Topic: Bitcoin's first major deflation event, and its consequences - page 3. (Read 14159 times)

Yes he is right, I didn't read practically anything he wrote but the above response sounds pretty much what I'd answer with if I had read it all.

The thing that most have a hard time grasping is that when I examine markets I always put ethics first. I.e. the individual having the ability to do whatever and if this means being clobbered in a manipulated market, then so be it because he will learn from it or go extinct and if he learns from it he will be better of next time. So I really don't care what monsters you can find in a market regulated strictly by consumption i.e. in a free market.

arepo, I have taken your concerns seriously and I thought about them and what others had to say here in this thread. I came - for myself - to the conclusion that your concerns do not have much substance.

I'm not blindly saying "all is good, enjoy the ride": there will be volatility, also to the downside.

I don't buy the "predatory speculation" explanation for the rally. Other simple fundamental reasons (like tons of people discovering bitcoin and businesses entering the game) seem more likely to me.

Neither do I think a "deflationary spiral" would happen or is a bad thing in general. I don't think it's currently applicable to bitcoin.

;tldr: people listened to you but noone got really scared.

hazek's recaps of 'my argument' have consistently been strawmen. i'm convinced he doesn't even read what i write. there is some predatory speculation going on right now, and it's being fueled by the sentiment that bitcoin is supposed to go up, up, up. this kind of behavior scares me.

he snipped the quote in just the right place to make it look like i've been beating the same old deflationary spiral dead horse. and it makes me a little sad that you're assuming all of these things about me just because i've taken an unpopular opinion. it's dangerous to tend to think that people who disagree with you have rarely done their homework.

i also probably don't even disagree with you. deflationary currencies are perfectly fine, no fundamental problem about them. this thread was in response to the then 500%, now 600% growth in the price in the past 12 months. this is unprecedented since the early deflation rallies from pennies to dollars that led to the bubble.

to recap better, i'm trying to say: SOMETHING'S GOING ON. i have a negative feeling about it. if you have a positive feeling, please share here.

thanks

Of course a BTC has better properties than a 400 oz gold ingot...it is divisible at no cost...and may be moved at no cost...and it is securely stored at no cost...

yes, you're right, nothing wrong with that.

In the wiki you have an introduction to bimetallism and some historical events: http://en.wikipedia.org/wiki/Bimetallism

Eventually the evolution was towards the gold standard in the XIXth century. When Gresham law acts, the equilibrium is reached by the non-circulation of the good money. The same may happen for BTC...and there is nothing wrong with this...A BTC would be like a 400oz gold ingot...

This sums it up quite well for me.


how would an equilibrium be reached when the gold/silver ratio is fixed at an arbitrary value and the market disagrees? Can you point me to some such historical event?

Furthermore, this has been addressed in many places by competent economists, and the people who start these kinds of threads are rarely familiar with the arguments against their ideas, and they never address them.  No homework has been done first.  People just show up and claim they are seeing something that nobody else is seeing, and then get upset and call names when noone agrees with them.  And my ignore list just grows.

What we see is nothing but  Gresham's law: http://en.wikipedia.org/wiki/Gresham's_law

People hoard good money and spend bad money.

This is deflationnary for BTC  but it does jeopardize its currency status.Eventually BTC will reach an equilibrium for its value. Similar things did happen historically at the moment when bimetallic standard were in place.

If that's your largest worry, then you're better off investing in improving the Bitcoin infrastructure or providing a good/service.  You don't need to hoard Bitcoin to be part of the economy, be the casino and not the gambler, if you will.

I agree. Well said nagato... well said.

Limiting the total supply of bitcoins was a stroke of genius from Satoshi.

• It provides an incentive for early adopters to mine the currency, thereby fueling it's adoption
• It will probably make Satoshi extremely rich, perhaps the wealthiest person to have ever lived on this planet
• It won't have a serious effect on the use of Bitcoin as a currency, since merchants can simply choose to have all incoming bitcoins automatically exchanged for fiat, thus limiting the volatility risk, and users of the currency can always choose to buy more bitcoins to replenish the ones they've used to buy stuff
• The most important reason of all: if the supply of bitcoins wasn't limited, there would remain a serious risk that an alternative currency would take over, since it could be a better store of value than the ever inflating Bitcoin

Clearly famous paintings have moneyness also. It is a safe haven for saving, when money are worthless and other investiments risky.

