Inflation and Deflation of Price and Money Supply - page 35.

vansy1

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Quote from: thefiniteidea on February 02, 2013, 05:57:48 PM

An area dedicated to discussing the differences of these two terms and the theories supporting them.

I'm looking forward to an in-depth discussion on the subject! I've noticed that confusion between the two seems to come up quite a bit on the forum, and thought it may be reasonable to dedicate a thread on the matter.

Pulled from a discussion in Wall Observer

Price-Deflation is what you are used to hearing about in Bitcoin. That term is used to describe the prices of goods/services as they decrease, because the value of Bitcoin goes up.

Price-Inflation is the opposite. When prices of goods/services increase because the value of Bitcoin goes down.

So, when dealing with Price-Inflation or Deflation, there is an inverse relationship of price and value, in regard to goods/services and Bitcoin.

Example: As the Bitcoin price goes from $10 to $20, the prices of goods/services goes down from 20BTC to 10BTC. As the Bitcoin price goes from $20 to $10, the prices of goods/services goes from 10BTC to 20BTC!

Why does the price of Bitcoin go up and down? The price of BTC goes up and down based on the exchange rate, or market price, which is set by buyers and sellers, or traders. They directly trade the Bitcoin currency with all sorts of other currency, and even some with gold; the most popular being the USD (US dollar). They set the price when executing orders to buy or sell. I will get into the actual reason of why the price fluctuates in the last section.

Now that we've gone over PRICE Inflation and Deflation (which honestly, to me, is a term made popular by Keynesian's to hide the real facts, as price inflation/deflation is simply the market exchange rate, reflective of the money supply into a currency from itself and other currencies), let's go over the REAL inflation/deflation of a currency (otherwise known by many as Monetary Inflation).

MoneySupply-Inflation is when the value of Bitcoin decreases when the total supply of Bitcoin increases. In our current state, this is at a generation rate of 25 BTC every 10 minutes.

MoneySupply-Deflation will essentially never occur. It is when the value of Bitcoin increases when the total supply of Bitcoin decreases. This may happen, say, when someone loses their private key and all the BTC associated with it are lost. This effectively "makes the rest of us richer". That being said, there is a SET DECREASE in the generation rate of BTC, so you have sort of a "deflationary effect" in the value, as long as more exchange occurs for BTC at a rate which is faster than that set generation rate.

When all 21 million coins are produced, the MoneySupply will be neutral, and the value will continue to increase (prices will decrease, consequently), as long as people continue to exchange in BTC.

This leads me to the last section.

What determines the PRICE of Bitcoin? The VALUE of Bitcoin at a particular moment.

What determines the VALUE of Bitcoin? The SUPPLY and DEMAND of Bitcoin in the economy.

What determines the SUPPLY of Bitcoin? Currently, the MoneySupply-Inflation rate of 25 BTC every 10 minutes, and traders willing to SELL Bitcoin to BUYERS in exchange for other supplies of money (currencies).

What determines the DEMAND of Bitcoin? Traders willing to BUY Bitcoin from SELLERS in exchange for other currencies.

Therefore: BUYERS, SELLERS, and MONEYSUPPLY-INFLATION (miners) determine the VALUE of Bitcoin, which determines the PRICE of BTC as BUYERS and SELLERS trade based on that VALUE (or supply and demand) of Bitcoin.

We don't exactly know the totality of the supply and demand. Sure, we could try and aggregate data from all the exchanges, but we will never be accurate as there are exchanges which can not be accounted for (OTC). The cool thing is that we DO know the MoneySupply rate, and we DO know the exchange rate. From this, we can determine a real value of Bitcoin when simply multiplying the two factors; a sort of inflation-adjusted view of the currency.

Effectively, the quantitative analysis of supply and demand is really what the currency exchange traders attempt to accurately determine which is conveyed through buying and selling of Bitcoin, setting a VALUE via the PRICED exchange rate of the currency. On a side note, most of the big Market Makers (FX Traders) use this price movement as a way to make a profitable living, as well. Especially when price fluctuations are a consequence of hype or fear (bubbles, cliffs), not factual supply/demand data, and are wildly out of the real price range.

Thus, if you analyze the proper macroeconomic data in an attempt to forecast future DEMAND for more Bitcoin (price increase), you will realize some very interesting things, and have a more accurate picture of where the price is going...

Happy trading! Wink

Thank you so much for the informations that you've given to us man.

dawnpot

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Inflation occurs when the price of goods and services rise, while deflation occurs when those prices decrease. The balance between the two economic conditions is delicate, and an economy can quickly swing from one situation to the other.

