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Topic: Bitcoin inflation now is 44% per year (Read 3682 times)

newbie
Activity: 35
Merit: 0
June 27, 2011, 03:39:52 PM
#32
Look, I have no emotional attachment to the classical definition inflation, but the modern one is bordering on the absurd. Or over. If tomorrow(next year, decade) technologies will evolve  in such a way that prices of basic necessities (those whose weight is not zero) will halve, the money supply will have to be doubled in order to avoid harmful deflation?

You already know that's exactly what they'll do..


Yes, that's so. Of course, bitcoins may catch on... (crosses fingers, or whatever...)
legendary
Activity: 1148
Merit: 1001
Radix-The Decentralized Finance Protocol
June 27, 2011, 03:33:07 PM
#31
The main division in macroeconomics today is between Keynesian "saltwater schools" and Rational Expectations "freshwater schools". While the two schools disagree on substantive issues, they share definitions of common terms, like inflation. Sure there are crackpots who lie outside of these two schools (e.g. Marxists, Austrian Economists, etc.), but definitions written down by these guys don't influence common usage.

Now that this thread has made these distinctions clear, I will take my posts elsewhere.  Grin

The way to create a community is not to insult people.

Also, I dont know how you can call crackpots to the people that predicted the housing bubble, while a majority of keynesians did not see it coming, including Krugman. Krugman specifically called for the creation of the housing bubble. So if someone has to be called a crackpot here are the keynesians.

The real problem with keynesianism is that its not scientific, but that is another discussion.
newbie
Activity: 59
Merit: 0
June 27, 2011, 03:28:00 PM
#30
Look, I have no emotional attachment to the classical definition inflation, but the modern one is bordering on the absurd. Or over. If tomorrow(next year, decade) technologies will evolve  in such a way that prices of basic necessities (those whose weight is not zero) will halve, the money supply will have to be doubled in order to avoid harmful deflation?

You already know that's exactly what they'll do..
newbie
Activity: 35
Merit: 0
June 27, 2011, 03:25:44 PM
#29
OK, I'll bite. So "you" (long/short list of mainstream economic trolls[1]) stand by the textbook definition of inflation? Let's have a closer look at it.

It is just weighted sum of prices. That's it, period. It could have been other weights/prices? Absolutely. Are those weights continually adjusted and tweaked? Absolutely. But it is those arbitrary and tweaked weighted sums which make economics into a science, almost like physics. Oh, really?

Look, I have no emotional attachment to the classical definition inflation, but the modern one is bordering on the absurd. Or over. If tomorrow(next year, decade) technologies will evolve  in such a way that prices of basic necessities (those whose weight is not zero) will halve, the money supply will have to be doubled in order to avoid harmful deflation?

Or if the greens will take over and all efficient technologies will be banned as un-green, and the price of those commodities whose weight is not zero will double the central bank will have to halve the money supply in order to avoid inflation?? Is that absurd enough or not yet?

Ugh, now I feel better.

[1] A troll in my definition is one with no interest in understanding the subject.
newbie
Activity: 56
Merit: 0
June 27, 2011, 02:36:11 PM
#28
stop argueing about the definition of inflation.
a hundred years of economic theory hasnt settled on one definition. you wont either. it's obvious what kind OP meant.

How can one have a rational discussion with out defining what they are talking about?

congratulations.

you have just encapsulated 300 years of economic debate into one, easy to grasp sentence.

I guess you two missed an important part of what I wrote. I bolded it for you.
legendary
Activity: 1050
Merit: 1003
June 27, 2011, 02:28:32 PM
#27
The main division in macroeconomics today is between Keynesian "saltwater schools" and Rational Expectations "freshwater schools". While the two schools disagree on substantive issues, they share definitions of common terms, like inflation. Sure there are crackpots who lie outside of these two schools (e.g. Marxists, Austrian Economists, etc.), but definitions written down by these guys don't influence common usage.

