Topic: Does bitcoin foster economic growth or stagnation? (Read 3003 times)

Re point 1, bitcoin replaces centralised entities like savings banks. So most definitely no.

And 2; greece is already a basket case with too much public debt. Savings banks of any kind will fail in greece because no one has any money/euros. Greece's economy is deflationary whether you use euros or bitcoins.

A stooge is a stooge, no matter which forum they are in. Bad manners? So sue me.

indebted yes not unrealistically just 150k capital for my home, you know like all insecure greeks
what brings me under? an upcoming 200k+(8k annual) taxation + 8% interest on the total. cause I don't see me finding that money... Can't escape that now can I?

So your take is No Banks at all, cool I like to hear more opinions.

That's not all living systems/subsystems. Just a handful of them.


I don't understand dots.

The answer is simple.
Banks=debt (fractional reserve blah blah blah) hence, no deflationary economy.
Debt HATES deflation.


Forgot to ask you. Are you personally indebted? I would assume yes!

I live in Greece, I managed to escape debt and now I have to live hell because everyone else including the state
decided they should indebt themselves to death. FUCK THAT! It's their decision, not mine!

It seems that the crux with most arguments can be reduced to these questions:
1.Are Savings Bank needed for an economy to grow?
2.Can Savings Bank operate in a deflationary economy? (with/without fractional reserve)

my take on those is
1. Most propably Yes
2. By experience in greece, No

lol Lloydie are you a lawyer or something? Does crossposting a quote without context actually reveals anything but bad manners?

In fact I talk about "stable" supply, not "rigid" or "predefined" supply.
1.5% medium increase per annum is "stable" compared with the US$ with a 10-20% increase of M1 per year or even the € with its 13% year.

In fact, the increase of the supply is self regulating: if the price is not high enough to cover the mining and refining costs the supply reduce and would stop if the market price go under the costs to operate the most profitable mine.


I use inflation for an increase in the supply of money (M1 mainly). This can easily be measured without ambiguity.
The increase on CPI or Price index is what common people call inflation. This depend on how you select the prices of good and services you measure and how you measure them. These naumbers are heavily manipulated with all shenanigans possible.

Change in money supply is undesirable because it redistribute purchasing power from the owners of the existing money to the creator of new money.
With gold it was not so bad, as there were limits on the production of new gold (the costs and limited quantity available to be mined at any price level).

I disagree on how you understand interest rates.
You understand interest rates would be right if there was no inflation or deflation and the value of the money woudl be stable.

When I, or anyone else, consider if investing in any business, I must evaluate the interest rate and the devaluation of the currency.
If I'm able to return the interest rate but I'm not able to repay the capital costs, I should not invest in it.
If I buy a truck to move stuff around, I must be able to pay pack the money invested after paying back all variable costs (my salary, the fuel, the interests on the loans, etc.) but not on nominal terms.
At least I must be able to buy back another truck before the end of the previous truck life.
If I spend 100K$ for a truck and, after 5 years I get back 100K$, the truck best to cost me 100K and not 120K$ or I'm in a loss and can nopt continue my business.

The point is,
with a inflating currency, the prices will go up long term and I will must foresee I need to get 120K$ if I invest 100K$ now to keep the same purchasing power and replace the capital consumed.
with a deflating currency, the prices go down long term and if I foresee to get 100K$ back, probably the new truck will cost me 80K$ and I will get an higher profit.



As I wrote, the return must exceed inflation plus the real interest rate (I must pay back more than what I loaned in real term, not in nominal terms).
This is because I would not find a loan if there are no lenders to lend me. And the lenders need to being paid back principal (with the same purchasing power) plus interests (at market rates) to have a reason to lend.
So, if I take a loan, I will be asked an interest rate covering inflation and a profit. If the lenders foresee a lower inflation than the real one, he lose purchasing power and will be unable to lend me the same purchasing power later on. And if he doesn't receive a profit he have no incentive to not spend his money on something now instead of later on.


