Topic: Bitcoins Can Inflate Too - Stop worrying about deflation. - page 3. (Read 12311 times)

Yes, we need more free monies.

Inflation and Deflation in themselves are not a problem. I want voluntary, competing currencies that are trying to convince me to use them with their features, privacy, and ease of use. If one is inflating and one deflating, then it is fine. People will have a choice as to what money they want to use. The problem with FRNs is that we must use them, court judgments are monetized in them, and taxes must be paid in them. There isn't another option. This monopoly of money is the problem. Inflation and deflation are only a problem when you are forced to use that inflating or deflating currency.

Because it means that those holding bitcoin will have lost buying power.

How is that bad news?

(Disclaimer: invested in dairy farms and btc.)

So a gallon of milk that would run me about 0.18 BTC today will cost me 0.20 BTC in 2030?

That doesn't seem right.  There doesn't seem to be enough inflation in the currency supply between now and 2030 to justify an inflation in milk prices.

The total bitcoin supply will be less than double what it is right now, and yet the price of milk (as expressed in USD) is nearly 10x as much.  Meanwhile if bitcoin hasn't failed and completely collapsed by then it would likely be in rather common mainstream use.  This should spread the available supply rather thin creating a deflation effect on pricing of goods.

If milk is $20 in 2030, and bitcoin is in rather mainstream use, I'd think that 1 BTC would be worth more than $111, and probably more than $200.

It is the year 2030.  The good news, 1BTC is worth $100.  The bad news, a gallon of milk is $20.

True, but they do such a thing because they cannot open a MtGox account in their countries, so it's much more difficult to access to bitcoin for them.

I mean, yes, they are buying them, to GET bitcoins (the real thing). And the seeller is doing it to get profit.

I believe there is some trading going on in these "holds". People are buying and selling them at a discounted value based on speculation of the likelihood of return. This is similar to how I said promisory notes might be valued above and is not dissimilar to how debt is traded (if you get a call about a really old debt, it is likely the caller only paid pennies on the dollar to buy the debt and is probably far from the first person to have bought the debt)

This sort of FRB is already openly occurring right now at an exchange.  Read up about bitFloor and the theft issue they ran into.  Rather than shutting down the exchange permanently, the chose to record the deposited "bitcoins" (that have been stolen and therefore no longer exist at the exchange) as being "on hold" so that people can't access them immediately (and quite possible, ever).  These bitcoins come out of "hold" as the exchange replenishes their "reserves" from what would otherwise be their profits.

EDIT: As of 2013-04-17 BitFloor has ceased all operations.

People already trade MtGox codes. How do you know Mt.Gox isn't issuing extra codes?

OK, the trust thing is a bit of a non-sequitur and a different discussion. I think we should leave that to one side (though it does play into things a little).

So let's take your situation with me and Bob. Firstly, it's not bitcoins that have been inflated, it's bank-of-mrvision promisory notes. Now, there's a question of how much those notes are worth. Pragmatically, that's what the market will bear. But more philosophically, it wouldn't be half of the number of bitcoins, it would be some factor depending on the trustworthiness of your bank and the actual value of the note.

Where the confusion arises is that currently, a deposit in the bank is treated as if it is an actual store of value, of the actual items on the note. That the items have been lent out to someone else and are thus at-risk is hidden from the depositor and hence a form of government-backed fraud. If everyone acknowledges that deposits in a fractional reserve account involves a degree of risk and retrieval of funds is dependent on the liquidity of the bank, everyone will be better off and the issues with FRB (in and of itself) become mostly insignificant.

I think there was a guy named pirateat40 that promised that he would return the bitcoins. Bitcoiners of course never saw those bitcoins.
Note:some of them phisicaly met the guy in las vegas.

secondly: even if the 'bank' is trust worthy, you are not seeing the real issue. If for example, you give me your bitcoins and i give you a note, and then i lend them to alice. And Alice buys stuff from bob, then bob puts his bitcoins in the bank and i give him a note. Ok. Now You and bob have both notes for the same bitcoins (fractional reserve started), but your notes worth half your actual bitcoins (At this point).  So why would you keep using these notes instead of real bitcoins?

Why do you think bitcoin has a hard limit of 20.999.999 bitcoins?

With bitcoin, all FRB requires is that the lender deposit X bitcoins and be given a note promising the return of the bitcoins (or rather an equivalent amount of different bitcoins). The actual bitcoins can then be lent to someone else. Thus there is no reason that there couldn't be reserve banking in bitcoins.

The issue becomes if the depositer wants their bitcoins back. If there is a reserve, they may be able to be paid in full. If many people want their bitcoins back, there is a problem. Insurance is one possible answer but the best answer is for people to be told that if they deposit their money in such an account, they may not be able to access them immediately (and quite possibly, ever). If you want to be able to access your bitcoins immediately at all times, that is a different type of account (and will likely require fees for the service)

Yes and that's why i think it wouldn't work.

Good point, I think DannyHamilton had the same one. 

The difference is that there is no need to issue "credits".  If we are talking about gold, then there is an obvious need for some kind of paper or electronic transfer mechanism so we don't have to carry around scales, metal, or forges with us just to make some purchases.  That is how this FRB got started..  bankers realized that they could issue more paper gold "credits" than they had real gold in their vault.  Merchants are forced to accept paper money because that's what people are able to carry around and thus they get more business accepting an easier payment method. 

In theory, one could of course do the same thing with bitcoins, issuing credit notes based on a certain reserve of coins.  However, who is going to take a bitcoin "credit" in payment?   With gold, we are forced to accept such payments.  With bitcoins, there is nothing to gain and a lot to use.  I don't see how people would be forced into using fraction reserve bitcoin notes.  Why not use the real thing? 

If we do want to use bitcoin "credits" for some reason (network speed, security, other reasons?)  then we will likely choose a version that is transparent so we aren't getting robbed.  With gold, that is impossible.  With bitcoin, a bank can make public the proof of reserve, the list of customer BTC addresses or credit accounts..  so that people can check if they are being robbed.  With FRB gold, there's no way to know for sure, thus people are bound to abuse the system at some level. 

 

You know how much bitcoins they have, but you don't know how many 'credits' they've given. So you don't know if those credits are all backed.

Or 102,5 satoshi - not that you can have a half a satoshi... yet!

Now, though, I'm mathematically aware enough to tell apart BTC0,005, BTC0,0005 and BTC0,00005, but I can see where some confusion might set in. 5 BTM / half a cent, 50k satoshi and 5k satoshi respectively reduce the prospect for confusion somewhat.

1.025 Mikes.

Sure, but how do you know what the total loans and deposit accounts are?  If you have 100 BTC deposited at the bank, and the bank demonstrates for you that they have 10,000 BTC in reserve, do they have 10% reserve? 50%? 90%?  How would you know?

A bank can say "here is our major offline storage address, and a signature to show we control the funds".

Anybody can check and see just how much is there and that it's all real.   

Compare that to all the difficulties in auditing gold reserves..