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Structurally, Bitcoin is a lousy idea for a currency as it is intrinsically deflationary (i.e., even without the speculative inflating of the cost of a Bitcoin,

by dhosek 2y ago

Structurally, Bitcoin is a lousy idea for a currency as it is intrinsically deflationary (i.e., even without the speculative inflating of the cost of a Bitcoin, the structure of the coin is such that coins become increasingly scarce and expensive as time goes by). You do not want this in your currency. The ideal is a low-level of inflation which provides an incentive to spend sooner rather than later. With a deflationary currency, the incentive is to put off purchases as long as possible as your currency will buy more tomorrow than it does today. Deflation ends up being economically disastrous, as Japan’s battles with deflation over most of the twenty-first century have shown. This is why, aside from speculation, purchase of illicit goods and ransom payments, Bitcoin has had little traction as a currency.

ripped_britches 2y ago
Maybe more importantly even, you need a currency which you can tune in real-time via a central bank. This is one of the reasons that dollar-dependent economies have a hard time managing fluctuations.
aboardRat4 2y ago
>You do not want this in your currency. I really want this in my currency. Bitcoin might be a Ponzi scheme, but fiat currencies are even more so.
- shortrounddev2 2y ago
  [flagged]
- creato 2y ago
  > I really want this in my currency. A deflationary currency that you own a disproportionate amount of is great. For you.
  - not_really 2y ago
    did the person you are responding to say that he owns a lot of a given currency? How do you know?
  - aboardRat4 2y ago
    Quite the opposite. If you own a disproportionate amount of INflationary currency, you are, you know, still a rich person who can afford investments, investment consultants, tax optimization experts, have preferential treatment from banks and personal relations with the government employees, so you're good anyway. Whereas if you're poor, you don't even have a chance to save enough to invest a little bit, because whatever you save today becomes useless paper tomorrow, so you're forced to spend, thus enriching service and goods providers, that is the rich. In a deflationary currency you actually have a chance to save some money for an investment, plan for tomorrow, or even next year, and not spend everything today while money still have today's value.
MadSudaca 2y ago
These are the typical statements you hear repeated as gospel from the economists. > With a deflationary currency, the incentive is to put off purchases as long as possible as your currency will buy more tomorrow than it does today. What I hear from this is that people think twice before making a purchase, that is, they use their money more wisely. Seems like a bonus to me. Regardless of this, people will still need to buy things to conduct their lives, and there will still be people who are reckless with their money. So this seems like a non-issue. > Deflation ends up being economically disastrous, as Japan’s battles with deflation over most of the twenty-first century have shown. Any other example or it's only Japan? Because honestly it's not the country one associates with economic disaster, on the contrary, they were for quite a long time the 2nd world's economy, and if you visit it's a lovely place all around. On the other hand, the list of countries that have had to contend with inflation is much much longer, as far as I can tell, and the problems stemming from inflationary currencies orders of magnitude more severe. If you put both prospects on a balance and weighing the evidence, deflation seems like a much better problem to have. > This is why, aside from speculation, purchase of illicit goods and ransom payments, Bitcoin has had little traction as a currency. It has had little traction as a currency because it's unusable. You have to pay exorbitant fees to move it around and it takes way too long to work for every day transactions. Not to mention another host of problems, which other cryptocurrencies fix, by the way.
- Unearned5161 2y ago
  hahaha it was a good idea to remove that last sentence from your comment I'll nibble at the bait regardless: Your comment of spending patterns is missing the forest for the trees. A modern, capitalist infused, economy works like a big cardiovascular system, or like an engine. That is to say, it's happiest when blood/oil is pumping through it. Therefore, you can compare to a certain extent the different states an economy can be in to its cardiovascular counterpart. When an economy is struggling with deflation, you can imagine this as the heart pumping slowly. Slower pumps mean less blood going everywhere, means less performance. The less money circulates, the smaller its multiplying effect, the harder it is for suppliers to stay afloat, prices fall. The opposite of this would be someone walking around with their heart rate through the roof nonstop. Too high, too much blood, too much pressure, dangerous. When money is flowing too quickly through an economy, its effects are magnified, and in a sense, you can think of it as harder for the consumer now, prices rise. To aid the visualization, step into the shoes of a dollar for a moment, and imagine its journey in these different scenarios. It comes into someone's account from a paycheck, it stays for a while, goes to the candy store, sits there, goes to a supplier of the candy store, etc. Now multiply that journey countless times. See if you can spot the effect that more or less tendency to spend can have on these journeys. So you see now, it's a pendulum. A delicate balance that must be struck. And there you have the job of the federal reserve and other central banks like it. They are in charge of modulating the accelerator of an economy and making sure that we're neither going too fast nor too slow. Right in the middle is where you get the most stable and efficient economies. Bitcoin is unsuitable as a currency because it belongs to the same family as other tried and failed systems of _hard currency_, think gold, but now its worse. Due to its decentralized nature, it will never (by design) be controlled by a central bank. And so it will be at the whim of all the things fixed supply currencies are at the whim of. If you want examples of why this is bad, just take a look at basically anything before 1970's. If you want a more thought out and perhaps entertaining debrief on this, I encourage you to check out this blog post by Matt Ranger: https://singlelunch.com/2020/10/21/badeconomics-putting-400m-of-bitcoin-on-your-company-balance-sheet/ https://singlelunch.com/2020/10/21/badeconomics-putting-400m...
bufferout 2y ago
As a counter, inflationary systems slowly transfer more and more wealth from those without assets, to those with. It might be different if wages grew at the same rate as inflation, but they rarely do. The standard target rate of 2% inflation does not take into account the deflationary effects of ever increasing technology / efficiency. So in reality, it's much higher then the 2% stated figures.