Now that this thread has made these distinctions clear, I will take my posts elsewhere.  Grin

full member
Activity: 126
Merit: 100
June 27, 2011, 02:14:19 PM
#26
stop argueing about the definition of inflation.
a hundred years of economic theory hasnt settled on one definition. you wont either. it's obvious what kind OP meant.

How can one have a rational discussion with out defining what they are talking about?

congratulations.

you have just encapsulated 300 years of economic debate into one, easy to grasp sentence.

me - i'm from the why-don't-we-wait-and-see-what-happens school...
legendary
Activity: 1050
Merit: 1003
June 27, 2011, 02:07:28 PM
#25

If you are aware of contemporary textbooks which define "inflation" in terms of the money supply, I'm interested, please list/quote them in this thread.

Please don't tell me about how the word was used by Ron Paul or in 1920, however. Not interested.

Murray Rothbard - Man, Economy, and State, 1971.
http://mises.org/store/product.aspx?ProductID=177

If you prefer to believe Keynesian "economists," such as Mankiw and Krugman, you're welcome to do so. However, if you wish to be correct in your thoughts, I'd encourage you to read beyond what is offered in the US public education system... a system which has been declining in it's effectiveness for decades, despite absurd levels of money spent on "improving" it. I've read Krugman's textbook... have you read Rothbard's?

1971, huh. Has someone assigned this for an undergraduate course somewhere?
legendary
Activity: 1008
Merit: 1023
Democracy is the original 51% attack
June 27, 2011, 02:06:09 PM
#24
Okay, are there universities teaching Austrian economics nowadays?


Yes. George Mason University, Clemson, Florida State, NYU, Suffolk, West Virginia U, San Jose State, Loyola University, and certainly others.

Of course, truth is not up for democratic vote... I don't much care how many schools teach Theory A vs. Theory B. All I care about is which theory is correct. My own judgement, for whatever it's worth, tells me that a theory which suggests digging holes in the ground and filling them back up as an "economic stimulus" is probably missing something.
legendary
Activity: 1222
Merit: 1016
Live and Let Live
June 27, 2011, 02:00:20 PM
#23
If you are aware of contemporary textbooks which define "inflation" in terms of the money supply, I'm interested, please list/quote them in this thread.

Correct the standard 'inflation' is regarding price... However the OP was clearly talking about the growth of the monetary supply, (that is in 'inflation' in the generic sense).

It is useful to clarify what sort of 'inflation' we are talking about otherwise the OP post would be clearly incorrect by common definitions.  Since the OP was clearly talking about the monetary supply we should at least talk about it by it's correct label.... (no-matter how rarely it is used in common literature).
legendary
Activity: 1008
Merit: 1023
Democracy is the original 51% attack
June 27, 2011, 01:58:15 PM
#22

If you are aware of contemporary textbooks which define "inflation" in terms of the money supply, I'm interested, please list/quote them in this thread.

Please don't tell me about how the word was used by Ron Paul or in 1920, however. Not interested.

Murray Rothbard - Man, Economy, and State, 1971.
http://mises.org/store/product.aspx?ProductID=177

If you prefer to believe Keynesian "economists," such as Mankiw and Krugman, you're welcome to do so. However, if you wish to be correct in your thoughts, I'd encourage you to read beyond what is offered in the US public education system... a system which has been declining in it's effectiveness for decades, despite absurd levels of money spent on "improving" it. I've read Krugman's textbook... have you read Rothbard's?
legendary
Activity: 1050
Merit: 1003
June 27, 2011, 01:51:14 PM
#21
Okay, are there universities teaching Austrian economics nowadays?

The OP's definition is consistent with the Austrian view:

http://en.wikipedia.org/wiki/Monetary_inflation
sr. member
Activity: 546
Merit: 253
June 27, 2011, 01:43:39 PM
#20
Lets not argue over silly semantics. The issue is that "inflation" has two widely accepted definitions - a generic one - it means growth in general, and has a specific one for economics. The OP was correct - the supply of bitcoins is inflating. The demand is also inflating, but more rapidly. Then the price goes up which means that bitcoin is undergoing deflation.