Inflation is caused when goods and services are in high demand, creating a drop in availability. Consumers are willing to pay more for the items they want, causing manufacturers and service providers to charge more whereas deflation occurs when too many goods are available or when there is not enough money circulating to purchase those goods. For instance, if a particular type of car becomes highly popular, other manufacturers start to make a similar vehicle to compete. Soon, car companies have more of that vehicle style than they can sell, so they must drop the price to sell the cars.

tradesup

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It just a matter of belief. People will buy into something they believe in, whether it works or not is secondary, if they think it has value, or future value, then that is all they care about, and that stems from their beliefs.

So if you want to see a change, don't change the money in your wallet, change your beliefs.

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Quote from: FaucetRank.com on December 13, 2016, 10:18:08 AM

Quote

Example: As the Bitcoin price goes from $10 to $20, the prices of goods/services goes down from 20BTC to 10BTC. As the Bitcoin price goes from $20 to $10, the prices of goods/services goes from 10BTC to 20BTC!

I'm not agree with your lines OP because if Bitcoin price goes up from $10 to $20 the prices of goods/services still remains same but the quantity of Bitcoins goes down because of increase in Bitcoin price.

Example: One Bitcoin faucet script costs $25 and current Bitcoin Price is also $25 (assuming) thus I pay BTC1 for that script but very next day Bitcoin price goes up by $1 and now I pay BTC0.96153846 Bitcoin for the same script. so here only quantity of BTC changes not the price of goods/services.

I think you two said the same argument, but in different forms. As I understood both are right.
The goods price won't change, just the amount of necessary bitcoins to buy it, because the product cost is calculated based in dollars, bitcoin is a secondary currency in this case. Bitcoin is very changeable yet, until the price stable the best deal is to hold only.

FaucetRank.com

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Quote

Example: As the Bitcoin price goes from $10 to $20, the prices of goods/services goes down from 20BTC to 10BTC. As the Bitcoin price goes from $20 to $10, the prices of goods/services goes from 10BTC to 20BTC!

I'm not agree with your lines OP because if Bitcoin price goes up from $10 to $20 the prices of goods/services still remains same but the quantity of Bitcoins goes down because of increase in Bitcoin price.

Example: One Bitcoin faucet script costs $25 and current Bitcoin Price is also $25 (assuming) thus I pay BTC1 for that script but very next day Bitcoin price goes up by $1 and now I pay BTC0.96153846 Bitcoin for the same script. so here only quantity of BTC changes not the price of goods/services.

jvc12

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Inflation this is the constant increase in price of goods services in an economic over times at this time money looses it buying or purchasing power at this time more unit of currency goes out to purchasing small unit goods.

Deflation this is the constant decrease in prices of goods and services in an economic over time, at this time money gain it buying or purchasing power at this time less unit of currency goes out for it purchasing more goods and services.

Multipulty

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this is a consistent increase in the price of goods and services over time. During inflationary times, money loses its "buying" or "purchasing" power, and it takes more units of currency to purchase the same units of goods or services. Over time, inflation lowers the value of each unit of currency.

deflation is consistent decrease in the price of goods and services over time. During deflationary times, money increases in its "buying" or "purchasing" power, and it takes less units of currency to purchase the same units of goods or services. Over time, deflation increases the value of each unit of currency.

STT

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Its dangerous to just disregard details in a system in favour of a hoped for positive outcome. The banks incurs a debt also when they issue a mortgage. I get what you are referring to but there is some kind of balance there, not just free money. All debts the bank allows for can be called on, typically the bank will sell on the debt it issues to a wider series of investors

If the bank just kept on issuing debt and the people it gives the money to do not repay then losses are placed on all involved. Customers, employees, investors, creditors and also possibly just the normal public can lose money badly controlled by that bank. Its very likely the bank ensures its own survival by being quite cautious in their issuance of this money, they dont usually act like its free though we know banks have and do act badly on occasion. There are also regulators and in the west now its all centred around a national bank which underpins government finance also it seems (thats dangerous, apt to fail imo)

Quote

How can a digital simulation of money become more illusory than it already is? Simulated money will always be an illusion, but because it is a simulation we do not have to accept the 'rules' coded into it as if they were the Ten Commandments. Instead, we can select the relevant sections of source code, hit the delete button, and start over.

