Topic: Deflatory nature of Bitcoin - the problem and a possible solution (Read 6351 times)

Deflation never worked well for normal currency's. Right now base on rather limited data it is hard to tell how would metacurrencys react to more excesive actions of larger groups with aim of deflation of them (if i am describing it in right way). Inflation even though look terible in long run might creat more natural environment for future meta-monetary markets.

Both reported as possible posting bots.

more like a transistor in this case, with BTC as Gate

I don't care what happens if I fail.  I won't be around to see it.

Is there communication through a diode?  There is.

Still for it to happen isn't a 2-way flow necessary for equilibrium? if BTC acts as a sink then there is no "Communication" for USD/CNY through BTC.
Since the topic is derailed anyway...
I will claim that the time dimension and for that matter neither the space is a continuum, rather discretum, so at most you will divide
by 5.39106(32) × 10−44.
Mathematically speaking though the equation of exchange is curiusly *not* described as a Partial differential Equation, for the non-linear and wavelike properties markets exhibit, so my take is that it is a simplified version of a more complex one.
Infinity is not a number, its a place
I think China play chess, carefully trying to corner US, while US plays poker bluffing all the way

It certainly won't break arbitrage; arbitrage takes advantage of temporal differences in exchange rates, and fixes that difference as quickly as the market will allow, taking into account all actual costs of exchange. The only way to "break" arbitrage is to find a way to nullify the existence of time in the equation, and to remove a fee from exchange -- in the absence of a time cost or a fee cost to exchange, you wind up dividing a part of the exchange equation by zero (literally). So a completely frictionless market is impossible, at least from our 3-dimensional perspective, unless a genius figures out how to divide by zero in a consistent way. This is not without precedent in mathematics. The concepts of zero, negatives, and then imaginary numbers all revolutionized parts of mathematics in their day, which we all take as common sense now. I'm not particularly optimistic about the dividing by zero bit, as I suspect it will really come down to "infinite sets" which already can be of different size, yet not... i.e. the set of all positive integers is infinite, yet can be considered larger than the set of all positive even integers, which is still infinite. But I digress.

It's hard to say for sure what they'd prefer: Our currencies are doing pretty much opposite things right now, yet neither is scrambling to reverse course. Our economists seem to think they can keep printing and fiddle with the numbers; theirs seem to be happy with whatever is going on also. It's possible that the players aren't all aware of all the implications of how this will play out, mathematically.

I see yes, it bypasses capital controls and "fixed" rates, But wouldn't the chinesse prefer a less appreciated CNY (export-wise)? but that maybe just a matter of circumstance, the point is they both US/China lose control.
But what if BTC acts as a "Sink"/Ground sucking up any USD and CNY which may well be the dominant case, wouldnt that break Arbitrage through BTC?

I'll have to poke around and see what I can find beyond conspiracy sites. Again, I don't doubt for a bit that there are plenty of fakes... I'd think that with the last 10 or 20 years of tech, it'd be really, really easy to spot now. If they were made 30+ years ago, they might've felt they could pull it off, but there's a half dozen inexpensive to moderately expensive ways to detect this now. Maybe that's what happened.


Arbitrage is exactly the cause of it. Because the USD is depreciating against the CNY so quickly -- 1000 USD worth of CNY in 2005 is worth $1435 now, by itself -- arbitrage, whether for this purpose or not, between USD and CNY via BTC, negates the differences, connecting them as a pair in a different way than the planners can control. Thus the USD depreciates a bit less, which also means the CNY appreciates a bit less, relative to each other. As world currencies are connected in this way, this is a good thing for the world as a whole, but I can understand why China might not want to allow this freely, at present.

a quick google: I think it hit the news around the time Soros decided to ditch gold, I guess he had advance warning and the news must be credible
http://www.exohuman.com/wordpress/2011/02/fake-gold-bars-sold-to-china/
Shouldnt arbitrage, especially auto-bots nullify this effect? I don't actually get what you mean here. Is there some "friction" between the triplet of USD-BTC-CNY, (that can be exploited? lol)
Maybe the Senate sees is as an alternative to gold, if they ever need to pin USD to something,
(lol can you imagine USD backed by BTC )
and chineese may not like the idea especially after they got in the trouble of sucking up the world's gold.

Source?? I guess I wouldn't be surprised -- at least, not surprised that there are fake gold bars in vaults. That's why we can't estimate the surface gold amount to more than a full degree of magnitude in precision (i.e. there may be x surface gold, or 10x surface gold; no one is sure.)

Anyway again, the threat -- if they see it -- is that BTC can be an equalizer between currencies with unequal debasement rates. Thus, our debasement of the USD, by connection via BTC exchange, has a (small but measurable) debasing effect on the CNY, or, looked at inversely, the strength of the CNY trickles to USD (in a small but measurable amount). We're both playing games with our currencies, but the effect of BTC in the mix is to the benefit of the USD, and the detriment of CNY, albeit small (since the BTC market is incredibly small vs. the market caps of USD and CNY).

I've wondered if the interesting and unexpected response in the Senate, and the reversal of China's position since November (when BTC was covered positively on state media) are related. Possibly they fully expected us to ban the whole thing, in which case it WOULD have been a neutral or good thing for China (the currency with the least trade friction is the more attractive currency for making your reserve currency; and China appears to have aspirations of making the CNY a challenger to the USD for other countries' reserve currency).

