6 ms·

Inflationary currency makes sense from economics point of view, if you can force it onto people, as governments do. No one will hold inflationary currency volun

by pakitan 13y ago

Inflationary currency makes sense from economics point of view, if you can force it onto people, as governments do. No one will hold inflationary currency voluntarily, if they can choose a deflationary one, all else being equal.

atmosx 13y ago
Sure, but no one will spend a non-inflationary currency when he can spend an inflationary one.
- pakitan 13y ago
  Yes, and that's why I agree that bitcoin is "digital gold", rather than the Holy Grail of ecommerce. But that doesn't make peercoin a good idea. If I want to spend I have credit card and a paypal account, I don't need whatevercoin to help me with that.
  - atmosx 13y ago
    I totally get that and I agree with you. My initial point stands though: As a currency BTC is/has failed. As an asset might work, but I don't know for how long.
    - pakitan 13y ago
      "Failed" is a strong word and it's still too early to tell. Sure, I don't think it will ever be used predominantly as an exchange medium but that could be a nice "bonus" functionality. A lot of it depends on how bitcoin-friendly governments are. For example, if a global network of bitcoin ATMs can be built, this could practically put Western Union out of business.
- snitko 13y ago
  It is really a sad state of things that people misunderstand deflation. They have this idea that no one will spend, but it doesn't stand any scrutiny, really. Please read these articles, we made a real effort here to explain why deflation wouldn't be a bad thing: http://blog.oleganza.com/post/66215430631/deflationary-spiral http://blog.oleganza.com/post/66215430631/deflationary-spira... http://snitko.ru/blog/the-beauty-of-deflation.html http://snitko.ru/blog/the-beauty-of-deflation.html
  - atmosx 13y ago
    And did you convince anyone?
    - snitko 13y ago
      It is up to you to decide whether you are convinced or not. If you have any logical counter-arguments, then great, I would be willing to listen to them, discuss them and change my mind about deflation. However, simply saying "it doesn't work this way" and "it's more complicated than that" is not a way to argue and seek truth.
      - atmosx 13y ago
        My argument is about currencies not inflation or deflation. The primary service provided by a currency is facilitating the exchange of goods. Being inflationary is imperative for the population to use it. It is true that currencies are forced upon population by governments (or any form of governance) and it's true that anyone would rather be holding an asset that will not lose value over time compared to one that will. Inflation is an indirect motive to spend money today and not hoard. Now the above is the generally accepted truth in micro-economics and social theory, so I'm not feeling any heat proving the dominant view on this. It's how our world uses currencies actually. All in all, to me makes sense: a currency SHOULD lose a small (1% or 0.5%) amount of purchasing power over time, to boost commerce/spending and so on. It's an indirect way but works. Until we find another way, I think we are stuck with it. Bitcoin in my view, will never be a largely used currency because it does not have this imperative characteristic any currency should have. So people would rather spend dollars (as a user already said about PPCoin for example..) or any other inflationary currency instead of spending an asset.
        krrrh 13y ago
        Boosting commerce and spending is a fine goal, but a larger value of mild inflation is that it boosts investment. Deflation of course has an opposite effect, you get risk free gains by making your capital idle rather than investing in productive assets.
- oleganza 13y ago
  Imagine if you spent $1000 for bitcoins a year ago and now they are worth $40000. Wouldn't you enjoy spending a little bit of it here and there, spread the word etc? If you are a hard believer, then you'd probably wait till it's worth $100000 and maybe then, you'd spend a little here and there?
  - TylerE 13y ago
    Last year 3.5x the US money supply was spent by consumers (not even counting b2b transactions, which I suspect are at least as high). So in your hypothetical example, holding $40k in bitcoins, you would need to spend _$150k_ in bitcoins yearly to match that level of liquidity.
    - oleganza 13y ago
      US cash is a depreciating asset fuelled by cheap artificial credit. This level of spending is not a genuine liquidity, but a economy on heroine. It will not end well because while people are buying all these plasma panels, printed money is being spread in to actually productive economies where it will cause inflation and massive losses. So either, say, China goes into depression and production halts and everyone loses, or China throws their USD back into U.S. causing massive inflation there. Short-term liquidity figures do not tell this story and they are not to be matched. Everyone needs to invest in hard assets and save instead of spending: invest in education, profitable businesses, friendly neighbours, bitcoin.
    - shit_parade 13y ago
      Silk road did what, 10 million btc over two years?