The digital currency is a representation not really a simulation, people can lose value when its conducted badly. I think of it more like a map, its not set out to be a lie or one persons idea, its a transmission system of values. In fact if the 'rules' laid out are badly placed, people will likely lose in a real way despite it not containing actual physical goods

iamnotback

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Quote from: HugoStone on November 16, 2016, 12:59:32 PM

If this sounds like madness to you then consider what happens when you walk into a bank and ask for a mortgage. The bank pushes a button, transfers a number to your account, then tells you that this number represents a 'debt' and that you must spend the next 20 years paying off that debt. Who would possibly accept such a system?

My system would be an illusion, just as the existing system is also an illusion. The difference is that my illusion works to everyone's advantage.

There is a profound difference between the two "illusions". The first one is not an illusion because it is stabilized by a power-law distribution of wealth, i.e. a power vacuum has been filled so that society can function. Whereas, yours is commonly known as communism where "we can give away from free, what is not free" which results in the end of all production and megadeath.

STFU idiot. You are not smart.

You are spamming us with offers of megadeath. Thanks a lot!

HugoStone

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Quote from: kiklo on November 17, 2016, 06:10:12 PM

Hmm, Your system appears to grant every person the right to print money by their merely being present.

No, nothing is being 'printed' and this is not mere semantics on my part.

Quote from: kiklo on November 17, 2016, 06:10:12 PM

This will fail, for the following reason, unless when present, you trade food, water, entertainment , or something else of worth , then you being present have no value and only becomes a deduction in my potential trading value.

Again, no. See my comments here: https://bitcointalksearch.org/topic/m.16908409 Bitcoin and all modern digitised monetary systems are merely simulations. There is no 'value', only the perception of 'value', which is itself a misperception based on the belief that things (and unreal digital abstractions of things) can become something more than what they are simply by an act of faith.

You seem to be suggesting a return to some form of barter system. The point isn't to 'deinvent' the digital wheel but to reconceptualise it in a way that works to everyone's advantage.

Quote from: kiklo on November 17, 2016, 06:10:12 PM

Feed Store accepts credit from everyone that buys from them, Everyone that pays them uses only their credit, Feed Store runs out of Product , and goes to buy more, their vendors deny any more product on credit and require something of actual worth, which the Feed Store owner is unable to give them.

What is this 'credit' you're referring to? That's not what I'm proposing. I'm proposing a truly decentralised currency which allows everyone to create money as they require it. It would operate much like a debit card system (but using mobile phones), with the exception that if you do not have sufficient 'funds' available to complete a transaction then those funds would automatically be created debt-free. This can be viewed as 'credit' only in the literal sense of the term, i.e. to 'give credit' to someone, to reward them. The difference (and it's the only difference) between existing monetary systems and my proposal lies in how money is created: as debt by centralised sources under existing systems, as a debt-free gift by individuals themselves under my system. The only logical approach to 'money' when 'money' has been reduced to a digital simulation is to stop pretending that it has to be earned or issued as debt. It does not follow from this that everything will grind to a halt and everyone will do nothing at all. Hundreds of millions of people volunteer their time everyday. Look at the open source movement - Bitcoin itself is an example. People are creative and will still want to come together and create. Think of what could be achieved technologically if we stopped pretending that simulated money is 'real' and 'scarce', and recognised that there's no limit to the number of digital abstractions of money that can be created within a simulated system.

Quote from: kiklo on November 17, 2016, 06:10:12 PM

The more illusion, the faster a system will fail.

How can a digital simulation of money become more illusory than it already is? Simulated money will always be an illusion, but because it is a simulation we do not have to accept the 'rules' coded into it as if they were the Ten Commandments. Instead, we can select the relevant sections of source code, hit the delete button, and start over.

HS

kiklo

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Quote from: HugoStone on November 16, 2016, 12:59:32 PM

My system would be an illusion, just as the existing system is also an illusion. The difference is that my illusion works to everyone's advantage.

HS

Hmm,

Your system appears to grant every person the right to print money by their merely being present.

This will fail, for the following reason, unless when present, you trade food, water, entertainment , or something else of worth , then you being present have no value and only becomes a deduction in my potential trading value.

Example, (True Story)
Feed Store accepts credit from everyone that buys from them,
Everyone that pays them uses only their credit,
Feed Store runs out of Product , and goes to buy more, their vendors deny any more product on credit and require something of actual worth,
which the Feed Store owner is unable to give them.
So the Feed Store operator goes out of business and the deadbeats that used his free credit never pay him.
(I know a guy this happened too, at some point in the game items of worth are required, and this illusion breaks.)