And here you are wrong again:
there are no "idle" resources. There are savings and investments.
Savings is what you need just in case things do not go as you foresaw.
If I keep no savings (because I have invested all of them), if something unforeseen happen I will be forced to liquidate my investment or take loans or sell something I use.
Saving is always keeping two gallons of "idle" gasoline in your car's tank. Are they "wasted" or are they "insurance"?

Sure, whatever you say mr central bank stooge. Disagree or agree, who can say? I know where I stand. Now the audience knows where you stand.

Ultimately, bitcoin is anathema to centralisation and central banks. Can we really have the same intentions? I don't think so.

cant blame me for trying to feed your paranoia...
You seem unable to accept that one can start with the same realizations as you, have the same intentions as you and yet disagree on the course of action.

Lungs, Blood vessels,Brain, Intestines, Trees.
...

Deflation is terrible.... If you have debt denominated in that currency.  Otherwise, no problem.  The only victims of deflationary death spirals are debtors.  Everyone else sees a drop in prices and wages eventually follow, but cheaper goods and services balance it.

Read Adam Smith.  He describes historical inflationary and deflationary periods that occurred during the time of metal based money.

Deflation isn't the enemy, but high debt loads and central planning can make it a menace.

No, this is not true. A business can exceed the inflation rate and still be economically unproductive.

I present to you China. The economy produces millions of empty apartments that appreciate in value every year by more than double the rate of inflation. 

Rich people own these apartments and prefer to keep them empty so as not to devalue them, plus the fact that most of them are just shells without internal walls and fittings.

Debt is incurred by ordinary people to hop onto the property ladder. This pushes up asset prices further. Inequality in society worsens.

Meanwhile, poor people live in the buildings' basements, in cramped flats or ghettos. Is the Chinese economy really productive? Not in my view.

2K:  Above ground gold supplies have vastly increased in the 20th century and continue to increase at something like 1.5% percent per year.

Due to horrible misuse of the word inflation on these forums it is hard to tell what people actually mean by inflation, do you mean change in value or change in supply.  Inflation has always meant a change in value but it's a popular fallacy here to call any change in supply, even one which is done to keep money constant in value an inflation event.  It is unfortunate that you will need to be more precise because of this.

I'm glad to see that you have a good grasp of business financing, and I can certainly agree that any change in money value introduces distortions into this financing and this is undesirable.  

With regard to what factors keep a business afloat and which go under the one to consider is the interest rate.

If your business activity can return 3% per year nominal, but interest rates are 5% then your business can not pay back it's loans OR if the business had no debt the owner of the business should have liquidated the business assets and put the money in a bank.  I will frequently get morons saying that being 'self financing' and not having debt makes interest rates irreverent, but interest rates are a universal signal for all investors, thouse making new investments and thouse continuing to RE-invest in their existing businesses.  The rate of inflation or deflation doesn't need to be considered in this calculation because your always returning to money at the end and your just trying to maximize your profits (or minimize losses) irregardless of what money is doing.

If your concerned about 'mal-investment' the notion that interest rates may be encouraging activity which is not productive in a REAL sense, then you would look at rate of return vs inflation/deflation.  If returns exceed inflation then the business is actually being productive.

But business motivation is based on interest not inflation so we would only expect mal-investment when interest rates are lower then inflation.  This would allow a gap in which a business could be returning more then interest rates but less then inflation and would be judged to be productive against interest rates but would be unproductive against inflation.  Currently interest rates are lower then inflation buy just a bit as both are nearly zero.  But we must also consider that their are lots of idle resources right now (human, infrastructure, machinery etc) and idle resources decay at an appreciable rate, probably in excess of 1-2% per year.   We can't put thouse resources in a vault and get them back later if they are not used now.  We shouldn't seriously worry about mal-investment until were seeing a gap of several points between interest and inflation AND we have a 'hot' economy operating near full potential.

Ideally what I think we want is for both inflation AND interest rates to be brought to zero, this would present no window for mal-investment while allowing the maximum rate of truly productive business activity to be conducted as any activity with a net return would be profitable.

