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Because economic activity is fundamentally incompatible with a deflationary currency like Bitcoin? If I can passively generate wealth by doing nothing but wait

by boc 4y ago

Because economic activity is fundamentally incompatible with a deflationary currency like Bitcoin? If I can passively generate wealth by doing nothing but waiting, so can everyone else. Only suckers would work. This is basic macroeconomics but for some reason crypto believers just choose to live in an alternative reality.

coffeebeqn 4y ago
That’s assuming you have enough wealth to generate enough extra to live off of. That’s already what the rich/FIRE do
mirzap 4y ago
I disagree. Wealth today is preserved thanks to "deflationary" instruments, whose value rises over time - like gold, silver or even stocks. Rich people take a loans of inflationary $$$ against their deflationary assets to generate economic activity. With that they not only preserve their fortune, but generate a lot more thanks to that economic activity they initiated. Bitcoin will allow that to everyone, not just the rich people. Also, it worked for thousands of years with gold. Whole civilisations have run on gold, for thousands of years. Every time in history when some innovation comes up people doing the old way were saying "that's not possible. it will never work. you don't understand the basics of X". History surely rimes.
- lxgr 4y ago
  What incentivizes people to spend their Bitcoin today (whether as a business expense or for their cost of living) rather than holding on to them until tomorrow, getting richer passively? Would lending be allowed in your model? If so, what makes it different from the status quo (fractional reserve banking and ultimately debt becoming money itself)? If not, how do I start a business or purchase a home without the lump sump required to do so under my pillow? How do you adapt the monetary base to increased or decreased production capacity in a world based on the Bitcoin standard? Not every fundamentally broken economic model is an innovation, and just because everybody tells its proponents so does not make this idea some kind of underdog stroke of genius.
  - throwup 4y ago
    > What incentivizes people to spend their Bitcoin today (whether as a business expense or for their cost of living) rather than holding on to them until tomorrow, getting richer passively? The same thing that incentivizes people to spend their USD today instead of passively getting rich using VTSAX
    - boc 4y ago
      USD is inflationary by design. The intent is to encourage investment, not stuffing it under the mattress. So no, your example doesn’t work.
  - mirzap 4y ago
    Your daily needs. If you get paid in bitcoin you have to spend some in order to make living. Bitcoin, in contrast to gold, is infinitely divisible. As production capacity increases and Bitcoin spreads to billions of people smaller and smaller monetary units will be used.
dmichulke 4y ago
> If I can passively generate wealth by doing nothing but waiting, so can everyone else. Only suckers would work. Sure, no eating, heating, transport, comms, but you can do that. Also very ecological. Plus you safe like 0-2% per year on prices. > This is basic macroeconomics What do they say happens when you have 2% deflation?
jonathan-adly 4y ago
You are right - that's the undergrad class in macroeconomics. A little more depth and you will find that it's not that black and white. A centrally-managed currency really has a terrible track-record everywhere in the world except maybe the US and Switzerland (emphasis on maybe). Political-pressure on the central bank, incompetence, corruption all add up to eventually break things. You have to have a lot of institutional checks and balances and almost unshakable faith in those institutions for things to functions. That really doesn't exist in reality. I will give you that a perfectly managed currency (with cycles of inflation and deflation) is better than a deflationary currency for economic activity. But, you have to see that no such thing exists. The US dollar central management have been reasonably good - but that's the exception, not the rule.
- JumpCrisscross 4y ago
  > centrally-managed currency really has a terrible track-record everywhere in the world except maybe the US and Switzerland TIL nobody uses the euro, pound, yen or renminbi.
  - nradov 4y ago
    The pound (GBP) had a pretty serious management failure as recently as 1992. But cryptocurrencies are obviously no better on that score. Central banks have generally abandoned the idea of pegging their fiat currencies to other fiat currencies at fixed exchange rates, so that greater flexibility should reduce the risk of management failures going forward.
- boc 4y ago
  I think you're confusing my use of basic. Basic here means fundamental, not surface-level. It's like saying carbon is a basic building block of life. It doesn't mean that if you dig deeper, it's actually something else. It means that carbon is where everything starts, and you go from there. I personally have a bit more than a single undergrad econ class under my belt.