by dhosek 2y ago

ripped_britches 2y ago

Maybe more importantly even, you need a currency which you can tune in real-time via a central bank. This is one of the reasons that dollar-dependent economies have a hard time managing fluctuations.

aboardRat4 2y ago

>You do not want this in your currency. I really want this in my currency. Bitcoin might be a Ponzi scheme, but fiat currencies are even more so.

shortrounddev2 2y ago
[flagged]
creato 2y ago
> I really want this in my currency. A deflationary currency that you own a disproportionate amount of is great. For you.
- not_really 2y ago
  did the person you are responding to say that he owns a lot of a given currency? How do you know?
- aboardRat4 2y ago
  Quite the opposite. If you own a disproportionate amount of INflationary currency, you are, you know, still a rich person who can afford investments, investment consultants, tax optimization experts, have preferential treatment from banks and personal relations with the government employees, so you're good anyway. Whereas if you're poor, you don't even have a chance to save enough to invest a little bit, because whatever you save today becomes useless paper tomorrow, so you're forced to spend, thus enriching service and goods providers, that is the rich. In a deflationary currency you actually have a chance to save some money for an investment, plan for tomorrow, or even next year, and not spend everything today while money still have today's value.

MadSudaca 2y ago

These are the typical statements you hear repeated as gospel from the economists. > With a deflationary currency, the incentive is to put off purchases as long as possible as your currency will buy more tomorrow than it does today. What I hear from this is that people think twice before making a purchase, that is, they use their money more wisely. Seems like a bonus to me. Regardless of this, people will still need to buy things to conduct their lives, and there will still be people who are reckless with their money. So this seems like a non-issue. > Deflation ends up being economically disastrous, as Japan’s battles with deflation over most of the twenty-first century have shown. Any other example or it's only Japan? Because honestly it's not the country one associates with economic disaster, on the contrary, they were for quite a long time the 2nd world's economy, and if you visit it's a lovely place all around. On the other hand, the list of countries that have had to contend with inflation is much much longer, as far as I can tell, and the problems stemming from inflationary currencies orders of magnitude more severe. If you put both prospects on a balance and weighing the evidence, deflation seems like a much better problem to have. > This is why, aside from speculation, purchase of illicit goods and ransom payments, Bitcoin has had little traction as a currency. It has had little traction as a currency because it's unusable. You have to pay exorbitant fees to move it around and it takes way too long to work for every day transactions. Not to mention another host of problems, which other cryptocurrencies fix, by the way.

Unearned5161 2y ago
hahaha it was a good idea to remove that last sentence from your comment I'll nibble at the bait regardless: Your comment of spending patterns is missing the forest for the trees. A modern, capitalist infused, economy works like a big cardiovascular system, or like an engine. That is to say, it's happiest when blood/oil is pumping through it. Therefore, you can compare to a certain extent the different states an economy can be in to its cardiovascular counterpart. When an economy is struggling with deflation, you can imagine this as the heart pumping slowly. Slower pumps mean less blood going everywhere, means less performance. The less money circulates, the smaller its multiplying effect, the harder it is for suppliers to stay afloat, prices fall. The opposite of this would be someone walking around with their heart rate through the roof nonstop. Too high, too much blood, too much pressure, dangerous. When money is flowing too quickly through an economy, its effects are magnified, and in a sense, you can think of it as harder for the consumer now, prices rise. To aid the visualization, step into the shoes of a dollar for a moment, and imagine its journey in these different scenarios. It comes into someone's account from a paycheck, it stays for a while, goes to the candy store, sits there, goes to a supplier of the candy store, etc. Now multiply that journey countless times. See if you can spot the effect that more or less tendency to spend can have on these journeys. So you see now, it's a pendulum. A delicate balance that must be struck. And there you have the job of the federal reserve and other central banks like it. They are in charge of modulating the accelerator of an economy and making sure that we're neither going too fast nor too slow. Right in the middle is where you get the most stable and efficient economies. Bitcoin is unsuitable as a currency because it belongs to the same family as other tried and failed systems of _hard currency_, think gold, but now its worse. Due to its decentralized nature, it will never (by design) be controlled by a central bank. And so it will be at the whim of all the things fixed supply currencies are at the whim of. If you want examples of why this is bad, just take a look at basically anything before 1970's. If you want a more thought out and perhaps entertaining debrief on this, I encourage you to check out this blog post by Matt Ranger: https://singlelunch.com/2020/10/21/badeconomics-putting-400m-of-bitcoin-on-your-company-balance-sheet/ https://singlelunch.com/2020/10/21/badeconomics-putting-400m...

bufferout 2y ago

As a counter, inflationary systems slowly transfer more and more wealth from those without assets, to those with. It might be different if wages grew at the same rate as inflation, but they rarely do. The standard target rate of 2% inflation does not take into account the deflationary effects of ever increasing technology / efficiency. So in reality, it's much higher then the 2% stated figures.