4 ms·

If only there was a currency that would do it for me even better than a bearing account. Oh wait.

by snitko 14y ago

InclinedPlane 14y ago
Beautifully illustrating my point. Inflation forces people to get off their butts. To put their money in investments. To loan it to other people with interest. To use it to build businesses. To buy durable goods and land and so forth. There's no such thing as money for nothing. An implicitly deflationary currency comes at a cost, and that cost is the entire economy based on that currency. It stifles growth and activity compared to an implicitly inflationary currency. Which costs the individual a little over the short-term but benefits the entire economy as a whole. The end result being that economic growth spurred by the activity of people trying to avoid loss due to inflation more than makes up for that loss. In the time since 1950 the US dollar has inflated by a whopping 840% (a factor of 9.4x), but the per capita GDP has grown by an even more impressive 3200% (a factor of 33x in nominal dollars), or 250% in inflation adjusted dollars.
- mrb 14y ago
  InclinedPlane, your anti-deflationary arguments can be refuted in 4 different ways: 1. A deflationary currency strongly encourages businesses to maximize revenues today instead of tomorrow, because they know they can get more units of the deflationary currency today rather than tomorrow. This incentive does not exist with inflationary currencies. 2. If you had 100% confidence in Bitcoin being deflationary, you would invest in bitcoins. But the fact you do not (I presume) shows a very important point: you, like many, doubt Bitcoin will remain deflationary on the long term (eg. it might crash to zero). This uncertainty is why, despite being in theory deflationary, Bitcoin will continue to see a growing economy. People will continue to invest and spend bitcoins, because the future of Bitcoin, like the future of any currency (inflationary or deflationary), is fundamentally uncertain. 3. There is an often-cited counter-example to the argument that "people will not spend if they know prices will decline in the future" (as prices will in a deflationary currency): the electronics industry. Laptops, smartphones, servers, etc: prices are always decreasing. Yet this industry is very successful. Buyers are not afraid to spend money today, even if they know they can get the product for less tomorrow. This is because prices decreasing over time stimulate spending. 4. The traditional arguments against a deflationary currency only work within a self-contained economy anyway. Bitcoin currently exist as a side currency next to all other (USD, EUR, etc). People will still want to invest these currencies, and the Bitcoin economy being tightly coupled to others will naturally benefit from these investments. That's why for example we are seeing a bunch of Bitcoin startups popping up: Coinbase, BitPay, BitSpend, BitcoinStore, CoinLab, etc Edit: downvoting me, seriously? I would like to know why.
  - InclinedPlane 14y ago
    1. Deflationary currency encourages extractive businesses, such as property ownership and renting. Inflationary currency encourages people to re-invest their profits in their business, and to grow their business as much as possible. In other words, with a deflationary currency people operating a business are encouraged to keep value in money mostly, with an inflationary currency people are encouraged to keep value in the business. It seems pretty obvious which of these encourage economic growth more. 2. I'm making an argument about deflationary vs. inflationary currencies in the abstract, Bitcoin itself is too complicated to fit into that argument except in so far as people arguing that deflationary behavior is a benefit to bitcoin as a currency. It certainly could encourage purchasing of bitcoins but I'm not convinced it encourages use of bitcoins as currency. 3. This is not a counter-example at all, because goods are not currency, they have an innate value. The cost of waiting for years to purchase some good that you desire (such as a computer or a cellphone) comes at a cost of spending years of your life without the benefit of being able to use those goods. And that cost may be significantly greater than the value of saving money. 4. Bitcoin as an investment only makes sense as a pyramid scheme, in order for it to have value it must be used as a currency. Regardless of the interaction at the edges that means that it must have some core use as a currency, which is currently not the majority use, and that's a bit troubling. As to downvoting, HN wouldn't let me downvote your reply even if I wanted to so I can't help you there. I suspect someone disagrees strongly with what you've written but doesn't want to take the time to write a rebuttal.
    - deleted 14y ago
      [deleted]

If only there was a currency that would do it for me even better than a bearing account. Oh wait.

by snitko 14y ago

If only there was a currency that would do it for me even better than a bearing account. Oh wait.