by boc 4y ago

coffeebeqn 4y ago

That’s assuming you have enough wealth to generate enough extra to live off of. That’s already what the rich/FIRE do

mirzap 4y ago

I disagree. Wealth today is preserved thanks to "deflationary" instruments, whose value rises over time - like gold, silver or even stocks. Rich people take a loans of inflationary $$$ against their deflationary assets to generate economic activity. With that they not only preserve their fortune, but generate a lot more thanks to that economic activity they initiated. Bitcoin will allow that to everyone, not just the rich people. Also, it worked for thousands of years with gold. Whole civilisations have run on gold, for thousands of years. Every time in history when some innovation comes up people doing the old way were saying "that's not possible. it will never work. you don't understand the basics of X". History surely rimes.

lxgr 4y ago
What incentivizes people to spend their Bitcoin today (whether as a business expense or for their cost of living) rather than holding on to them until tomorrow, getting richer passively? Would lending be allowed in your model? If so, what makes it different from the status quo (fractional reserve banking and ultimately debt becoming money itself)? If not, how do I start a business or purchase a home without the lump sump required to do so under my pillow? How do you adapt the monetary base to increased or decreased production capacity in a world based on the Bitcoin standard? Not every fundamentally broken economic model is an innovation, and just because everybody tells its proponents so does not make this idea some kind of underdog stroke of genius.
- throwup 4y ago
  > What incentivizes people to spend their Bitcoin today (whether as a business expense or for their cost of living) rather than holding on to them until tomorrow, getting richer passively? The same thing that incentivizes people to spend their USD today instead of passively getting rich using VTSAX
  - boc 4y ago
    USD is inflationary by design. The intent is to encourage investment, not stuffing it under the mattress. So no, your example doesn’t work.
- mirzap 4y ago
  Your daily needs. If you get paid in bitcoin you have to spend some in order to make living. Bitcoin, in contrast to gold, is infinitely divisible. As production capacity increases and Bitcoin spreads to billions of people smaller and smaller monetary units will be used.

dmichulke 4y ago

> If I can passively generate wealth by doing nothing but waiting, so can everyone else. Only suckers would work. Sure, no eating, heating, transport, comms, but you can do that. Also very ecological. Plus you safe like 0-2% per year on prices. > This is basic macroeconomics What do they say happens when you have 2% deflation?

jonathan-adly 4y ago

You are right - that's the undergrad class in macroeconomics. A little more depth and you will find that it's not that black and white. A centrally-managed currency really has a terrible track-record everywhere in the world except maybe the US and Switzerland (emphasis on maybe). Political-pressure on the central bank, incompetence, corruption all add up to eventually break things. You have to have a lot of institutional checks and balances and almost unshakable faith in those institutions for things to functions. That really doesn't exist in reality. I will give you that a perfectly managed currency (with cycles of inflation and deflation) is better than a deflationary currency for economic activity. But, you have to see that no such thing exists. The US dollar central management have been reasonably good - but that's the exception, not the rule.

JumpCrisscross 4y ago
> centrally-managed currency really has a terrible track-record everywhere in the world except maybe the US and Switzerland TIL nobody uses the euro, pound, yen or renminbi.
- nradov 4y ago
  The pound (GBP) had a pretty serious management failure as recently as 1992. But cryptocurrencies are obviously no better on that score. Central banks have generally abandoned the idea of pegging their fiat currencies to other fiat currencies at fixed exchange rates, so that greater flexibility should reduce the risk of management failures going forward.
boc 4y ago
I think you're confusing my use of basic. Basic here means fundamental, not surface-level. It's like saying carbon is a basic building block of life. It doesn't mean that if you dig deeper, it's actually something else. It means that carbon is where everything starts, and you go from there. I personally have a bit more than a single undergrad econ class under my belt.