My point: that the value of Bitcoins would have to scale massively for bitcoins to be widely accepted globally.
legendary
Activity: 1050
Merit: 1003
June 27, 2011, 01:42:05 PM
#19
You can lookup a history of the word inflation here:
http://www.clevelandfed.org/research/Commentary/1997/1015.pdf

Currently, economics textbooks and the academic economics literature defines inflation in terms of the price level.

Homework for you. Look up the definition of inflation in contemporary undergraduate texts

These are probably the two most popular intro texts at the moment:
1) Krugman and Wells. Marcoeconomics
2) Mankiw Principles of Economics

If you are aware of contemporary textbooks which define "inflation" in terms of the money supply, I'm interested, please list/quote them in this thread.

Please don't tell me about how the word was used by Ron Paul or in 1920, however. Not interested.
legendary
Activity: 1222
Merit: 1016
Live and Let Live
June 27, 2011, 01:39:51 PM
#18
stop argueing about the definition of inflation.
a hundred years of economic theory hasnt settled on one definition. you wont either. it's obvious what kind OP meant.

How can one have a rational discussion with out defining what they are talking about?
newbie
Activity: 56
Merit: 0
June 27, 2011, 01:35:02 PM
#17
stop argueing about the definition of inflation.
a hundred years of economic theory hasnt settled on one definition. you wont either. it's obvious what kind OP meant.
legendary
Activity: 1222
Merit: 1016
Live and Let Live
June 27, 2011, 01:31:51 PM
#16
people are again painfully mixing up 'price inflation/deflation' and 'monetary inflation/deflation'

Bitcoin is in strong price deflation (things are getting cheaper in relative terms to bitcoin).
Bitcoin is also in strong monetary inflation (bitcoins are getting less rare, or the monetary supply is getting diluted by the issuing of new currency).
legendary
Activity: 938
Merit: 1001
bitcoin - the aerogel of money
June 27, 2011, 01:26:05 PM
#15
One thing I have (painfully) learned about bitcoin is that everything happens on an accelerated time scale. I don't know where the price of bitcoin will be 12 months from now, but I'm almost certain it wont be within a measly +40% , -40% range of the current price.
legendary
Activity: 1008
Merit: 1023
Democracy is the original 51% attack
June 27, 2011, 01:15:24 PM
#14
Inflation rate is measured by change in the price level over time.

The '44%' you are measuring is the growth rate of the money supply.

......

To avoid future embarrassments, look up definitions of economic terms on wikipedia or in an introductory economics text.

Inflation, properly defined, is not a "change in the price level." Rather, it is an increase in the money supply. The fact that government schools have taught generations of people differently does not change the proper definition of the term.

People get these things confused because inflation (ie - an increase in the money supply) tends to cause prices to increase. But the price increases themselves are not "inflation." One is the disease, the other the symptom. Changing the term "inflation" to refer to the symptom instead of the disease has led to widespread misunderstandings regarding why prices increase in an economy.  

So to you, I would say, to avoid future embarrassments, DON'T look up definitions of economic terms on wikipedia.

And yes, Bitcoin's inflation is 44% this year, but it will fall as we know to zero percent over time. Comparatively, USD inflation will continue without end - and no, it should not be measured by the price changes in the economy, for the reasons mentioned above. When the government says "inflation is only 1%," they are deceiving people because they're measuring price changes, not money supply changes.
legendary
Activity: 1708
Merit: 1010
June 27, 2011, 01:11:33 PM
#13
Inflation rate is measured by change in the price level over time.


That's actually price inflation.  The economic definition of "inflation" in this context is the expansion of the monetary base.

Quote

To avoid future embarrassments, look up definitions of economic terms on wikipedia or in an introductory economics text.

You should take your own advice before playing among the adults.
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