Topic: Bitcoin is a Zero-Sum Game - Long-term interest bearing instruments viable? - page 4. (Read 14623 times)

I don't think so. I think you can argue that regardless of whether you believe that market failures exist the voluntary adoption of a fixed supply currency is not a market failure. Sort of like how you could argue that a particular horse is not a unicorn by pointing out that he doesn't have a horn. The question of whether unicorns exist (they do) is separate.

Deflation leverages the creative class they can do more with less - programmers - designers all are now free to create,  in an inflation economy designers and programmers don't borrow because there outcome has no guarantee. But when free to do R&D  ( leveraging deflation) the ones who innovate, now have a tool to solicit investment, and we get quantum leaps in progress.

Are we assuming a priori that "market failure" is a valid concept?

I agree with almost everything you said.  But what if someone argued that a deflationary currency represented a kind of prisoner's dilemma? Maybe an inflationary currency would be better for everyone, but it would never get off the ground because individuals would tend to defect and store their savings in an alternative deflationary currency? (Note I don't think this is the case!) But my point is that the question of whether a market failure exists is a completely separate question from whether state coercion is an effective (or legitimate) response.

Leverage the declaration - this would encourage a boom in creativity.   

The most optimum currency can only be determined by examining what people choose when they are free to decide.

What we can observe is that people act in ways to preserve the purchasing power of their deferred consumption. Based on their risk profile they choose to store their savings in ways that maximise future purchasing power.

Currency devaluation can only be imposed on a population by force, because individuals are constantly trying to flee from it.

That tells you all you need to know about inflationary vs deflationary currency. Anything that must be imposed by force is only optimum for those holding the guns and suboptimal for everyone else.

No, I'm not. Instead I'm saying the business cycle will continue in a different form.



Why do you absolutely have to resort to some fallacious argument or another? I am not an "inflationist". You saying so does not make it true. Nor does making inflation a bad word prove that deflation is the answer.


Looks like BTC has fallen over 200% to me.


Yes, BTC-related as in "only does business in exchanging BTC to fiat".


Because impaired implies there will be no investment? Oh wait, it doesn't.


Not like you would listen or ever accept that you are the one full of fallacies.

This is correct,  that is how you spend that saved money each day.  If everyone took their money and chased all the goods with it, prices would rise according to the items most useful or in demand.

No, obviously everyone should spend all of their money as fast as possible Brewster's Millons-style. Think of all the jobs that would be created! But seriously, the point of saving money is not to never spend it.  It's to spend it later. And no one saves all their money because most people prefer to not be homeless or starve to death.  And again, no one said that putting your money in the safe is the best investment. It's not.  It's just the safest. Of course, depending on your situation and risk preference, it will generally make more sense to lend or invest some of that money to earn a real return.  The question is what currency will optimize the balance between present consumption versus savings / investment.  I think it's a deflationary one for the reasons I've argued.

So if everybody puts all their money in the safe the economy will be booming from all the money it's borrowing, right...? This theory is obviously just more rationalization from deflationists.

50-100 years ago there was 1 million goat herders in Saudi Arabia, today they are 30+ million people, many of which live in huge buildings and drive golden cars.
This was caused by ONE thing: Energy, oil - prices didn't drop, rather today they are higher than ever along with demand.

Unless they do something radical 20-29 million of those people will likely die when they run out.

The problem with you inflationists is that you assume 10 second timeframes and perfect information. But demand follows real worlds supply of goods no matter where it goes after 5-10 years and people don't know shit - that is precisely why they need non-manipulated money and prices to go by.


As I see it, the ball is in yours, Etlase's and other inflationist's court:

1. BTC value is climbing, unless free markets are entirely devoid of any logic or reason, there must be a good reason for it. Why is NONE of the inflating crypto-currencies valued at all?
2. If deflating economies self-destruct then why are we seeing a sea of BTC-related businesses spring up?
3. If investments are impaired in deflationary economies why is GLBSE seeing any business? Why do people start BTC businesses instead of straight up buying BTC?
4. Central banks still hold gold despite it being "horrible"/"evil" money.
5. People let Pirate owe 500.000 BTC in debt before it fell apart - that's a lot of loaning right there.

But you CAN'T explain that so you do ad hominem attacks, use fancy words that mean squad, appeal to economist "expert" authority that can't predict anything, pretend WE are missing something or straight up incorrectly accuse us of using logical fallacies.

The way I see it even if you are in a generally deflationary economy there is no way to tell whether the next year it will be inflationary or if the currency is just presently overvalued and will crash some and so, humans being careful, hedge with real world investment even if on paper perhaps its not perfect given perfect information or constant dependable deflation - the world keeps spinning as they say.