A currency with stable supply (like gold or bitcoin) allow a better economic calculation than a currency like $ or € that is continually inflating.
The problem is, a unit of accounting is supposed to be a stable, fixed, unit. But an inflating currency is a shrinking unit of account.
This make accounting always more meaningless.
If I account for capital expenditure (say a big milling machine for my factory, that will be used up in ten years) I must foresee the time it  need to pay back the capital invested plus interests and how much time I need to turn a decent profit.

If the currency is stable, I can impute 10% depreciation every year for ten year and it's done. With an inflating currency, I must impute the same 10% but I must foresee how much the currency will devalue (and the price of the machine will increase) to end saving enough money to buy the machine back when it is time to substitute it. This is order of magnitude more difficult, because if I foresee a number too high (to be safe), I will end to sell my products with a price too high, so I could be trick to not produce because I could not make a profit. Or, if i foresee a price too low, I will sell too low and will end without the money needed to buy the next machine when the first need to be scrapped. Both ways, I end with lower profits and probably end producing what I'm producing.

In a free market, competing firms have a margin of error in their economic calculations. Some will have it right enough to stay and other will fail.

An inflating currency will make business appear viable when they are not and a deflating currency will make business appear not viable when they are.
The difference is inflating will cause to waste resources in a losing business where deflating will cause to save resources surplus more.
If something wrong happen unexpectedly in a inflating environment the business will go bust a lot easier than in a deflating environment where conditions force you to pay back faster the capital.

That's totally wrong, there are elephants and whales that have a small surface/volume ratio
and there are mice with a much bigger ratio.




Pi (fractalish in itself) is always bigger than itself with one less decimal (3.141 is bigger than 3.14, both are still pi ) but always smaller than 3.15
It has a limit.

Out money supply is limitless.

See the difference?

All living systems/subsystems try to maximize their interface with their environment by using fractal structures, as they provide surface/volume ratio, I don't see why a human society is different,

This is why money supply in FIAT world needs to be adjusted and is not constant


True but the point from human perspective is to keep the metric stable localy, bitcoin is bringing in (local) global information noise,
It's like using global variables than local.
Imagine if you were living in an expanding surface, and you had to constantly adjust your meter to account for the total surface,even though localy nothing really changed

Exactly!!!! 

I am a hodler!!!  
I will only spend when I please, not when a bank or whoever else says that I should!



I would bet that the economy is like that!
The question is, why do I need more money to reflect that?
Why is not a constant amount of money adequate?
Even if the above is necessary, why should it be done via debt?

That's why bitcoin has divisibility, to show us all the fine granularity.

At least you are not a Hodling Parrot

What if economy is like a coastline, trying to grow into a fractal dimension, keeping a constant measure would make it look as nothing changed, only by adding more resolution to your metric you would be able to measure the true size, and growth.

Bitcoin has liquidity. Yet it doesn't have inflation. So your logic does not hold. Liquidity can be provided via divisibility.

Expecting inflation for free is expecting subsidisation. I.e. rich people enjoy ever inflating asset prices is pure subsidisation from society. Such a sick system.

People must remember that money has LIQUIDITY and that has value independent of the underlying change in value.  Everyone who holds money is enjoying liquidity and inflation is what you pay for that.  Expecting liquidity for free is expecting to be subsidized by the rest of society.

When talking about economic growth or stagnation, money is a measure like a meter or a scale.
You add the total number of meters or kilos and you have the total size of the economy.
Problem is, if your print money, you all of a sudden are able to say that my economy amounts to more
money, so, TADAAAAA, my economy got bigger.
What is never taken into account though is the buying power of that money, which nowadays is getting smaller and smaller.
In the end, we fool ourselves that we have economic growth.

Now, imagine the world using 21 mil bitcoins as its sole currency. If you tried to measure the economy in money,
there would apparently never ever exist economic growth.
BUT, if this year the economy consisted of 2 cars, 2 buses, 2 trucks and 1 spaceship and the next year it consisted
of double that, wouldn't that be growth? Wouldn't that growth be shared by all bitcoin holders?

