7 ms·

My view is that it can never be used as a currency because it is inherently deflationary.

by spacemanspiff01 2y ago

clementmas 2y ago
Genuine question: why is that? Is inflation required?
- psychlops 2y ago
  Not at all, but it's a dominant view for a variety of reasons. A base concept is to keep money moving into other investments and discourage saving. I suspect the ongoing inflation rates will make this view less attractive in the future.
- halfcat 2y ago
  Not required, but a deflationary asset used as currency discourages borrowing, and companies and governments love borrowing. If you knew that inflation was going to rapidly increase, the smartest thing you could do would be to take out as many loans as you can and buy usable assets, like a car and a warehouse full of canned beans. Imagine you take out a loan to buy a car. Tomorrow, hyperinflation happens and the currency has lost 99% of its value. You can now pay off your car with a can of beans. Inflation is also an avenue for a government to steal the excess value produced by an economy over time. Probably just a coincidence though.
  - whimsicalism 2y ago
    It does not, in an ideal economic scenario, discourage borrowing - it just means nominal interest rates might be negative.
  - the_gastropod 2y ago
    > Inflation is also an avenue for a government to steal the excess value produced by an economy over time What's the incentive here? "The government" (unless we're talking monarchies or dictatorships?) usually isn't some monolithic, self-interested entity capable of benefiting from things like "stealing" via inflation. Who's the evil mustache-twister behind all this? The way this is usually trotted out makes it sound like Nancy Pelosi—because there's almost always a Nancy Pelosi hot take—is siphoning $20's out of IRS revenue streams, and laughing her way to the bank.
    - Ferret7446 2y ago
      It lets you increase taxes without actually increasing taxes. People get upset when you increase taxes (sometimes upset enough to create their own country), but less so when you increase the money supply a little bit.
    - halfcat 2y ago
      By moving the goal posts of how CPI is calculated, the government can take in more, or pay out less. Social security, Medicare, etc are indexed to inflation. Tax brackets are indexed to inflation. So when the government needs more money, it can create it by paying less to elderly, poor, and sick people, or taking more taxes without the population aware. There are better ways of calculating inflation. But they allow less shenanigans. You know what would really make it hard to siphon money off to a black budget project, or to the business of a politician’s brother-in-law that gets the contract? A deflationary asset where there’s a cryptographically secure immutable ledger of all transactions.
      - the_gastropod 2y ago
        > You know what would really make it hard to siphon money off to a black budget project, or to the business of a politician’s brother-in-law that gets the contract? A deflationary asset where there’s a cryptographically secure immutable ledger of all transactions. I’m not sure how Bitcoin is simultaneously completely transparent, bringing daylight to big bad government fraud and also a privacy-protecting, regulatory circumvention tool. These things seem at odds. If scam artists and criminals can obfuscate their transactions sufficiently to avoid being tracked down, I’m confident any half-competent government could do the same for its black budget spending.
        halfcat 2y ago
        Bitcoin is not privacy-protecting, per se. It’s public, but anonymous. And people often confuse anonymity with privacy.
        2y ago
- dools 2y ago
  If you were to choose between a little bit of inflation and a little bit of deflation, you should choose a little bit of inflation. Deflation means people have a greater incentive not to spend, so dissuades investment and thus innovation and progress. It leads to wealth hoarding and feudalism.
cypress66 2y ago
Gold was used as a currency for ages, and it's similar to bitcoin (limited amount with a bit of gold being mined every year)
- dools 2y ago
  When currency was made using gold/silver it was also deflationary, which was a fucking nightmare for everyone except the very rich.
  - monero-xmr 2y ago
    Working people could save money in a currency that didn’t inflate. If you start looking for signs of Bitcoin, you see them everywhere. Every convenience store near me has the option to buy BTC with a crypto ATM or point of sale system. It’s far easier for someone with some extra cash to buy crypto than stocks.
    - dools 2y ago
      What you're talking about is using money to buy a commodity as an investment. If the currency WERE the commodity, and assuming a deflationary environment, working people would find they would have a decreasing share of the currency to begin with. In other words, the reason working people currently have enough money to buy BTC as an investment, is that they are using a non-deflationary currency. Also note that buying stocks is only marginally more difficult than opening a bank account, and investing in major index funds via ETFs is almost as good as a term deposit (with minimal long term risk of realising a loss UNLESS you are forced to access the money at some time relatively soon after purchasing). After you have created the account, buying more is easier than using a BTC ATM. Given the risk of a) BTC going to 0 and b) being scammed and/or otherwise losing all of your BTC I'd say everday people are much, much better off putting their money in index funds.
  - Ferret7446 2y ago
    > which was a fucking nightmare for everyone except the very rich Citation needed.
hanniabu 2y ago
It is not deflationary, where are you even getting this from?
- saxonww 2y ago
  This post. There's I think supposed to only ever be 21 million bitcoin. Bitcoin rewards for mining halve every ~4 years. Eventually they will stop; there will be no new bitcoin. People will also lose bitcoin; this already happens. Famously, no one knows where ~1m bitcoin supposedly mined by Satoshi are, they are assumed to be permanently out of circulation. So not only is there a cap on maximum bitcoin, and over time less new bitcoin will be injected into circulation, existing bitcoin will also be removed from circulation over time. This presents a strong incentive to hold bitcoin instead of spending it, since scarce assets become more valuable with increased scarcity. If a bitcoin is likely to be worth more tomorrow than it is today, you're less likely to spend it. Which has the compound effect of reducing bitcoin in circulation further. This is why people say it's deflationary.
  - hanniabu 2y ago
    That's the most laughable thing I've read in a while Also ethereum is actually deflationary now without relying on people losing their keys (and being excited about that)

