I dislike the analogy of BitCoin mining to Gold mining.
There is one huge difference between the two:
With Gold the ease/difficulty of uncovering does not adjust according to the amount of human effort invested in attempting to find it, whereas BitCoin's "difficulty" is dependant on the amount of people attempting to mine it.
For example. If there were only 3 people in the network, they would each find it easier to earn BitCoins than 3,000 people in the network.
Topic: Deflationary currency? Really? - page 2. (Read 8703 times)
I have a very hard time imagining that the amount of Bitcoins that people simply lose will by anything more than a negligible amount
And even if people do lose them, the amount lost per year will trend towards zero far faster than the total supply of Bitcoin will trends toward zero. No matter the length of time they will not reach zero.
And even if people do lose them, the amount lost per year will trend towards zero far faster than the total supply of Bitcoin will trends toward zero. No matter the length of time they will not reach zero.
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Quote from: Lithium on Today at 04:39 pm
The Bitcoin "monetary base" (number of outstanding Bitcoins) is deflationary in the long term and their supply will, given enough time, approach 0. This is because once a wallet is lost the Bitcoins associated with it are no longer transferable and effectively forever removed from the Bitcoin supply. This is a terrible flaw in the Bitcoin paradigm as it currently implemented.
The Bitcoin "monetary base" (number of outstanding Bitcoins) is deflationary in the long term and their supply will, given enough time, approach 0. This is because once a wallet is lost the Bitcoins associated with it are no longer transferable and effectively forever removed from the Bitcoin supply. This is a terrible flaw in the Bitcoin paradigm as it currently implemented.
What? The total number of Bitcoins will never decrease, but people will lose the means to access these coins. However, the rate at which access is lost will be inversely proportional to value. You have more of an incentive to protect your wallet when Bitcoins are worth $10 than when they are worth $1.
You are correct. What I intended to say is that: The supply of Bitcoins will, given enough time, approach 0. It doesn't matter how many there actually are as there could be 100 million Bitcoins but if people can only use 10 million of them there is in effect only 10 million in existence. People will get much better at protecting their coins and loss will be inverse to their value as you say but that will not stop the supply of coins from reaching 0 eventually.
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The gold supply is not in deflation and likely never has been for any significant period in history. Total supplies of gold have increased every year since gold has been considered valuable.
The gold supply is not in deflation and likely never has been for any significant period in history. Total supplies of gold have increased every year since gold has been considered valuable.
Really? Are you saying that there is an infinite amount of gold that we can extract from the planet? Gold is a soft metal, and wears easily. Are you saying that given a finite supply of gold, and that a coin loses some gold atoms every time it is touched, that Bitcoins are not the same as gold in this regard?
No, I don't claim that there is an infinite amount of gold, it is clearly a finite resource; however, since people have mined it faster than it is consumed/lost the supply has been increasing. This trend is likely to continue very far into the future until all economically recoverable gold is removed from the Earth's crust. New Bitcoin supply on the other hand will cease in a relatively short time span leading to loss and supply deflation relatively quickly.
So in your world what do you do to consume things that is different from division and distribution?
Sorry, I assumed your reply had some relevance to my initial message. 
The Bitcoin "monetary base" (number of outstanding Bitcoins) is deflationary in the long term and their supply will, given enough time, approach 0. This is because once a wallet is lost the Bitcoins associated with it are no longer transferable and effectively forever removed from the Bitcoin supply. This is a terrible flaw in the Bitcoin paradigm as it currently implemented.
What? The total number of Bitcoins will never decrease, but people will lose the means to access these coins. However, the rate at which access is lost will be inversely proportional to value. You have more of an incentive to protect your wallet when Bitcoins are worth $10 than when they are worth $1.
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The gold supply is not in deflation and likely never has been for any significant period in history. Total supplies of gold have increased every year since gold has been considered valuable.
Really? Are you saying that there is an infinite amount of gold that we can extract from the planet? Gold is a soft metal, and wears easily. Are you saying that given a finite supply of gold, and that a coin loses some gold atoms every time it is touched, that Bitcoins are not the same as gold in this regard?
Quote from: BitterTea
I've seen this term used more and more to describe Bitcoin, and I really don't think it fits.
The supply of Bitcoins is inflating, though the rate of inflation is decreasing. Once ~21 million coins have been created, it is true that the currency will only experience monetary deflation.
The supply of Bitcoins is inflating, though the rate of inflation is decreasing. Once ~21 million coins have been created, it is true that the currency will only experience monetary deflation.
The Bitcoin "monetary base" (number of outstanding Bitcoins) is deflationary in the long term and their supply will, given enough time, approach 0. This is because once a wallet is lost the Bitcoins associated with it are no longer transferable and effectively forever removed from the Bitcoin supply. This is a terrible flaw in the Bitcoin paradigm as it currently implemented.
Quote from: BitterTea
However, gold is deflationary in exactly the same way. The supply of gold in the ground is finite, and as the easy gold is found and mined, the cost of mining the same amount of gold increases. The circulated supply of gold also deflates over time, due to natural processes causing minute amounts of gold to separate from the coin or bar.
Yet, does anyone refer to gold as a "deflationary currency"?
Yet, does anyone refer to gold as a "deflationary currency"?
