Topic: Bitcoin. In no way deflationary. - page 2. (Read 4687 times)

Me. I'm picking MNW as an escrow, ready to go?


It's in my signature after all, neh?


More whats? Will BTC buy more S.DICE shares in the future? Perhaps. Will BTC buy more S.MPOE shares in the future? Perhaps not, at least if history is any guide. Will BTC buy more iPhones in the future? Certainly, Moore's law. Will BTC buy more blow jobs in the future? Perhaps, if the population keeps growing. Will BTC buy more tuna in the future? Perhaps not, as tuna seems to be going extinct, and for all its virtues the USD can't buy any mastodon meat and never could. The list goes on and on and on.


This is a mistaken view much akin to the notion that "go left" MEANS something to a topology and an individual. In practice GPS uses actual coordinates. Which then it translates into go lefts and go rights for the need of the barely literate driver, sure, but what bearing does this have?

My point wasn't that you're arguing for or against inflation, but in regards to the use of terms, inflation and deflation are actually quite good for both price and supply issues. This is why I personally just say "price inflation" or "deflation of the supply of X" because it tends to get over this semantic hurdle with most people while still applying the ideas of inflation and deflation to both spheres.


This is why I said that it's exactly the opposite of the inflationary mechanism. The point was that the first person to lose the currency is the worst off while the last ones to adjust (rather, to be forced to adjust) to that pricing shift are the best off. It was just inverting the issue to try to make the point about the necessity of qualitative analysis rather than looking at the aggregates of price inflation and deflation.




If you're trying to relate Bitcoin deflation to the relative inflation of the Dollar against Bitcoin, then sure...... But that doesn't really make a meaningful point above and beyond saying that Bitcoin has deflated relative to the Dollar...

I'm not really sure where you're going with all of that. In terms of spending more in an economy, if the size of the market of goods being bought using the currency increases at a faster rate than the reduction in hording, then price deflation will occur even as the supply of currency being circulated is inflated... But that's completely relative... So again, I'm not really sure where you're going with all of this.

To tell you the truth, your statement caught me off-guard for quite some time.  Nevertheless, after a few sips of some fine cuban rum and a wisdom spark, I think I may have found just the right words to clarify my initial position. So, here it goes. Ready? Let us first agree on the following play of words... If trading USD for BTC can be considered buying BTC, then trading BTC for USD will be considered buying USD. Does this sounds about right? So, if by buying BTC you would be engaged in demand creation for BTC, then by buying USD you would be engaged in demand creation for USD... But where is the value creation in that?

By trading one currency (say BTC) for another (say USD) you are merely engaging in the transfer of some assumed value between those currencies, and nothing more. Now, if the underlying value (not to be confused with the exchange rates) of each such currency has not changed between the two back and forth transfers, then both transfers would simply cancel each other out. But if one currency's underlying value (BTC's) was suddenly projected to increase relative to another currency (USD's), then the exchange rate between the two currencies would eventually self-adjust (due to some market forces) to reflect that projection. And we all know what would happen then: you would receive back less BTC for every USD than what you had initially used to buy those USDs (when you initially transferred some assumed value from BTC to USD).

Hopefully these badly-structured sentences were somewhat helpful in shining some light on why the increase in the underlying value of a currency is derived from the assumptions/projections about the increase in economic activity, rather than the increase in trading activity (i.e. back and forth buying/selling BTCs for USDs). Unfortunately, the only way to increase economic activity in a market-driven economy is to increase consumption of products/services produced in that economy — this is what I call the increase in spending. And when it comes to BTC-based economics, deflation is just a pretentious way of saying inflation.

Well said, let me only add one thing. 

Modern "Keynesian economics" is NOT the economics of Keynes.

Not sure what you are getting at here.  But you are conversing in the realm of logic, and our understanding of history, and it's relation, if any, to current events.

So don't get mad at me.  In the realm of discussions of logic, nothing is true because you or I say it is, and everything is open to be verified or refuted.  And of course there's nothing I've said that I can't back up....or I wouldn't have said it...