You also assume all-or-nothing; what if people keep 90% of their wealth in deflationary BTC and invest 10% like there's no tomorrow? That would mean a constant ongoing investment stream in society. As long as there is A flow there would be resource allocation.

Do you guys even have ONE inflationary scheme you agree on? No, it's all "MY personal client idea or inflation model is better!".

You spend it by spending the money in your pocket on goods and services.  Your money will now go further because the money in other people's safes is not chasing after those same goods and services.

So, what how do I go about spending my share of the money people have in their safes?

For more on this topic, take a listen at What is Money by Frederick Bastiat, as hosted by Cypherpunkd.

Have you accounted for other factors which typically correspond to a liberalized financial sector, like increased recognition of property rights and fewer restrictions on entrepreneurship in general, which could potentially affect the correlation/causation relationship?

That's exactly right. All currency can be modeled as a series of informal loans, which means every transaction involving any type of currency requires a lender and a borrower.

Factory workers loan their labor to their employed and don't truly get paid for it until they consume products and services with their paycheck. Their production happens before the corresponding consumption which makes them lenders.

The factory itself  consumes the productivity of its employees first before producting a valuable product and getting paid by its customers. In this case the factory is the first in a series of borrowers that correspond to the workers' loan of productivity. The debt flows through the economy via the transfer of currency and is extinguished when the workers finally spend their paychecks (or is defaulted on in the case of inflation).

Note this form of informal, decentralized debt has only a superficial resemblence to "long-term interest bearing instruments".

Here's a thought: it's impossible to save money without lending it. Imagine that you take a $100 bill and stick it in your safe for a year.  It's true that when you do so, you're not lending that money to a specific person, but you are lending the purchasing power of that money to the overall economy.  (And lending the purchasing power of money is the equivalent of lending money itself. After all, that's the point.) Think about what that $100 bill represents. It represents your right to claim $100 worth of stuff in the real world.  When you don't redeem that claim immediately, that stuff is available to be used by others.  You've effectively loaned it to them.  And that's why you are rewarded with increased purchasing power over time in an economy that uses a sound currency (i.e., the kind of currency that people would choose in the absence of government coercion). Of course, the loan you've made is a very low risk loan. (But it's not a zero risk loan. While there's no risk of default, it's possible that the economy will contract leading to price inflation rather than the expected deflation.) The loan you've made is also one that can be recalled at any time. (You can change your mind and decide to spend that money.)  And that's why the return on that loan will be smaller than the return you could earn on a loan of money to a specific individual or business.  But it makes no sense to complain about "greedy hoarders who refuse to lend." They are lending, and they're providing value by doing so.  

Are we using industrialization as the gold standard to measure economic prosperity of a country? 

If so then, yes lending is involved in all cases.   If we use a different standards then I may have other examples.

"I am assuming real growth causes deflation"

Exactly!

And what is the cause of economic growth? Profitable investments. You are basically saying that the existence of profitable investments makes profitable investments impossible. It's circular and a contradiction. So one step in your chain of thought must be wrong. I'd say it's the step where you assume that growth-induced deflation hinders growth (as opposed to deflation caused by a credit contraction which I see problems with as well).

You have overlooked the fact that if those smart enough to wait and benefit from deflation could and would, they are only benefiting form a previous investment in the economy, that afforded growth (the cause of deflation) in the first place. It is not a tax but a resulting benefit. If the economy stops growing there investment has eroded, if they do not reinvest inflation happens, and if they remain among the majority who choose not to invest at point 4 there will be no point 5 and inflation will increase until such time as it is viable (and the  saved money will justly lose value.)  

In contrast induced inflation is a tax on the productive, it also has the negative effect of displacing wealth through the Cantillon effect.

yes people adapt  by growing the economy and eroding there wealth, the planets natural capital and become more dependent on credit.

Trade is still the source of benefits, growth induced by inflation remains just a misapplication of capital and resources.

I don't think that's right. You can't say that deflation encourages people to abstain from consuming money but not real resources.  After all, money is simply a claim on those real resources. But sure, if you're the one holding a particular resource whose value is declining over time due to deflation, your incentive is not to just sit on it.  (You'd rather sell it quickly and then sit on money which is increasing in value.)  Of course, everyone else makes that same calculation.  So the buyer must be someone who has a way to take that resource and use it to produce something of greater value.  So there's no reason to expect real resources to disappear!  People don't have an incentive to waste real resources in a deflationary economy. In fact, they have the exact opposite incentive.  The use of real resources to produce greater value is why the economy is growing, which is the reason that prices are deflating in the first place.  And this also answers the objection about "people just sitting on their money" in a deflationary economy and thus (allegedly) "not producing anything of value."  Money is not a productive real resource.  Again, it's a claim on real resources. Who cares if it "sits in somebody's safe" if the effect is, as shown above, to encourage the productive use of real resources?