The gold supply is not in deflation and likely never has been for any significant period in history. Total supplies of gold have increased every year since gold has been considered valuable.
Division and distribution is the same as consumption. They are absolutely equivalent.
I guess we live in different worlds, then. In mine you can't eat the cake and have it.So in your world what do you do to consume things that is different from division and distribution?
Division and distribution is the same as consumption. They are absolutely equivalent.
I guess we live in different worlds, then. In mine you can't eat the cake and have it.
Nothing I said was the least bit Keynesian. But biflation does have meaning. It tells us that there is not one unified market, just like you said. There are artificial barriers separating monetary tiers, and this makes measurement of any kind of "on net" metric impossible.
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With inflation you should buy what you need early, but that doesn't mean you should consume it.
Division and distribution is the same as consumption. They are absolutely equivalent.
This applies to everything from raw materials, refined commodities, manufactured goods, and obviously services.
So, why would a 'deflationary currency' be any better than an 'inflationary currency'? An 'inflationary currency' encourages consumption because the longer you hang onto it the less stuff you can buy with it, in this way it also discourages resource efficiency.
Neither model encourages or discourages consumption, it just shifts the best way to preserve wealth. With inflation you should buy what you need early, but that doesn't mean you should consume it. Because it will be more valueable tomorrow than it is today, it makes just as much sense to delay consumption as it would with a deflationary model.
Inflation in the monetary sense is a term that lost all meaning with the advent of tiered money. Now we can have both inflation and deflation at the same time. The price of paper instruments (mortgages, derivatives) goes down, while the price of physical goods (food, energy) goes up. Bankers call this deflation. Everyone else calls it inflation.
To answer the original question, yes, many people will argue that a gold standard is 'deflationary'. It's ridiculous, of course. And it belies the extent to which wealth confiscation has become an acceptable part of American culture. Any monetary standard that doesn't automatically enable the confiscation of productivity growth through technical advancement is considered 'deflationary' and therefore bad.
When, in reality, deflation just means cheaper goods and fewer jobs means more free time and the only real problem is the concentration of wealth created by, wait for it, monetary fraud and manipulation in the name of wealth redistribution.
To answer the original question, yes, many people will argue that a gold standard is 'deflationary'. It's ridiculous, of course. And it belies the extent to which wealth confiscation has become an acceptable part of American culture. Any monetary standard that doesn't automatically enable the confiscation of productivity growth through technical advancement is considered 'deflationary' and therefore bad.
When, in reality, deflation just means cheaper goods and fewer jobs means more free time and the only real problem is the concentration of wealth created by, wait for it, monetary fraud and manipulation in the name of wealth redistribution.
"Disinflationary" would be a more fitting adjective to describe the Bitcoin model.
http://en.wikipedia.org/wiki/Disinflation
If there is disinflation there is still inflation, only less. Bitcoin leads to the opposite of inflation, which is deflation (provided there is economic growth and the population stays the same or increases).http://en.wikipedia.org/wiki/Disinflation
Resource usage not so much. It is limited by available materials and the energy from the sun. It would be stupid to bet on exponentially increasing amounts of for example copper, so don't. Prices will make sure most people won't.
Mine asteroids.
"Disinflationary" would be a more fitting adjective to describe the Bitcoin model.
http://en.wikipedia.org/wiki/Disinflation
If there is disinflation there is still inflation, only less. Bitcoin leads to the opposite of inflation, which is deflation (provided there is economic growth and the population stays the same or increases). http://en.wikipedia.org/wiki/Disinflation
You do need energy. Only right now the amount of energy that is takes to extract energy resources is higher than it has ever been in our history.
This is significant. Especially if you disagree with this statement, I highly recommend watching this series of videos - "The greatest shortcoming of the human race is our inability to understand the exponential function".
Population growth is a serious long term problem.
Resource usage not so much. It is limited by available materials and the energy from the sun. It would be stupid to bet on exponentially increasing amounts of for example copper, so don't. Prices will make sure most people won't.
Economic growth is a good thing, not a problem. It will eventually slow, but having run out of new ideas to discover and new things to invent is quite an accomplishment and a pretty nice problem to have.
"Disinflationary" would be a more fitting adjective to describe the Bitcoin model.
http://en.wikipedia.org/wiki/Disinflation
http://en.wikipedia.org/wiki/Disinflation
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Disinflation is a decrease in the rate of inflation
You do need energy. Only right now the amount of energy that is takes to extract energy resources is higher than it has ever been in our history.
This is significant. Especially if you disagree with this statement, I highly recommend watching this series of videos - "The greatest shortcoming of the human race is our inability to understand the exponential function".
The money supply is not expanded by printing money, but by issuing credit. This is what the Fed does when it does Quantitative Easing, it issues credit.
Suppose they scrap the printing presses and then go on a Zimbabwe-style credit issuing binge. Now a banana costs a billion dollars. You feel like having a banana and go to the nearest ATM and try to withdraw a few billion dollars. See the problem?
This has been going on for a long time... And we have recycled only a tiny portion of the same stuff, mostly it was all just wasted, and so we have the problem that we have now.
Few things are really wasted unrecoverably. In the end it's all atoms and pretty much anything can be recycled if the need arises. You just need energy.
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