4 ms·

This is fundamentally the difference between the left and right economic worldviews. The left prizes inflation, spending, and centralized nation states. The rig

by temphn 14y ago

This is fundamentally the difference between the left and right economic worldviews. The left prizes inflation, spending, and centralized nation states. The right supports deflation, saving ("hoarding"), and powerful individuals or voluntary groups. And now we are finally going to have an empirical test where the left can't wave a gun at the right to force them into inflation.

sneak 14y ago
Fuck yeah. Great time to be a cypherpunk.
mtrimpe 14y ago
Excessive hoarding is obviously dangerous to a currency though. Imagine a fixed supply of 1.000.000 coins and suppose 99 people managed to nab 10.000 coins initially and are just sitting on them. The bitcoin economy will then run as though the remaining 10.000 coins is the entire economy, but 99 people will have spending power equal to the value of the entire economy.
- snitko 14y ago
  "Buy an economy" is a meaningless term. They can either buy products and services or invest. And this is dangerous why? If they decide to start spending their money, this would indeed mean temporary inflation as the money supply circulating would increase. But this also means that they themselves, the rich ones, will lose a lot of the value of their remaining money. Also, they wouldn't be able to spend it all at once, so with each new chunk of investment the value of their money will be less and less and less. The truth, as it turns out, that in a deflationary system rich are only rich as long as they don't spend too much and invest wisely. Thus the incentive is there to continue hoarding, even though this incentive is quite different from the incentive of the poor: for the poor in a deflationary system the incentive to hoard is making money. For rich the incentive is not losing them.
  - makomk 14y ago
    I don't think you're thinking this through properly. The same loss of value will happen no matter how they spend or invest their money, so a rational wealthy person should conclude that it was never really "worth" the face value in the first place. (What good is money that only holds its value if you never spend it?) So that's not an incentive against spending.
- temphn 14y ago
  First, Moore's law is technological hyperdeflation. Your dollar buys more computer power in 18 months than it does today. Yet people still buy computers. And computers are the one bright spot in this otherwise Fed-bubble-governed economy. Second, a deflationary currency is inherently viral. The more people in it, the more valuable it is. Third, 99 median powers are better than one government having power over the whole world currency. Power over the economy is linked to the capacity to delay gratification, rather than the ability to maintain a monopoly on counterfeiting dollars through violence against alternate currency providers (see Executive Order 6102, Bernard von Nothaus, e-gold, et alia). In your scenario, spending by those guys would drive down the value of the currency. But they couldn't do so to an infinite extent; at best one guy could devalue it by 50%. USG by contrast has devalued the dollar 96% since 1913. Moreover, their purchasing power will rapidly decline as they sell more and more off. Finally, the blockchain will show the global distribution of holdings, making "monetary policy" of this kind more predictable than the opacity of the Fed. People have gotten into this mindset that inflation and infinite debt are good. But I'll go with something backed by computer science over macroeconomic pseudoscience anyday. At best, consider this a controlled experiment, Satoshi vs. Bernanke. I know what side my mine is on.
  - XorNot 14y ago
    Computers are in no way deflationary. They're manufactured. Better ones are made. There are so many computers in the world now compared to demand that their value has simply inflated away, making them accessible to everyone. If the computer market were deflationary, then computers would really only be affordable by the 5 richest men in the world. You seem to under the mistaken assumption that money itself is an investment. It's not. Investments produce value - which hoarding money does not. Neither does hoarding computers for that matter. The moment you buy a computer it decreases in value, so unless you use it productively it really is just inflated away - much faster then your money is.
    - pothibo 14y ago
      Agreed! And he also conveniently forgets to mention that computers increasing in power comes from research & technological advancement. Both these things are possible because of investments. Why would someone build a 2b$ factory to produce new chip when they could sit on their money selling the same chip forever.
- Houshalter 14y ago