I think China is so invested in gold, and propably
A. sees bitcoin as a threat to it's gold reserves
B. Most likely thinks that since in the west there is no more gold it's propably a technological sleight of hand
to fuck them over

EDIT: Especially since US tried to send them fake goldbars

Excellent take. Yes, or put slightly differently, you're betting that compared to your saving/hoarding, you will lose less than the places you could have invested in. It's all relative. Either that's because you didn't have access to places which could have better utilized the money (giving a higher yield) or because you really are the most amazing human ever. It couldn't be zero, though, unless you were wrong. Your savings would appreciate against whatever others did. This means you MUST be already saving in the most non-depreciative asset.

Temporarily, Bitcoin is probably this. It's as close to it as you can get. It won't be forever; eventually you'll want to invest in specific implementations of blockchains, and other ideas. And already there are stocks that yield more that Bitcoin — some of them just out of pure speculation, but others because they really are using that money superbly.

When investing, don't forget to correct for the yield of the underlying asset. As in, investing in Alibaba or Baidu, if yielding a 150% gain YoY in RMB, is actually more in USD, because the USD is -3% roughly since 2005 (annually, not -3% total).

Edit: I rather doubt China considered it this way when they began cracking down on Bitcoin, but as the country with probably the highest actual appreciation of underlying currency value in the world, they have the most to lose economically (or really, the most advantage to give away, not anything being lost technically) by allowing the free flow that is permitted with Bitcoin.

Since the transaction is not atomic is there not a risk involved that scales with time? Where is that captured in the above definition?

I could ripost that hoarding/saving(not in a bank) then is nothing more that investing in yourself at 0% rate interest.

Wouldnt a rational player hedge the risk of his own single point of failure and pool-hoard/save with others like a savings bank?

Very, very good. Tweaked and added commentary.

And, indeed, hoarding and saving are the same. The common notion of saving in a mattress vs. saving in a bank is a conflation; a misunderstanding the difference between saving and investing. Saving is saving, investing is investing. Putting money in a bank where the contract permits them to loan and invest it, is investing -- in other humans, in the economy. This is good, and is better than simply saving, unless there is something wrong with the investment process (this is the problem!).

Right now, I can save USD, in a vault or a mattress perhaps, or even by letting it sit in BTC-e as USD: I don't think they're doing much investing with it. Really, most of it is sitting as Bitcoin, but BTC-e is absorbing the difference of appreciation as profit or loss. In fact, I frequently do this exact thing, but with RMB on BTCChina, because the CNY is appreciating against the USD at about 3% annually. This is one reason they are my primary exchange: When my funds are existing as fiat, I want to know they are in a healthy fiat.

Investing is great, too. I regularly invest in many things. BTC can't really be invested in, beyond simply saving as BTC, because Bitcoin functions, more than anything else, like a stock-commodity hybrid, and really, it is mostly a stock. You're investing in a technology, the blockchain-distributed-p2p-cryptocurrency system.

If Google was a purely supranational company with an open-source, tamper-proof, uncounterfeitable share issuance algorithm: with no regulations to prohibit such things we could pay each other in fractions of stock shares, and it would be much like Bitcoin, only our investment would also be an investment in everything else Google does, in addition to that trade mechanism.

Bitcoin, we are investing in the trade mechanism itself, and all the activities of all the humans and companies using Bitcoin. Everyone who benefits from a rise in "stock" price, that's who we invest in by buying and holding Bitcoin. In the future, I expect to be able to invest in more specific groups of humans by buying stocks valued in Bitcoin itself. That is what investing truly is, but we've come very far from being able to recognize it. Shorting of course is betting against them (or at least betting that they aren't as worthy of investment as their current trade price). Naked shorting is another day's commentary, but is very, very bad, for the same reason that money debasement is bad. Shorting Bitcoin, done properly and transparently, does help to stabilize the market, believe it or not; but the key is "properly and transparently". But really, exchanges have the same problem. We could be buying naked long positions. It's pretty obvious that at Gox, dollars are very often held as naked longs, and it's a wonder a run hasn't happened and destroyed them. Only the community's anti-state-intervention tendencies, the distance of the internet, and a little hopeful greed that the price will come true for them, has prevented this.

Since my train of thought has veered that direction, this is why a true, transparent p2p trade system MUST be created. I have been working on one for a while. The only other options are central or voluntary regulation; and people continuing to get burned. I don't like two of the three, and we're pretty far from any voluntary regulation concepts being the norm, though I do believe that is the future.

That's probably enough rambling for now...  

That agrees with my own personal definition of what money actually is.  I think money is the state of an unfinished transaction.

Money is an abstraction of barter.  You trade wealth you have for wealth you want, but the two halves of the trade don't have to happen at once, they can be spread across time and space, and with different people.

If you are holding money (saving, hoarding, whatever you want to call it), it means that you have given wealth to the world to use, but have not claimed wealth back to complete your trade.

The difference between saving and hoarding is the difference between understanding this and not understanding it.

"Squawkkk, stooge, stooge, stooge.  Squawkkk"  

The parrot only knows what the parrot sees and hears.

I feel I have to apologize for my little Hodling Parrot perched on my shoulder, seems I am not feeding him enough nuts

As we have said many times:  bring on your OURO ȣ alt coin and let's let the market decide.