CONCLUSION: the amount of money DOESN'T reflect value.


PS: I'm not an economist. Just thinking out loud. Flame me all you want.  

you are not looking... there are other dimensions than space.

I'm not convinced a grade school teacher should be talking about space colonization and dimensional travel.

Oh but the universe is vast...

I will tell you a secret now...

When you reach all known boundaries, what do you do to continue growing?
... You break into a new dimension ....

need proof? you are looking at it.

Fact: The world's population is growing.

Fact: The Earth's resources are finite.

Fact: The worlds central banks were on the cusp of solving this problem once and for all through brilliant monetary policy when some jerk invented Bitcoin and obliterated this dearest hope.  Now were all doomed; thanks a lot Satoshi. 

Actually growth with boundary is suicide, in nature you start dying when you stop growing. That's what make people to allways look for new markets, new frontiers, new scapes

Could someone explain to me how the USD, an inflationary currency, is supposed to be successful when it punishes those who hang onto it?

The main assumption about inflationary currency is that the economy must grow, that is wrong. Like any living things, once reached certain level of maturity, it can't grow forever, especially when the available resources on the planet are limited, growth without boundary is suicide

BTW, in an inflationary model, the growth resulted in more and more wealth concentrated to a few people, because the new money is issued by a centralized organization, and all the organizations around this organization will get the majority of the money. So it seems the economy is growing, but in reality the majority of people's economy condition is worsening due to inflation eating up their wealth day by day

Why there is a very easy way to unravel them: Bankrupcy? and start over?
I agree the conversation is derailed but people cherry pick my arguments instead of answering the real question:
Is there any experience of an actually deflatory economy, that prospered? other that hypothetical estimations of how it would work?

Maybe some day you will understand that it takes time for the financial world to unravel very complex worthless financial products. Furthermore, I consider the continuation of this discussion as pointless, because you keep throwing in all kinds of historic financial situations, which have nothing to do with the deflationary nature of Bitcoin.

Its not about prices, they rise mainly because of increasing Taxation,

BTW Tried to find an aggregate but here it is
http://rwer.files.wordpress.com/2012/10/private-debt-x-countries-linear5.png
And I place the The crisis start at 2008

"A deflationary spiral?" Really? Aren't you confusing rising prices with deflation here?

Edit: BTW I don't think it is fruitful to deny facts, of which this is just one example:
http://abehnisch.com/wp-content/uploads/2011/04/eu-public-debt-gdp-2010.png

*On Average*, local variations apply
untrue, had just the weakest economy, and got in the crosshair of speculators, sure kill by the way.
"The avalanche has begun, it's to late for the pebbles to vote" - Kosh
Greece doesnot hold the excellence in corruption as most would like to believe, and sleep well at night.
If so what's the problem in Spain,Italy,Ireland and Cyprus?
Unemployment rose After the crisis while greece was traped in a deflationary spiral, much like Bitcoin is bound to induce

And you lash at the current economic status? So all the plebs got to do is switch masters, I don't see why they should, for the Promise of a Deflationary economy?
Because population grows, maybe if we drop a few nukes here and there, there will not be a need for growth for a while...

Facts:
1. Greece uses the Euro, which is (almost by definition) an inflationary currency, just like the Dollar.
2. Greece made more debts than any other country in the EU.
3. Greece financial tragedy got worse because of the world wide financial crisis, which started in the USA.
4. Greece's bankruptcy was caused by governmental corruption in combination with 2 and 3.

IOW your claim that Greece suffered from a deflationary currency causing over 50% youth unemployment, is ridiculous.

BTC has no impact whatsoever on economic growth or stagnation at the current stage it is in. The market just isn't large enough.

In a few years? Maybe, we'll see

Essentially yes. We are the 0.1%. It's our reward for getting in early and helping to spread bitcoin to the rest of the world.

And, again, why does the economy need to grow? For how long? At what point is it enough?

that and single currency.