  The only reason prices get so low in the first place is that no one wants to buy anything. The same amount of goods is now divided among much fewer people. Which makes the people who aren't hoarding incredibly rich at the expense of the hoarders, since the hoarders aren't getting any of it. The second the hoarders "cash out" prices go up back to normal to cover the increased demand. They only gain insofar as the actual amount of goods in the economy increases (which is natural deflation.) And in a real economy most people who save money do so by investing it or putting it in a bank, which lends out 90% of it back into the economy anyways. At the end of the day, the loans are paid back and they get the same amount of bitcoins back, so its all the same to them, but they also get interest.
- Djehngo 14y ago
  The analogy I like is that traditional currencies work in the same way, the money supply is the 10,000 coins and the central bank represents the 99 people and has the 1,000,000 coins. (In practice they have an infinite amount but whatever) In traiditional currency systems the central back adds more money to the supply by buying financial products In your scenario the 99 people add currency to the money supply by buying whatever they opt to buy. The differences are that the central backs can print as much currency as they want rather than being limited to what they bought earlier and that it's many people vs one institution with some mandate to keep the currency and economy stable. That said, if I was one of those 99 I would be careful and probably collude with the other 98, if I tried to cash out too fast I would collapse the value of bitcoin and the rest of my investment would be rendered valueless. So they do have an implicit motivation to preserve stability.
  - XorNot 14y ago
    You actually have an incentive to collude and carefully manage the market, then crash it and buy all the money back and go back to hoarding it. With sufficient deflation, you end up spending less on necessities (food) then the rate of increase in the value of your horde. Making you the permanent upper class, and making everyone else the permanent lower class. It's a return to feudalism.
eli_gottlieb 14y ago
The Left, in fact, is anti-capitalist entirely. Please stop trying to build false dichotomies to support your right-wing views.
- sounds 14y ago
  For that matter, his portrayal of the right is oversimplified, but that's politics for you.
- temphn 14y ago
  Oh, I agree with you, though this is not often explicitly admitted after the late unpleasantness of 1917-1991. Bernankeist inflation seizes money for the central government slowly via dilution, while the USSR/Maoist PRC variety seized it more overtly. Same leftism, only a difference of degree. Though with Cyprus we begin to see chronic Bernankeism drop the mask. With Cyprus we begin to see the anti-capitalist core come to the surface: "all your moneys are belong to them". 100% seizure of all bank accounts over 100,000 is de facto communism. But the anti-capitalists need to understand that they are soon to be completely undone by technology. It is going to be impossible for central governments to seize wealth once Bitcoin ramps up, just as defcad.org has made it impossible for them to seize guns. The universities? Nuked by MOOCs. The media? Bankrupted by the Internet. All the left's citadels are aflame. And it is glorious.
  - eli_gottlieb 14y ago
    Actually, you're continuing to operate according to the idiotic American Rightist definition of "the Left": "THEY WANNA TAKE OUR MONIES, OH NO!" Yeah, no. Cryptocurrency presumes a proprietarian-capitalist legal system in the first place. Capitalism is about private ownership of the means of production. Its financial superstructure can and will vary.
jaimebuelta 14y ago
Saving and hoarding are not the exact same thing. Saving is invested (on any variety of forms and risks), meaning that it is actively used in the economy to (at least try to) generate more value. Hoarding is just sitting on top of it, which is not a great for economy.
- nhaehnle 14y ago
  Unfortunately, this notion of saving is based on a rather antiquated understanding of how banks work. In modern banking, lending is not constrained by the amount of deposits or reserves that a bank has. The only thing limiting the amount of loans given out are capital requirements, and of course risk/return considerations of the bank. The result is that putting money into a savings account of a bank does cause the bank to increase its lending volume. Rather, the amount of bank lending is determined by how many willing and credit-worthy borrowers approach the bank. This in turn depends much more on the overall state of the economy (e.g., whether households are confident enough in the job situation to take on a mortgage, and whether businesses are confident enough of future demand to expand). Note that saving actually tends to be a drag on those factors, because the first-order effect of increased saving is a reduction of aggregate demand. The reason some economists believe that saving is good at a macroeconomic level is that they believe interest rates will adjust to such an extent that banks will be approached by more willing borrowers. The problem with that notion is that loan demand is not actually all that sensitive to interest rates. Even worse is the fact that (nominal) interest rates cannot drop below zero, and (real) interest rates cannot drop below minus the rate of inflation. This makes the conservative position on the economy (disregard the demand side and target low inflation) completely untenable, but I digress...