by pakitan 13y ago

atmosx 13y ago

Sure, but no one will spend a non-inflationary currency when he can spend an inflationary one.

pakitan 13y ago
Yes, and that's why I agree that bitcoin is "digital gold", rather than the Holy Grail of ecommerce. But that doesn't make peercoin a good idea. If I want to spend I have credit card and a paypal account, I don't need whatevercoin to help me with that.
- atmosx 13y ago
  I totally get that and I agree with you. My initial point stands though: As a currency BTC is/has failed. As an asset might work, but I don't know for how long.
  - pakitan 13y ago
    "Failed" is a strong word and it's still too early to tell. Sure, I don't think it will ever be used predominantly as an exchange medium but that could be a nice "bonus" functionality. A lot of it depends on how bitcoin-friendly governments are. For example, if a global network of bitcoin ATMs can be built, this could practically put Western Union out of business.
snitko 13y ago
It is really a sad state of things that people misunderstand deflation. They have this idea that no one will spend, but it doesn't stand any scrutiny, really. Please read these articles, we made a real effort here to explain why deflation wouldn't be a bad thing: http://blog.oleganza.com/post/66215430631/deflationary-spiral http://blog.oleganza.com/post/66215430631/deflationary-spira... http://snitko.ru/blog/the-beauty-of-deflation.html http://snitko.ru/blog/the-beauty-of-deflation.html
- atmosx 13y ago
  And did you convince anyone?
  - snitko 13y ago
    It is up to you to decide whether you are convinced or not. If you have any logical counter-arguments, then great, I would be willing to listen to them, discuss them and change my mind about deflation. However, simply saying "it doesn't work this way" and "it's more complicated than that" is not a way to argue and seek truth.
    - atmosx 13y ago
      My argument is about currencies not inflation or deflation. The primary service provided by a currency is facilitating the exchange of goods. Being inflationary is imperative for the population to use it. It is true that currencies are forced upon population by governments (or any form of governance) and it's true that anyone would rather be holding an asset that will not lose value over time compared to one that will. Inflation is an indirect motive to spend money today and not hoard. Now the above is the generally accepted truth in micro-economics and social theory, so I'm not feeling any heat proving the dominant view on this. It's how our world uses currencies actually. All in all, to me makes sense: a currency SHOULD lose a small (1% or 0.5%) amount of purchasing power over time, to boost commerce/spending and so on. It's an indirect way but works. Until we find another way, I think we are stuck with it. Bitcoin in my view, will never be a largely used currency because it does not have this imperative characteristic any currency should have. So people would rather spend dollars (as a user already said about PPCoin for example..) or any other inflationary currency instead of spending an asset.
      - krrrh 13y ago
        Boosting commerce and spending is a fine goal, but a larger value of mild inflation is that it boosts investment. Deflation of course has an opposite effect, you get risk free gains by making your capital idle rather than investing in productive assets.
oleganza 13y ago
Imagine if you spent $1000 for bitcoins a year ago and now they are worth $40000. Wouldn't you enjoy spending a little bit of it here and there, spread the word etc? If you are a hard believer, then you'd probably wait till it's worth $100000 and maybe then, you'd spend a little here and there?
- TylerE 13y ago
  Last year 3.5x the US money supply was spent by consumers (not even counting b2b transactions, which I suspect are at least as high). So in your hypothetical example, holding $40k in bitcoins, you would need to spend _$150k_ in bitcoins yearly to match that level of liquidity.
  - oleganza 13y ago
    US cash is a depreciating asset fuelled by cheap artificial credit. This level of spending is not a genuine liquidity, but a economy on heroine. It will not end well because while people are buying all these plasma panels, printed money is being spread in to actually productive economies where it will cause inflation and massive losses. So either, say, China goes into depression and production halts and everyone loses, or China throws their USD back into U.S. causing massive inflation there. Short-term liquidity figures do not tell this story and they are not to be matched. Everyone needs to invest in hard assets and save instead of spending: invest in education, profitable businesses, friendly neighbours, bitcoin.
  - shit_parade 13y ago
    Silk road did what, 10 million btc over two years?