investing in BTC too late and making early adopters rich. The question is only when this ruse gets so outbalanced that no one wants to invest anymore which will either lead to inflation or the big crypto burn.
GoblinSlayer 4y ago
Intuitively laymen really care about purchasing power, not its cause, they just use inflation as a short synonym for reduction of purchasing power, because inflation is often the cause of reduction of purchasing power, but I think they aren't really synonyms.

irjustin 4y ago

> No, that's just an increase in the price of bread. > Definition of inflation: a general increase in prices and fall in the purchasing value of money. It feels like you are jumping through hoops to avoid the definition of inflation. The parent comment's mention of bread is literal and figurative. When talking about inflation, "bread" a whole sector of goods. The specific mention of bread is to reference necessity - basic needs like food/shelter/clothing. Clearly the lines of inflation are fuzzy but if 'large enough' people's basic buying power decreases then you have inflation. With BTC, the parent comment is simply talking about being able to buy less with BTC because they can't go to someone who will give it to them for a lower price. Do that with enough goods and you've got inflation?

celticninja 4y ago
So you agree that BTC is money. ;) But I think parent commenter is correct. The bread price increases because of inflation of the USD denominated inputs. What you can buy with BTC changes because of changes in currency swap prices. In Zimbabwe during hyperinflation a dollar would buy you the same amount of e.g. bread because the goods inputs were priced in USD, but it would cost vastly more in Zimbabwe dollars on a day to day basis.
- Nursie 4y ago
  Look up inflation as it is used by governments and economists, journalists and really everyone except internet 'Austrian' fans. It's a measure of the increase of prices compared to currency value. Currency supply change can be one of the forces which affect it, but it's far from the whole picture.
daniel-cussen 4y ago
No, if they decrease buying power because of pay cuts that's not inflation.

UncleMeat 4y ago

We measure inflation as the price of goods. People complain about inflation when the price of goods goes up.

tcmart14 4y ago

If it only happened to bread, sure. But at some point it has to be inflation if it ends up being across the board. So its not just bread, its bread, soda, car, houses, a computer, toilet paper, meat, etc. Sure, it may or may not fit the classical definition of inflation, but if it happens across the board, then functionally it is the same.