drawkbox 14y ago
It's not really a left or right thing. You have to have inflation via devaluation of currency to fuel investment. In a fiat system based on devaluing currencies and inflating prices, money shrinks if it is not moved, invested, paid interest on. Why invest otherwise? Just have a feudal-based gold backed system and sit on your gold like a king, loans will lock up creating depression without inflation/interest over deflating reserves to fuel investment. This is why non fiat currencies or gold backed would put too great a power in mining kingpins like oil does on groups like OPEC. I'd rather have the inflationary system controlled by bankers or algorithms that can keep economies going when they lock up. A fiat currency where the rates are a throttle mechanism but the throttle has to be watched closely and as public as possible for trust. A currency bound to a physical thing like gold is no longer a good system. Bitcoins, adjust in currency and value by mining new circulation via algorithm/time/market. "The money supply is automated and given to servers or "bitcoin miners" that confirm bitcoin transactions as they add them to a decentralized and archived transaction log approximately every 10 minutes." - devaluation built in, we'll see if it is is enough of a lever and who controls the lever or spigot as they say with oil, that sets the price. More importantly, who do you want controlling that? The article has a great circulation graph that shows it is almost linear, is that enough to make it through large crashes? http://blockchain.info/charts/total-bitcoins?timespan=all&showDataPoints=false&daysAverageString=1&show_header=true&scale=0&address= http://blockchain.info/charts/total-bitcoins?timespan=all&#3... Will it draw slow circulation if there is a crash? Will it pick up circulation if there is too big a bubble? This is where a centralized oversight starts to look good. Best thing about bitcoin markets, they never close! No after hours shenanigans and rushes at open and close.
- temphn 14y ago
  You have to have inflation via devaluation of currency to fuel investment. Incorrect assertion presented as fact. Why does anyone invest in hyperdeflating computer power, which rises exponentially in value relative to the fiat dollar? Inflation disincentivizes investment in the asset losing value in real terms, namely dollars. People are flooding into bitcoins because they have the opposite trend from dollars. And yet they will spend on things they need, rather than things they want, just like people still spend on computers. Hyperdeflation followed by moderate steady deflation means the death of the 30 year mortgage, the student loan, and all the other mechanisms of debt slavery. Deflation incentivizes production over consumption, savings over debt. These concepts are alien to the America of 2013 but weren't always so.
Nursie 14y ago
Hoarding is not saving. Saving generally involves investing, the money is used in a variety of other ways. The money grows (hopefully ahead of inflation) by being used to fuel growth. Savings that are not invested slowly lose value, a good incentive to either invest or spend and keep everything flowing. Hoarding BTC is much the same as stuffing cash into a mattress, it's totally unproductive. A currency that rewards hoarders is not useful. Also this is not a left-right issue. You'll find many on the right who are in favour of a small, controlled amount of inflation.
etherael 14y ago
When I first read you saying; > And now we are finally going to have an empirical test where the left can't wave a gun at the right to force them into inflation. I thought you were being hyperbolic, and then a few responses down; > I'll take debt slavery, thank you very much. So will the rest of the 99%, and if you use bitcoin to drive it to the point where it takes killing anyone who own bitcoin to restore debt slavery, it is a matter of time until we call your bluff. I can't believe that there are people that honestly hold this position and are completely OK with it, give me debt slavery or I will kill you or die trying. Fuck this species.
mcherm 14y ago
I think you are completely wrong: in your characterization of the left, in your characterization of the right, and in the ability of governments to affect the use of bitcoin. But you've got an interesting viewpoint, so you've got my upvote.
niico100 14y ago
'the right prizes deflation' - clearly you know what you're talking about, not. Deflation is the worst nightmare of every government - all governments, pretty much, want low steady inflation so people keep spending money (ie not whats happening in Japan for 10 years - which they are now fixing).

