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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 co

by 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.
- temphn 14y ago
  Let's focus on a single parallel: True or false: under Moore's law, your dollar can buy K transistors today and 2K transistors in 18 months (ignoring inflation for now). Nevertheless, people do buy and sell computers in immense volume. True or false: under hyperdeflation, your bitcoin can buy K dollars today and (at least) 2K dollars in 18 months. Nevertheless, people are trading Bitcoin in large and exponentially increasing volume (see blockchain.info/charts). Now, I agree that the mechanisms behind the deflation in each case are different. Technological improvements are behind Moore's law while Bitcoin's ramp is due to the controlled currency supply. But what I'm getting at is that we've already faced a situation in which people could "hoard" dollars indefinitely to buy an increasingly valuable asset, namely computer power. The empirical result: they don't hoard indefinitely despite this exponential rise. In fact, they buy by the billion.
  - XorNot 14y ago
    Computers do not increase in value with time. The relative value of your money with respect to the computer market increases. But your money is subject to inflation, and interest, and other markets - computer purchases can be valued against the interest accrued in not buying a computer vs the expected returns of doing so. Which, if you don't have a computer, might be forgoing a massive amount of return profit (starting a startup, running a home office, being entertained). Deflationary currency is a very different matter entirely. Because the currency gains value relative to every other thing you could spend it on. Money you might spend on a computer, does not. These situations are not analogous in the slightest. If you want to treat computers as a currency (money-like object), then the reality is that computers are a currency experiencing hyper-inflation. They don't hold any value at all, to the point that people consume them as commodities instead.

by temphn 14y ago

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.
temphn 14y ago
Let's focus on a single parallel: True or false: under Moore's law, your dollar can buy K transistors today and 2K transistors in 18 months (ignoring inflation for now). Nevertheless, people do buy and sell computers in immense volume. True or false: under hyperdeflation, your bitcoin can buy K dollars today and (at least) 2K dollars in 18 months. Nevertheless, people are trading Bitcoin in large and exponentially increasing volume (see blockchain.info/charts). Now, I agree that the mechanisms behind the deflation in each case are different. Technological improvements are behind Moore's law while Bitcoin's ramp is due to the controlled currency supply. But what I'm getting at is that we've already faced a situation in which people could "hoard" dollars indefinitely to buy an increasingly valuable asset, namely computer power. The empirical result: they don't hoard indefinitely despite this exponential rise. In fact, they buy by the billion.
- XorNot 14y ago
  Computers do not increase in value with time. The relative value of your money with respect to the computer market increases. But your money is subject to inflation, and interest, and other markets - computer purchases can be valued against the interest accrued in not buying a computer vs the expected returns of doing so. Which, if you don't have a computer, might be forgoing a massive amount of return profit (starting a startup, running a home office, being entertained). Deflationary currency is a very different matter entirely. Because the currency gains value relative to every other thing you could spend it on. Money you might spend on a computer, does not. These situations are not analogous in the slightest. If you want to treat computers as a currency (money-like object), then the reality is that computers are a currency experiencing hyper-inflation. They don't hold any value at all, to the point that people consume them as commodities instead.