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Maybe you can explain why the fixed quantity is a problem? If it had some way to allow bitcoins to "split" while maintaining their owner would that fix the pro

Maybe you can explain why the fixed quantity is a problem? If it had some way to allow bitcoins to "split" while maintaining their owner would that fix the problem?

nl 14y ago
Maybe you can explain why the fixed quantity is a problem? See http://en.wikipedia.org/wiki/Deflation#Deflationary_spiral http://en.wikipedia.org/wiki/Deflation#Deflationary_spiral If it had some way to allow bitcoins to "split" while maintaining their owner would that fix the problem? No. The fact that Zimbabwe dollars were available in multiple of millions as a single note didn't fix hyperinflation in Zimbabwe.
- richcollins 13y ago
  So that provides evidence that it doesn't work?
  - nl 13y ago
    Why would it work? As I said elsewhere: The original deflationary spiral was defined in 1933[1]. The spiral is caused by the growth in value of currency AND a decrease in velocity of circulation. Splitting bitcoins wouldn't solve either of these problems in the same way having higher denomination currency doesn't solve inflation.
    - richcollins 13y ago
      Right so that shows that what Keynesians actually advocate is theft. They go about it the easy way, printing money instead of taking it directly.
parasubvert 14y ago
The fixed quantity is a problem because of a general theory of how money works. Bitcoin is effectively an artifically limited gold standard, with all of its positive and negative attributes. In (very) short terms: consider an economy with three goods: money, bonds, and output (i.e. stuff or servcies we buy). There's a supply and demand for all three. Except one of them (money) has a finite supply limit. When supply of bonds is high and demand low (such as when we've had a financial crisis and people are paying down debt), we eventually run into a case where price of bonds (i.e. their interest rates) are 0%. That means that the price of money soars, and the price of output tanks. That's called deflation, and it's really painful to the productive economy. People sitting on money doing nothing are fine, but output falls dramatically. The working class are wiped out in a spiral of "making less & spending less". Most of us would rather have an economy where output grows and everyone is better off. In theory, the ability to "split" bitcoins infinitely would fix the problem, but I think people may have psychological problems with dealing with millionth's of a fraction of a bitcoin for no reason except that the Bitcoin creaters arbitrarily decided there would be no more than 21 million of them.
- nl 14y ago
  Your write up of deflation is excellent, but I'd dispute this: In theory, the ability to "split" bitcoins infinitely would fix the problem The original deflationary spiral was defined in 1933[1]. The spiral is caused by the growth in value of currency AND a decrease in velocity of circulation. Splitting bitcoins wouldn't solve either of these problems in the same way having higher denomination currency doesn't solve inflation. [1] http://en.wikipedia.org/wiki/Debt_deflation http://en.wikipedia.org/wiki/Debt_deflation
  - parasubvert 14y ago
    Good point, I hadn't really thought it through.
- richcollins 13y ago
  OK so it would be solved if money could magically clone itself? Imagine that the fed could press a button that would make all USD in existence (physical or digital) suddenly split from $1 into 2x$1. Would that work?

Maybe you can explain why the fixed quantity is a problem? If it had some way to allow bitcoins to "split" while maintaining their owner would that fix the problem?

nl 14y ago

Maybe you can explain why the fixed quantity is a problem? See http://en.wikipedia.org/wiki/Deflation#Deflationary_spiral http://en.wikipedia.org/wiki/Deflation#Deflationary_spiral If it had some way to allow bitcoins to "split" while maintaining their owner would that fix the problem? No. The fact that Zimbabwe dollars were available in multiple of millions as a single note didn't fix hyperinflation in Zimbabwe.

richcollins 13y ago
So that provides evidence that it doesn't work?
- nl 13y ago
  Why would it work? As I said elsewhere: The original deflationary spiral was defined in 1933[1]. The spiral is caused by the growth in value of currency AND a decrease in velocity of circulation. Splitting bitcoins wouldn't solve either of these problems in the same way having higher denomination currency doesn't solve inflation.
  - richcollins 13y ago
    Right so that shows that what Keynesians actually advocate is theft. They go about it the easy way, printing money instead of taking it directly.

parasubvert 14y ago

The fixed quantity is a problem because of a general theory of how money works. Bitcoin is effectively an artifically limited gold standard, with all of its positive and negative attributes. In (very) short terms: consider an economy with three goods: money, bonds, and output (i.e. stuff or servcies we buy). There's a supply and demand for all three. Except one of them (money) has a finite supply limit. When supply of bonds is high and demand low (such as when we've had a financial crisis and people are paying down debt), we eventually run into a case where price of bonds (i.e. their interest rates) are 0%. That means that the price of money soars, and the price of output tanks. That's called deflation, and it's really painful to the productive economy. People sitting on money doing nothing are fine, but output falls dramatically. The working class are wiped out in a spiral of "making less & spending less". Most of us would rather have an economy where output grows and everyone is better off. In theory, the ability to "split" bitcoins infinitely would fix the problem, but I think people may have psychological problems with dealing with millionth's of a fraction of a bitcoin for no reason except that the Bitcoin creaters arbitrarily decided there would be no more than 21 million of them.

nl 14y ago
Your write up of deflation is excellent, but I'd dispute this: In theory, the ability to "split" bitcoins infinitely would fix the problem The original deflationary spiral was defined in 1933[1]. The spiral is caused by the growth in value of currency AND a decrease in velocity of circulation. Splitting bitcoins wouldn't solve either of these problems in the same way having higher denomination currency doesn't solve inflation. [1] http://en.wikipedia.org/wiki/Debt_deflation http://en.wikipedia.org/wiki/Debt_deflation
- parasubvert 14y ago
  Good point, I hadn't really thought it through.
richcollins 13y ago
OK so it would be solved if money could magically clone itself? Imagine that the fed could press a button that would make all USD in existence (physical or digital) suddenly split from $1 into 2x$1. Would that work?