by temphn 14y ago

sneak 14y ago

Fuck yeah. Great time to be a cypherpunk.

mtrimpe 14y ago

Excessive hoarding is obviously dangerous to a currency though. Imagine a fixed supply of 1.000.000 coins and suppose 99 people managed to nab 10.000 coins initially and are just sitting on them. The bitcoin economy will then run as though the remaining 10.000 coins is the entire economy, but 99 people will have spending power equal to the value of the entire economy.

snitko 14y ago
"Buy an economy" is a meaningless term. They can either buy products and services or invest. And this is dangerous why? If they decide to start spending their money, this would indeed mean temporary inflation as the money supply circulating would increase. But this also means that they themselves, the rich ones, will lose a lot of the value of their remaining money. Also, they wouldn't be able to spend it all at once, so with each new chunk of investment the value of their money will be less and less and less. The truth, as it turns out, that in a deflationary system rich are only rich as long as they don't spend too much and invest wisely. Thus the incentive is there to continue hoarding, even though this incentive is quite different from the incentive of the poor: for the poor in a deflationary system the incentive to hoard is making money. For rich the incentive is not losing them.
- makomk 14y ago
  I don't think you're thinking this through properly. The same loss of value will happen no matter how they spend or invest their money, so a rational wealthy person should conclude that it was never really "worth" the face value in the first place. (What good is money that only holds its value if you never spend it?) So that's not an incentive against spending.
temphn 14y ago
First, Moore's law is technological hyperdeflation. Your dollar buys more computer power in 18 months than it does today. Yet people still buy computers. And computers are the one bright spot in this otherwise Fed-bubble-governed economy. Second, a deflationary currency is inherently viral. The more people in it, the more valuable it is. Third, 99 median powers are better than one government having power over the whole world currency. Power over the economy is linked to the capacity to delay gratification, rather than the ability to maintain a monopoly on counterfeiting dollars through violence against alternate currency providers (see Executive Order 6102, Bernard von Nothaus, e-gold, et alia). In your scenario, spending by those guys would drive down the value of the currency. But they couldn't do so to an infinite extent; at best one guy could devalue it by 50%. USG by contrast has devalued the dollar 96% since 1913. Moreover, their purchasing power will rapidly decline as they sell more and more off. Finally, the blockchain will show the global distribution of holdings, making "monetary policy" of this kind more predictable than the opacity of the Fed. People have gotten into this mindset that inflation and infinite debt are good. But I'll go with something backed by computer science over macroeconomic pseudoscience anyday. At best, consider this a controlled experiment, Satoshi vs. Bernanke. I know what side my mine is on.
- XorNot 14y ago
  Computers are in no way deflationary. They're manufactured. Better ones are made. There are so many computers in the world now compared to demand that their value has simply inflated away, making them accessible to everyone. If the computer market were deflationary, then computers would really only be affordable by the 5 richest men in the world. You seem to under the mistaken assumption that money itself is an investment. It's not. Investments produce value - which hoarding money does not. Neither does hoarding computers for that matter. The moment you buy a computer it decreases in value, so unless you use it productively it really is just inflated away - much faster then your money is.
  - pothibo 14y ago
    Agreed! And he also conveniently forgets to mention that computers increasing in power comes from research & technological advancement. Both these things are possible because of investments. Why would someone build a 2b$ factory to produce new chip when they could sit on their money selling the same chip forever.
Houshalter 14y ago
The only reason prices get so low in the first place is that no one wants to buy anything. The same amount of goods is now divided among much fewer people. Which makes the people who aren't hoarding incredibly rich at the expense of the hoarders, since the hoarders aren't getting any of it. The second the hoarders "cash out" prices go up back to normal to cover the increased demand. They only gain insofar as the actual amount of goods in the economy increases (which is natural deflation.) And in a real economy most people who save money do so by investing it or putting it in a bank, which lends out 90% of it back into the economy anyways. At the end of the day, the loans are paid back and they get the same amount of bitcoins back, so its all the same to them, but they also get interest.
Djehngo 14y ago
The analogy I like is that traditional currencies work in the same way, the money supply is the 10,000 coins and the central bank represents the 99 people and has the 1,000,000 coins. (In practice they have an infinite amount but whatever) In traiditional currency systems the central back adds more money to the supply by buying financial products In your scenario the 99 people add currency to the money supply by buying whatever they opt to buy. The differences are that the central backs can print as much currency as they want rather than being limited to what they bought earlier and that it's many people vs one institution with some mandate to keep the currency and economy stable. That said, if I was one of those 99 I would be careful and probably collude with the other 98, if I tried to cash out too fast I would collapse the value of bitcoin and the rest of my investment would be rendered valueless. So they do have an implicit motivation to preserve stability.
- XorNot 14y ago
  You actually have an incentive to collude and carefully manage the market, then crash it and buy all the money back and go back to hoarding it. With sufficient deflation, you end up spending less on necessities (food) then the rate of increase in the value of your horde. Making you the permanent upper class, and making everyone else the permanent lower class. It's a return to feudalism.

