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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

by 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 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.