No one denies that the supply of money is a FACTOR that can contribute to inflation/deflation, and yes how new money is added (or old money removed) has massive effects and has to go through a messy process of rippling through the economy to rediscover new equilibrium points (and some people get screwed in this process).  None of that is even remotely in dispute, you seem to be assuming I support inflation simply because I don't spit on Keynes grave every time I mention him as is the normal etiquette here on the forums.

I am simply arguing that deflation/inflation as terms describing the change in the purchasing power of money are useful and meaningful and the orthodox meaning of these words amongst ALL economists.  The deeper ramifications, goodness badness, supply vs demand side mumbo-jumbo is irreverent here because I'm just trying to point out that semantically their is no disagreement.

And I have no idea what your lost wallet statement is supposed to mean as that's not inflationary by anyone's book, losing a crytpo coin wallet decreases money supply and all things being equal will cause deflation if it is not being offset by an equivalent decline in demand for money.  Mises and Keynes agree on this simple point.

A way to better think about the issue of qualitative analysis in the change of the money supply is to see how someone feels when they lose their Bitcoin wallet. This is the exact opposite of the inflationary mechanism described above.

That's a quote taken well out of context. Mises would acknowledge the semantics of price inflation/deflation, but he would stick to the supply issue of it.

But as you said, that's all semantics.

I'm responding to you to mention that there is in fact reason to look at the supply of money, and more importantly, changes in that supply. This is because money is a non-neutral good, and prices take time to change through an economy.

If you are to expand the supply of money exactly with the population, it isn't as simple as just saying that prices will adjust accordingly. You must know the qualitative issues that surround the means by which the supply of money was increased. If that money goes first to X individual, then that individual benefits most from the newly created money regardless of the aggregate data surrounding the change involved. Likewise, person Y who receives the new money (as in, who is last to adjust to the change in supply,) is actually made worse off because of the lower purchasing power of their money in the time until prices adjusted.

This is why the issue of "price stability" is really impossible to answer for the "best" outcome. There is no such thing as price stability when the market of millions of goods have independently changing prices. You may be able to make aggregates of the prices (CPI, PPI, etc,) but those aggregates hide the meaningful information that prices give to an economy.

Can we just agree that EVERYONE Austrian or Keynesian expects the exchange rate for real goods and services against BTC will rise and BTC's will buy more in the future.  All you Austrians have been arguing that will happen, have been advocating people hoard coins in anticipation of future consumption higher then the consumption deferred to buy and hoard the coins and so far (outside of some crashes) your prediction has been correct, BTC appreciated massively.

Now if a Keynesian when using the term 'deflation' means that price appreciation then by golly they are correctly describing BTC by what that word means to THEM.  If someone else with this weird idea that these words mean only nominal changes in money supply says BTC is inflating then yes they are also right by what that word means to them.  All we have here is a disagreement over what words mean, not the nature of BTC which everyone agrees on undeniable fact, that of growing supply and appreciation in value.

Now I'm going to argue that the so called 'Keynsian' (really everyone excluding a few wackos) definition of inflation/deflation is correct.  Why because it actually MEANS something to an economy and an individual, where as the nominal money supply tells us nothing about an economy or what to do as an individual.  Real inflation is an incentive to spend, real deflation is an incentive to save, BTC clearly falls under that latter kind of incentive structure (the Austrian and Keynsian would now have an actual disagreement over if this is good or bad).  If I make a statement about nominal money supply while ignoring the population of users, the quantity of production and the demand for consumption of those users I've ignored so many CRITICAL factors that I no longer say anything meaningful about the signals being sent, are individuals under an incentive to spend or to save, I haven't said one way or the other unless I make the assumption that ALL the other factors are constant which this narrow definition explicitly excludes if it mean ONLY nominal money supply.

