Topic: Current Bitcoin inflation rate = 35%. Price = stable - page 2. (Read 11518 times)

The cause of the inflation is important. Is it because people want it but can't obtain it OR is it because people don't want it so suppliers have to increase prices due to lack of demand (What I like to call Buggy Whip Economics).  Buggy Whips went up in price before they disappeared because no one used them anymore.

I judge demand by the amount of nodes using Bitcoin. Increasing nodes = increasing demand, decreasing nodes = decreasing demand.

I believe increasing use of Bitcoins is the goal here. Mining operations seems to have taken a precedence over this.

But my Nutshell says:


 If Bitcoin is increasing in price with increase in nodes, it is good.

 If Bitcoin is increasing in price with decreasing nodes, it is bad.

 If Bitcoin is decreasing in price with increase in nodes, it is good. (Although this scenario isn't 'good' for miners, it is good for the Bitcoin)

 If Bitcoin is decreasing in price with decrease in nodes, it is bad.


Then apply whatever inflation formulas you want.

YW
It might be down to ~34.5% by now.


There was a lot of follow-up debate. As a quick recap:

• Due to enthusiastic disagreements about definitions of inflation, I defined "inflation" for this thread as being "increase in the money supply", with no growth or price information included. I wanted to understand (and maybe help others understand) Bitcoin better, not a shouting match between proponents of Keynesian and Austrian economic theories.
• I was surprised that despite the high inflation (increase in money supply), the US dollar price wasn't falling. However, after considering that in this case the inflation has a mining cost, which reflects the price buyers are willing to pay, which reflects how much value they assign to bitcoins, it now makes more sense to me.
• Re: growth, I think the debate is wide open. The supply and price levels simply don't provide enough information about the size and qualities of the economy to be able to meaningfully discuss growth. Furthermore, any attempt to measure the growth would imply a set of arbitrary criteria that define growth.

What exactly are you calling bullshit on? That an inelastic supply of money causes the wealthy to become wealthier? It may have been exacerbated by government policy, but was still only an effect on supply. The same phenomena can and will occur every time bitcoin has a growth spurt.

BULLSHIT: http://www.youtube.com/watch?v=JeIljifA8Ls

O NO U DID'N'

I GON SLAP U WIF MISESES CORPSE

Thank you very much for these calculations, I was wondering what the current inflation rate was.

But I think you're making a mistake when you're equating inflation with rising prices. You correctly identified inflation as the growth of supply of bitcoins and what it's rate is but this is only one half of the supply/demand story that goes into the exchange rate with another currency/commodity price discovery.

Inflation != rising prices. Inflation can result in rising prices given the right conditions of supply/demand.

IMO what the current inflation rate of bitcoins really tells us is that the demand to hold bitcoins is greater than the growth of supply but it doesn't explain where this demand comes from. Is it new market participants coming in and shoring up their balance sheets? Is it the current market participants saving and increasing their balance sheets? Is it just miners saving? Who knows from who's balance sheet this demand really comes from and what Bitcoins "growth" rate actually is.

Firstly, where were you? You missed out on all the fun! And secondly, it's just Wikipedia - an eclectic mix of information and history, as written by the victors. I can provide a simple example to demonstrate that the Wikipedia definition doesn't even comply with the common-sense meaning of the word.

You see a balloon that's attached to an air compressor, and it seems to be getting bigger. Would you say "look! The balloon is inflating!" ? No, it makes far more sense to say: "look! The balloon is getting inflated." It's because you know the inflation is the underlying process that causes the balloon to look bigger.

It's the same with economics, but due to years of de-evolution, this:
"Why are all the prices increasing?
"It's caused by inflation."

has been corrupted to:

"why r all da prices increasing?"
"its inflation yo."

Well I hope your fears are unfounded on this one! Unlike money systems that are based on precious metals, Bitcoin is not dictated by nature. If the Bitcoin "gold" becomes a total racket, people can arbitrarily ramp up the cost of various "Litecoin" alternatives, unlike silver/brass/copper/bronze/cigarettes etc., which are stuck with a natural level of scarcity. The never-ending risk of people freely moving to greener pastures seems like a natural restraint to prevent wealthy speculators from exerting too much influence.

Unfortunately I can't support bitcoin as-is because it is a system very similar to what existed prior to the fed, and that didn't work either once a few people started amassing a large portion of the wealth. Bitcoin already has that built-in. Even without the early adopter boon, if bitcoin gets a substantial portion of world commerce, there will be entities that gain a large enough percentage of the total coins as to be able to move the market on their own. Namely, manipulate it for their own benefit. The money supply was so fragile prior to the fed and after the 2nd central bank that seasonal changes caused stock market problems--buying wheat after the harvest and such. The wealthy are able to pounce on these opportunities time and time again, if not create them in the first place. So, imnsho, bitcoin is just another variation on the broken system of money. And since it is not legal tender and likely never will be, any time one of these situations comes up, you are going to have people heading for the exits.


The con starts when a nation agrees to use a debt-based money. Whether or not the fed is "in on it" directly, they have a gigantic role in consistently making the non-banking class poorer. But because the fed leaves no elected official accountable for its actions, I think it is a just another layer in the con. Not that elected official means anything these days. Ohnoes somebody does something we don't like so we vote some other carbon copy in.

If those NWO guys are for real, then fate is against them. The huge irony is that if it weren't for their outdated ideologies, the Bitcoin idea might never have been thought of in the first place.