eli_gottlieb 14y ago

The Left, in fact, is anti-capitalist entirely. Please stop trying to build false dichotomies to support your right-wing views.

sounds 14y ago
For that matter, his portrayal of the right is oversimplified, but that's politics for you.
temphn 14y ago
Oh, I agree with you, though this is not often explicitly admitted after the late unpleasantness of 1917-1991. Bernankeist inflation seizes money for the central government slowly via dilution, while the USSR/Maoist PRC variety seized it more overtly. Same leftism, only a difference of degree. Though with Cyprus we begin to see chronic Bernankeism drop the mask. With Cyprus we begin to see the anti-capitalist core come to the surface: "all your moneys are belong to them". 100% seizure of all bank accounts over 100,000 is de facto communism. But the anti-capitalists need to understand that they are soon to be completely undone by technology. It is going to be impossible for central governments to seize wealth once Bitcoin ramps up, just as defcad.org has made it impossible for them to seize guns. The universities? Nuked by MOOCs. The media? Bankrupted by the Internet. All the left's citadels are aflame. And it is glorious.
- eli_gottlieb 14y ago
  Actually, you're continuing to operate according to the idiotic American Rightist definition of "the Left": "THEY WANNA TAKE OUR MONIES, OH NO!" Yeah, no. Cryptocurrency presumes a proprietarian-capitalist legal system in the first place. Capitalism is about private ownership of the means of production. Its financial superstructure can and will vary.

jaimebuelta 14y ago

Saving and hoarding are not the exact same thing. Saving is invested (on any variety of forms and risks), meaning that it is actively used in the economy to (at least try to) generate more value. Hoarding is just sitting on top of it, which is not a great for economy.

nhaehnle 14y ago
Unfortunately, this notion of saving is based on a rather antiquated understanding of how banks work. In modern banking, lending is not constrained by the amount of deposits or reserves that a bank has. The only thing limiting the amount of loans given out are capital requirements, and of course risk/return considerations of the bank. The result is that putting money into a savings account of a bank does cause the bank to increase its lending volume. Rather, the amount of bank lending is determined by how many willing and credit-worthy borrowers approach the bank. This in turn depends much more on the overall state of the economy (e.g., whether households are confident enough in the job situation to take on a mortgage, and whether businesses are confident enough of future demand to expand). Note that saving actually tends to be a drag on those factors, because the first-order effect of increased saving is a reduction of aggregate demand. The reason some economists believe that saving is good at a macroeconomic level is that they believe interest rates will adjust to such an extent that banks will be approached by more willing borrowers. The problem with that notion is that loan demand is not actually all that sensitive to interest rates. Even worse is the fact that (nominal) interest rates cannot drop below zero, and (real) interest rates cannot drop below minus the rate of inflation. This makes the conservative position on the economy (disregard the demand side and target low inflation) completely untenable, but I digress...