No because the economy will/must grow, unless your plan is to straightjack the global economy at something less that 21M BTC capitalization forever.
A new paradigm of lazy lords living off diminishing fractions of their stash, sure nobody thought it before. So I guess your paradigm is only for the few chosen then, the new Bitcoin Aristocracy, or for everyone? because food will not grow itself.
Why grow? Look at Nature what doesnt grow dies, Population will grow, if economy doesn't grow in pace people will be worse off, you want your children to have the same or better standard of living right?
If things turn your way, the Bitcoin generation will be the most hated of all.


You do realise that the metalic coins have been systematicaly debased right? So there was actually *gasp* Inflation even then.
So please present those facts and mathematical models.
The most perfect economy and deflationary mind you that I heard of in History were the Feuds, I wonder why that word carries such a negative meaning hmmm?

You do realise Gold and Silver have been used for centuries before paper money ever came into existence right? Also that paper money was originally receipts/IOU's for a *gasp* deflationary currency known as Gold/Silver? Your argument is pretty stupid, unfortunately for you I have historical facts and mathematics on my side so it doesn't matter how much people trash talk deflationary currencies it still isn't going to make the slightest bit of difference to how well any deflationary economy does.

Go and peddle your religion elsewhere.

It's only deflationary in the short term. Once saturation is reached, it will be neither deflationary nor inflationary. It will be stable.

But we won't have to wait that long. People are already buying cars and houses with bitcoin. I personally plan to start spendling once it hits 10k. The great thing about a (currently) deflationary currency is that you can spend it and still increase your net value. It really is a new paradigm.

*edit* also, why does the economy need to grow? nobody has answered that part of the equation yet

Are you suggesting that youth unemployment of over 50% in Greece is caused by deflationary currency?

Experience counts as Knowledge? or just your Flights of Fancy, Wishfull Thinking Models?
Tell me have YOU *any* EXPERIENCE in a deflative economy?

Yes I see it every day in GREECE, youth unemployment over 50% *great* system!

This statement has been repeated a million times and a million times it's been wrong, more and more businesses are springing up that accept Bitcoin and the idea of hoarding or buy and hold only realistically applies to speculators who are holding the currency long term either as a store of value or in order to make some profit. In the end the rest of us are saving and there's absolutely nothing wrong with that, eventually people will need to sell in order to make money and then they'll spend it on whatever they like.

I'm begging you spammers now, please go and read previous posts because this has been argued to death and people who attack deflationary currencies have clearly shown to me they have absolutely no knowledge of how they work.

You are treating Bitcoin like it's a standalone economy/currency. If anything it's there to compliment the dollar, euro, yn, or whatever. It's never going to replace these currencies worldwide, like some of the paranoid libertarians here like to preach. But it's a great alternative.

So yes, BTC's value compared to other currencies rises, but you could also say that about the value of a nice house in a growing part of town, or any other investment. The difference is you can't trade 0.3 of your house for an Xbox.

Yes, this is how bubbles form, and it's also how they pop. Just try not to put all eggs in one basket.

Inflation (resulting in higher prices) encourages debt, for they will be 'less of a burden' in the future. Deflation does the opposite, which is a great thing; the sooner you pay your debts the better. See how that works?

Could someone explain to me how bitcoin, a deflationary currency, is supposed to be successful when it rewards those who hang on it it? A currency like that would inherently lead me to believe that no inroads would be made in the future in regards to it's development because who wants to build bitcoin ATMs when not enough people are spending btc or accept bitcoin as a payment if there aren't enough spenders? While fiat currency has many many flaws, it spurs spending. You wouldn't want to keep your fiat in cold storage somewhere under that mattress of yours when you know it would be worth less next year!

You'd go out and spend it on something hoping to retain that value! By my understanding, this is the opposite for bitcoin. We've all heard the phrase "BUY AND HOLD"--is this literally what people will constantly do in the future with bitcoin? How will anything develop if there's no demand to spend in the short term?