Beautifully illustrating my point. Inflation forces people to get off their butts. To put their money in investments. To loan it to other people with interest. To use it to build businesses. To buy durable goods and land and so forth. There's no such thing as money for nothing. An implicitly deflationary currency comes at a cost, and that cost is the entire economy based on that currency. It stifles growth and activity compared to an implicitly inflationary currency. Which costs the individual a little over the short-term but benefits the entire economy as a whole. The end result being that economic growth spurred by the activity of people trying to avoid loss due to inflation more than makes up for that loss. In the time since 1950 the US dollar has inflated by a whopping 840% (a factor of 9.4x), but the per capita GDP has grown by an even more impressive 3200% (a factor of 33x in nominal dollars), or 250% in inflation adjusted dollars.

mrb 14y ago
InclinedPlane, your anti-deflationary arguments can be refuted in 4 different ways: 1. A deflationary currency strongly encourages businesses to maximize revenues today instead of tomorrow, because they know they can get more units of the deflationary currency today rather than tomorrow. This incentive does not exist with inflationary currencies. 2. If you had 100% confidence in Bitcoin being deflationary, you would invest in bitcoins. But the fact you do not (I presume) shows a very important point: you, like many, doubt Bitcoin will remain deflationary on the long term (eg. it might crash to zero). This uncertainty is why, despite being in theory deflationary, Bitcoin will continue to see a growing economy. People will continue to invest and spend bitcoins, because the future of Bitcoin, like the future of any currency (inflationary or deflationary), is fundamentally uncertain. 3. There is an often-cited counter-example to the argument that "people will not spend if they know prices will decline in the future" (as prices will in a deflationary currency): the electronics industry. Laptops, smartphones, servers, etc: prices are always decreasing. Yet this industry is very successful. Buyers are not afraid to spend money today, even if they know they can get the product for less tomorrow. This is because prices decreasing over time stimulate spending. 4. The traditional arguments against a deflationary currency only work within a self-contained economy anyway. Bitcoin currently exist as a side currency next to all other (USD, EUR, etc). People will still want to invest these currencies, and the Bitcoin economy being tightly coupled to others will naturally benefit from these investments. That's why for example we are seeing a bunch of Bitcoin startups popping up: Coinbase, BitPay, BitSpend, BitcoinStore, CoinLab, etc Edit: downvoting me, seriously? I would like to know why.
- InclinedPlane 14y ago
  1. Deflationary currency encourages extractive businesses, such as property ownership and renting. Inflationary currency encourages people to re-invest their profits in their business, and to grow their business as much as possible. In other words, with a deflationary currency people operating a business are encouraged to keep value in money mostly, with an inflationary currency people are encouraged to keep value in the business. It seems pretty obvious which of these encourage economic growth more. 2. I'm making an argument about deflationary vs. inflationary currencies in the abstract, Bitcoin itself is too complicated to fit into that argument except in so far as people arguing that deflationary behavior is a benefit to bitcoin as a currency. It certainly could encourage purchasing of bitcoins but I'm not convinced it encourages use of bitcoins as currency. 3. This is not a counter-example at all, because goods are not currency, they have an innate value. The cost of waiting for years to purchase some good that you desire (such as a computer or a cellphone) comes at a cost of spending years of your life without the benefit of being able to use those goods. And that cost may be significantly greater than the value of saving money. 4. Bitcoin as an investment only makes sense as a pyramid scheme, in order for it to have value it must be used as a currency. Regardless of the interaction at the edges that means that it must have some core use as a currency, which is currently not the majority use, and that's a bit troubling. As to downvoting, HN wouldn't let me downvote your reply even if I wanted to so I can't help you there. I suspect someone disagrees strongly with what you've written but doesn't want to take the time to write a rebuttal.
  - deleted 14y ago
    [deleted]