drawkbox 14y ago

It's not really a left or right thing. You have to have inflation via devaluation of currency to fuel investment. In a fiat system based on devaluing currencies and inflating prices, money shrinks if it is not moved, invested, paid interest on. Why invest otherwise? Just have a feudal-based gold backed system and sit on your gold like a king, loans will lock up creating depression without inflation/interest over deflating reserves to fuel investment. This is why non fiat currencies or gold backed would put too great a power in mining kingpins like oil does on groups like OPEC. I'd rather have the inflationary system controlled by bankers or algorithms that can keep economies going when they lock up. A fiat currency where the rates are a throttle mechanism but the throttle has to be watched closely and as public as possible for trust. A currency bound to a physical thing like gold is no longer a good system. Bitcoins, adjust in currency and value by mining new circulation via algorithm/time/market. "The money supply is automated and given to servers or "bitcoin miners" that confirm bitcoin transactions as they add them to a decentralized and archived transaction log approximately every 10 minutes." - devaluation built in, we'll see if it is is enough of a lever and who controls the lever or spigot as they say with oil, that sets the price. More importantly, who do you want controlling that? The article has a great circulation graph that shows it is almost linear, is that enough to make it through large crashes? http://blockchain.info/charts/total-bitcoins?timespan=all&showDataPoints=false&daysAverageString=1&show_header=true&scale=0&address= http://blockchain.info/charts/total-bitcoins?timespan=all&#3... Will it draw slow circulation if there is a crash? Will it pick up circulation if there is too big a bubble? This is where a centralized oversight starts to look good. Best thing about bitcoin markets, they never close! No after hours shenanigans and rushes at open and close.

temphn 14y ago
You have to have inflation via devaluation of currency to fuel investment. Incorrect assertion presented as fact. Why does anyone invest in hyperdeflating computer power, which rises exponentially in value relative to the fiat dollar? Inflation disincentivizes investment in the asset losing value in real terms, namely dollars. People are flooding into bitcoins because they have the opposite trend from dollars. And yet they will spend on things they need, rather than things they want, just like people still spend on computers. Hyperdeflation followed by moderate steady deflation means the death of the 30 year mortgage, the student loan, and all the other mechanisms of debt slavery. Deflation incentivizes production over consumption, savings over debt. These concepts are alien to the America of 2013 but weren't always so.

Nursie 14y ago

Hoarding is not saving. Saving generally involves investing, the money is used in a variety of other ways. The money grows (hopefully ahead of inflation) by being used to fuel growth. Savings that are not invested slowly lose value, a good incentive to either invest or spend and keep everything flowing. Hoarding BTC is much the same as stuffing cash into a mattress, it's totally unproductive. A currency that rewards hoarders is not useful. Also this is not a left-right issue. You'll find many on the right who are in favour of a small, controlled amount of inflation.

etherael 14y ago

When I first read you saying; > And now we are finally going to have an empirical test where the left can't wave a gun at the right to force them into inflation. I thought you were being hyperbolic, and then a few responses down; > I'll take debt slavery, thank you very much. So will the rest of the 99%, and if you use bitcoin to drive it to the point where it takes killing anyone who own bitcoin to restore debt slavery, it is a matter of time until we call your bluff. I can't believe that there are people that honestly hold this position and are completely OK with it, give me debt slavery or I will kill you or die trying. Fuck this species.

mcherm 14y ago

I think you are completely wrong: in your characterization of the left, in your characterization of the right, and in the ability of governments to affect the use of bitcoin. But you've got an interesting viewpoint, so you've got my upvote.

niico100 14y ago

'the right prizes deflation' - clearly you know what you're talking about, not. Deflation is the worst nightmare of every government - all governments, pretty much, want low steady inflation so people keep spending money (ie not whats happening in Japan for 10 years - which they are now fixing).