Was I being too generous? Even I sometimes have difficulty in thinking that it (the FED, fractional reserve banking, etc.) is a massive con, as long as there is some possibility of rationalising vindicating that system. Good intentions notwithstanding, the result is inevitable: the banks eventually confiscate a huge proportion of a country's total wealth. That process can always be fought against. For example, governments demand tax, or they re-nationalise important assets, but both methods tend to be a PR nightmare. The real problem is that the productive parts of society eventually dwindle, and huge banks are left squabbling over the remains of an ever-diminishing pool of wealth. (I loosely define "wealth" as = production and innovation in non-banking and non-government sectors.)

You know, I just watched the documentary called "Thrive", and the first 30-45 minutes is a terrible thing to watch where the guy talks about energy and the torus shape and stuff, but after that he actually makes a pretty decent point. Part of that point is the whole end-game of control. I have a hard time believing that this is all a game designed to eventually have the NWO and whatever, but seeing the way things are playing out makes it more and more difficult to be skeptical. The end-game can't be just getting money, because really, how much money can the wealthy elite possibly want before money has no meaning. I think they have long surpassed that point.


The problem with thinking that the Fed may have ever had the best interest of the people at heart fails on a three simple facts: JP Morgan was heavily involved in its creation, it is privately run, and the great depression followed shortly after. Most likely testing the waters and screwed it up by going too far. The point was to make it not so obvious that the people of the world were being robbed blind. It was becoming more and more obvious after each banking panic prior to the fed when JP Morgan single-handedly revived the economy at the political cost (from the people's perspective) of acquiring mountains of wealth. Thus, the fed and controlled inflation to make that theft not so obvious.

Don't be a suckkkka, don't save dollars. No excuse anymore.

The FED spent a whole century playing around with interest rates, creating boom and bust cycles. Why would they be scared now? I think they are being instructed to keep interest rates low as part of a plan to kill the dollar.

I've heard lots of complaints that the fractional reserve system is a scam because the FED charges interest, and where is that additional currency going to come from, unless it's also printed in a never-ended spiral of inflation? However, I think the idea was originally to create an economic system that had a combination of easy money (lots of lending to spur economic growth) and would also provide competitive pressure to repay FED loans. The best banks and corporations would last the longest, repaying the most interest, while weaker businesses would go bust and their bad debts would get deleted. Therefore, the FED wouldn't actually gain anything apart from a pat on the back from government.

However, as you can probably imagine, there is a lot of potential for abusing that system, especially if it's not tightly regulated. The possibility of perpetually increasing the debt level is one obvious loophole to inflate the money supply, even though the system could theoretically be deflationary. Even without inflation, the banking hierarchy easily becomes a privileged group that never loses. They either collect debt or collateral from their customers, while passing the debt write-offs up the food chain. What about corporations that borrow money, have a good time on the FED's (i.e.: savers') books, then go bust?


Bitcoin, bitches! (Borrowing a popular turn of phrase from Zero Hedge)


Two questions: pay who? And why bother? It's just a social contract in the minds of the people. While I strongly support fiscal responsibility for individuals, this is different. To help reduce the national debt, would you want to declare bankruptcy and donate your belongings to a bank, just so they can write off a tiny fraction of that 15 trillion?


No they don't. They're only human 

Perfect solution except for that little TIPS (Treasury Inflation Protected Securities) Bonds problem.

all the US government has to do is take control of money printing, buy back all the bonds and boom save $400 billion a year in interest. And then, this is a big one folks so hold on to your butts, our elected politicians would be liable for any inflation or deflation as they control the money supply. although I assume there would be a ridiculous period of inflation for awhile as $15T+fractional reserve entered the money supply. after that, however, we'd (as a world) actually be moving towards sound money again for the first time in hundreds of years.

the fed is such a scam to the point where it almost makes me want to get violent.

Transisto's point is spot on.

Inflation is taxation that is retroactive for the vast majority of people when it is done by purposely printing money.

e.g.

 If last week you earned $100 dollars and saved $10, then inflation goes up. The money you saved is being 'taxed' in a way. The money you thought you already earned, you didn't. It is a pay cut with the numbers staying the same.

Not that inflation is bad or evil because as resources dwindle inflation is a natural process. What is bad, is when one purposely causes inflation by printing money.

People with resources will counteract the Quantitative Easing (printing money) by moving to commodities, equities, etc... but the guy with a savings account and no time or money to 'invest' or 'trade' gets screwed.

Lets just try to stick with a natural inflation rate rather than impose one on the people.


My guess is the FED is deathly scared of increased interest rates, so they will print more to buy their own bonds. Why?  Because every 25 basis points increase, we owe $1 Trillion more in debt and we are already broke.

I fear we have already crossed the point of no return. Usually this is when people charge up their credit cards before they default and file bankruptcy.

Wonder what the 'new' dollar will look like in the future.

The above is a guess, it is entirely possible we will pay back the currently $15 Trillion now, or the projected $21 Trillion before any savings could possible be put on a downward spiral to pay it off.

But meh, the Aristocrats know what is best for you.

yada yada yada

http://austrianeconomics.wikia.com/wiki/Deflation

Well obviously they are right I mean just look at HDTVS, laptops, CD/DVD/BD players, smartphones, game consoles, internet bandwidth, video games, movies, etc.  Obviously nobody every buys them because the price is always going down. 

That's OK. The US dollar appears to have suddenly fallen against Bitcoin anyway. I kind of gave up when people started talking about EROEI and mysterious catalysts.


But we have to prevent prices from decreasing due to productivity based price deflation... because of some strange reason that Keynesians are never able to explain! We promise to delete the excess cash during periods of economic decline*.
* Government coffers and approved corporations excluded.

Sorry for being off-topic,