My view is that it can never be used as a currency because it is inherently deflationary.

clementmas 2y ago

Genuine question: why is that? Is inflation required?

psychlops 2y ago
Not at all, but it's a dominant view for a variety of reasons. A base concept is to keep money moving into other investments and discourage saving. I suspect the ongoing inflation rates will make this view less attractive in the future.
halfcat 2y ago
Not required, but a deflationary asset used as currency discourages borrowing, and companies and governments love borrowing. If you knew that inflation was going to rapidly increase, the smartest thing you could do would be to take out as many loans as you can and buy usable assets, like a car and a warehouse full of canned beans. Imagine you take out a loan to buy a car. Tomorrow, hyperinflation happens and the currency has lost 99% of its value. You can now pay off your car with a can of beans. Inflation is also an avenue for a government to steal the excess value produced by an economy over time. Probably just a coincidence though.
- whimsicalism 2y ago
  It does not, in an ideal economic scenario, discourage borrowing - it just means nominal interest rates might be negative.
- the_gastropod 2y ago
  > Inflation is also an avenue for a government to steal the excess value produced by an economy over time What's the incentive here? "The government" (unless we're talking monarchies or dictatorships?) usually isn't some monolithic, self-interested entity capable of benefiting from things like "stealing" via inflation. Who's the evil mustache-twister behind all this? The way this is usually trotted out makes it sound like Nancy Pelosi—because there's almost always a Nancy Pelosi hot take—is siphoning $20's out of IRS revenue streams, and laughing her way to the bank.
  - Ferret7446 2y ago
    It lets you increase taxes without actually increasing taxes. People get upset when you increase taxes (sometimes upset enough to create their own country), but less so when you increase the money supply a little bit.
  - halfcat 2y ago
    By moving the goal posts of how CPI is calculated, the government can take in more, or pay out less. Social security, Medicare, etc are indexed to inflation. Tax brackets are indexed to inflation. So when the government needs more money, it can create it by paying less to elderly, poor, and sick people, or taking more taxes without the population aware. There are better ways of calculating inflation. But they allow less shenanigans. You know what would really make it hard to siphon money off to a black budget project, or to the business of a politician’s brother-in-law that gets the contract? A deflationary asset where there’s a cryptographically secure immutable ledger of all transactions.
    - the_gastropod 2y ago
      > You know what would really make it hard to siphon money off to a black budget project, or to the business of a politician’s brother-in-law that gets the contract? A deflationary asset where there’s a cryptographically secure immutable ledger of all transactions. I’m not sure how Bitcoin is simultaneously completely transparent, bringing daylight to big bad government fraud and also a privacy-protecting, regulatory circumvention tool. These things seem at odds. If scam artists and criminals can obfuscate their transactions sufficiently to avoid being tracked down, I’m confident any half-competent government could do the same for its black budget spending.
      - halfcat 2y ago
        Bitcoin is not privacy-protecting, per se. It’s public, but anonymous. And people often confuse anonymity with privacy.
        2y ago
dools 2y ago
If you were to choose between a little bit of inflation and a little bit of deflation, you should choose a little bit of inflation. Deflation means people have a greater incentive not to spend, so dissuades investment and thus innovation and progress. It leads to wealth hoarding and feudalism.

cypress66 2y ago

Gold was used as a currency for ages, and it's similar to bitcoin (limited amount with a bit of gold being mined every year)

dools 2y ago
When currency was made using gold/silver it was also deflationary, which was a fucking nightmare for everyone except the very rich.
- monero-xmr 2y ago
  Working people could save money in a currency that didn’t inflate. If you start looking for signs of Bitcoin, you see them everywhere. Every convenience store near me has the option to buy BTC with a crypto ATM or point of sale system. It’s far easier for someone with some extra cash to buy crypto than stocks.
  - dools 2y ago
    What you're talking about is using money to buy a commodity as an investment. If the currency WERE the commodity, and assuming a deflationary environment, working people would find they would have a decreasing share of the currency to begin with. In other words, the reason working people currently have enough money to buy BTC as an investment, is that they are using a non-deflationary currency. Also note that buying stocks is only marginally more difficult than opening a bank account, and investing in major index funds via ETFs is almost as good as a term deposit (with minimal long term risk of realising a loss UNLESS you are forced to access the money at some time relatively soon after purchasing). After you have created the account, buying more is easier than using a BTC ATM. Given the risk of a) BTC going to 0 and b) being scammed and/or otherwise losing all of your BTC I'd say everday people are much, much better off putting their money in index funds.
- Ferret7446 2y ago
  > which was a fucking nightmare for everyone except the very rich Citation needed.

hanniabu 2y ago

It is not deflationary, where are you even getting this from?

saxonww 2y ago
This post. There's I think supposed to only ever be 21 million bitcoin. Bitcoin rewards for mining halve every ~4 years. Eventually they will stop; there will be no new bitcoin. People will also lose bitcoin; this already happens. Famously, no one knows where ~1m bitcoin supposedly mined by Satoshi are, they are assumed to be permanently out of circulation. So not only is there a cap on maximum bitcoin, and over time less new bitcoin will be injected into circulation, existing bitcoin will also be removed from circulation over time. This presents a strong incentive to hold bitcoin instead of spending it, since scarce assets become more valuable with increased scarcity. If a bitcoin is likely to be worth more tomorrow than it is today, you're less likely to spend it. Which has the compound effect of reducing bitcoin in circulation further. This is why people say it's deflationary.
- hanniabu 2y ago
  That's the most laughable thing I've read in a while Also ethereum is actually deflationary now without relying on people losing their keys (and being excited about that)