Hm, this is a better example than the gold I usually bring up that seems to derail people or make them emotional to the point where the rational mind is being switched off.

Then could you please explain to me what the intrinsic value of a rembrandt painting is because its worth $30millon dollar.. That is only some paint on some paper isn't it??

@OP
You are falling victim to a flawed logic: the deflationnnary spiral can only happen when people are using a single currency.
When they are several, competing currencies, why would the economy come to a halt because one of the currencies is emerging as more valuable than the others?
The deflationary spiral is a problem for a monopolisitic currency because all prices are denominated in this currency.
Also, the deflationary spiral is a problem for economists who advocate unlimited money supply growth and unsustainable development: if the money supply grows exponentially, they need more consumer spendings just to keep things afloat.

Bitcoin prices are always and will always be displayed alongside other denominations. If people see the euro price of a computer is stable while the bitcoin price is dropping, why on earth would they think that the computer is getting cheaper ?
People are not stupid: they will simply realize bitcoins are becoming more valable against the euro.
So people will not postpone their purchase of the computer based on future price expectations.
They will part with their savings (in bitcojns) only if they need the computer now.
Bitcoins are no different from an investment in a stock with high yield, high liquidity.
The asset underlying the value of the stock is an internet transaction processing network: the valuation can be measured against other transaction processing networks (check the stock price of Visa Inc). There will be no more than 21 million shares outstanding.
Who can reasonnably say that a high performance stock can trgigger a deflationnary spiral ? This is silly.
Bitcoins are not meant to replace other currencies: bitcoins welcome competition because bitcoins are made of a better design..

FTFY. you continue to respond to a point that i'm not making, and ignore the one that i am. i don't really know what more to say to this.

try again? reread the post i linked last. seriously. i don't even mention the words deflationary spiral. it's all about bad behavior. please, please, please put the effort in if you're going to post again. otherwise just don't bother.


i know the OP is about this. but the discussion has moved way past this dead horse. no one is arguing that the economy will grind to a halt... i didn't even say that in the OP. i referenced the mechanism of the deflationary spiral as a way to explain recent price rises. i feel it's also an example of predatory speculation, which will lead to newcomers having a bad time.

quote from the Porsche Cayman selling thread:


Maybe people just don't want a Porsche currently as badly as the politicians crying for the economy to revive would like?

Maybe we're currently still producing much more stuff than needed.




from above link:


Oh my god! It's harming the holy company sales. Quick, DO SOMETHING!

Do we want:

• constantly growing economy

or

• happy people

I think if we want the second option, the first one is not necessarily a way to achieve that. Maybe we should start thinking more fundamentally about what role "employment" plays or should play in our society.

I remember as a child I didn't understand why everybody was so keen to have employment. It seemed to suck to have a job. It was explained to me that it was about the money. Actually nowadays I think it's about security. People are afraid of not being able to live well and support a good life for their family.

In a "deflationary spiral", it's suddenly possible for people to actually save money. They might decide to work for 2 years and then take a break and see the world or spend more time with their loved-ones for a year or two. They will still buy food, shelter and airplane tickets and at the same time make room for someone else to earn some money.

I know people will probably call me naive and tell me it's more efficient to invest into one employee and suck the life out of him than to educate two of them.

I still think using "sound money" will change a lot of things in the minds of people and it's the way to go.

;tldr: "The economy must grow" <- I'm sick of that shit. In a deflationary spiral "the economy would grind to a halt" <- I seriously doubt that.

Because it makes zero sense: Hey people, we have a problem!! Many people will want to use Bitcoin so bitcoins are going to become very valuable therefor no one will want to use it!!!11

I mean, I don't know what more to say to this.

http://mises.org/daily/6362/The-Deflationary-Spiral-Bogey