And you know who else agrees with Mr. Keynes on this definition, VON MISES, quoted directly from Theory of Money and Credit, at http://archive.mises.org/19306/inflation-and-deflation-austrian-definitions/

You're at least very closely related to the person who did write it, if any of the connections that your account has with the supposed author are accurate.


The issue isn't about deflation preventing spending. You're putting the cart before the horse here. The discussion was on how hoarding affects deflation.

The fact that you've missed this repeatedly is telling me that you're really not worth any more of my time. I've already explained not only that this is a different issue, but that the article you linked includes points that I agree with. I'm rather certain that I've made it clear I understand what those article(s) are attempting to say.

Also, for future reference, it's wise to link to more than a single source time after time. If you wrote it, then fine, but you suggested otherwise already, and even if you wrote it there should be links to outside sources within the articles rather than further linking within the blog.

100 bitcoins says MPOE-PR is shorter than 5'7
who's in?

Yes I'm for real. Not my analogy, and not your place to say what it's for now is it? Not normally spelled "lamens" either.


You surmise wrongly. That's unsurprising.


How is this not about "the question at hand"? Deflation does not prevent spending. Deflation simply prevents misallocation of resources.

I assure you that in your case my condescension is amply merited. You don't know how to spell "hoard" and "hoarding", for instance. This is not a mistake, this is illiteracy. This is not a problem limited to spelling either; your approach to this discussion comes from a rich vein of ignorance about words and their meanings, and from the clearly entrenched practice of "surmising" superficial relations that are about on the level of what a kid trying to guess the etymology of words might come up with.

Are you for real?  The average person does not digest that sort of thing.  An analogy should be a way of describing a complex manner in "lamens terms", not further complicating it. 

I'm getting the feeling you didn't read the article, even though I surmise that you wrote it?

By all means, there are some good ideas that are presented in the article, but perhaps you were thinking of another one if you're trying to respond to the arguments at hand, because this one just doesn't address the issues being discussed. Essentially, this article is about consumerism and ecology rather than issues surrounding deflation in relation to the money supply.

By the way, I agree with the point about inflation encouraging consumerism, and I agree that we would be in a better world if there wasn't this built in disincentive to save/invest in the future.

And one more thing, the relation of the supply of dollars to turkeys is flawed in that any actual currency will always have more supply than all of what could possibly be bought in the connected (or nearly connected) market than what the current price multiplied by the supply of any good will be... This is because the currency is chasing after more than just that good... Essentially, that portion of the argument does not prove the point that there's an ecological problem, else you would make the claim about any monetary unit.

Did I answer your question? I'm rather certain I actually read the article (as well as that which was linked in the original post.) You should really stop making it a habit of being condescending to people you don't know.

I like people who spend more time typing than reading. Did you actually read the linked article or did you just ineptly skim it?

Uhh, I don't think you really got what was being talked about there... That blog post really doesn't hit the issue at hand.

I was referring back up to BTConomist's claim that there isn't deflation without spending -- that hoarding doesn't cause deflation. The article referred some to turkeys and oil (a reference to products/real wealth available to purchase,) but it doesn't talk about how hoarding of a currency changes the money supply or how that changes the way money is valued against products or services.

Actually that entire spending deflation thingie is amply discussed in Let's dig a little deeper into this entire deflation "problem".

No spending doesn't mean no deflation. Besides, if the only thing that's being traded is USD for BTC, that's still spending.

But here's why you're wrong on the no spending = no deflation idea...

If people horde the currency rather than spend it (rather, their demand for the currency increases,) then there is less of that currency actually being circulated to service the function of exchange. This will naturally create higher equilibrium prices as defined in that currency than would come about if people were to spend all that they had been hording.

As for deflation in the money supply sense, that one is dependent upon how you measure the money supply. If you measure only what is being circulated, then reducing the number of coins being spent necessarily reduces the money supply.

Why would we? Have you seen the prices of a mechano-hog on the WoW market?

Compare that to the motorcycle that was recently purchased with BTC.

I'll take BTC, thanks.

That's exactly my point!!! Now, how long before we go back to an inflationary MMO currency?