Yes, Banks are a scam, by trading multiple times the value of their deposits, and the more multiplies they go beyond their true worth, the closer they get to collapse.
In the US , the Majority of the Banks would have already collapse, however using the politicians they owned , they have stole Value from the Citizens to prop up their corruption , which is why many currencies are now on the verge of collapse.

The more illusion, the faster a system will fail. Tongue

At some point the services or products added to the system by real people are unable to make the illusion believable enough to work.
In other words, The Illusion is Shattered, and only real tangible goods or services to that individual are all that will be accepted.

Cool

HugoStone

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Quote from: painlord2k on November 16, 2016, 12:12:09 PM

Quote from: HugoStone on November 15, 2016, 01:56:41 PM

Hi. I think you're locked in a tautology. If "transactional utility is the price of money itself" then it can only be determined in relation to that which it prices itself by, i.e. its own unit of currency or an equivalent.

My opinion is he used the wrong words.

"transactional utility is the price of money itself" SHOULD BE "transactional utility is the value of money itself"

As money is always acquired to be exchanged later for something else, its value is in the ability it confer to obtain some other good and service in the future.

This, in exchange depend on its features and how many people use it and how often.

Menger explained money as the "more re-sellable commodity" available in the market.
Mises, explaining the Regression Theorem, state gold (or any form of money) INITIAL value is the value of direct use at the time it is used for the first time as a mean on indirect exchange.
As gold started to be used as a mean of indirect exchange, the price (the exchange rate of gold measure in other goods and services) raised. This can be understood as the same quantity of gold was used before only for direct use (jewelry, etc.) now must be used for indirect exchange and some direct use. So the less valuable direct use must be ceased to free some gold to be used as a mean of indirect exchange.

That's just another example of the numbers game though. Price, value, theorems, equations - they're just self-referential symbols. We have become 'numbed' by the 'numb-ers' game to the extent that we can't see past the numbers to the human considerations and needs the numbers represent.

Here's a scenario to think about: imagine you could create 'money' on demand as and when you need it. For example, you walk into a shop and pick up a carton of milk. Instead of being 'charged' to pay back an illusory 'debt' you are requested to make a donation (a gift of money) of 2 units of currency in return for the item. You then scan a QR code with your mobile phone and the 'money' (nothing more than a number) representing the gift is created (by you) and transferred to the recipient's account. Under such a system, price inflation becomes meaningless. Rather, we see that price inflation has always been meaningless and just a numbers game.

For example, next day you walk into the same shop and select the exact same item, only this time you are asked to make a donation (a gift of money) of 5 units of currency. Your 'spending power' has in no way been reduced because, once again, you simply need to scan the QR code, whereupon the 5 units are created and transferred to the recipient. Nothing of 'value' has been created or lost, just the illusion of it.

Under such a system, we would only need to pay attention to the numbers to the extent that they identify a real-world imbalance between supply and demand. Everyone (not just the rich) would have an equal opportunity to obtain what is available. If there is not enough to go around then the system permits the 'financial resources' required to address the imbalance to be created on demand. Also, because 'cost considerations' would no longer be a factor, the issue could be addressed using best practice, i.e. not merely paying lip service to ecological concerns.

If this sounds like madness to you then consider what happens when you walk into a bank and ask for a mortgage. The bank pushes a button, transfers a number to your account, then tells you that this number represents a 'debt' and that you must spend the next 20 years paying off that debt. Who would possibly accept such a system?

My system would be an illusion, just as the existing system is also an illusion. The difference is that my illusion works to everyone's advantage.

HS

deisik

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Quote from: HugoStone on November 16, 2016, 11:01:23 AM

Hi. OK, hitherto you've consistently claimed that there is an 'objective' quality to 'value'

I don't understand what you mean by this

Quote from: painlord2k on November 16, 2016, 11:59:01 AM

I don't wanted to go in too much details, but in this regard "inflation" is not "inflation of money" but "inflation of a particular type of money"

E.G. if we talk about bitcoin we can measure the inflation (increase) of the number of bitcoin tokens
If we talk about gold, we can measure the quantity of gold available overground in monetary form (because non-monetary - jewels - has different value and uses)
Same for silver.
Same for USD (printed and electronics). In these case we have many types of measure Money Base, M1, M2, M3, etc. based on what we want measure and the definition of any of the previous).

But we can not measure the quantity of money "per se" because money is a property not a thing. Everything can be used as money, if it has the right features

You evidently confuse here the aggregate of money properties with money tokens as such that are objectively representing these properties. Indeed, property is not countable (unless we decide to count properties of money, but this is evidently not what you meant to say). On the other hand, money tokens (say, dollars) as well as derivatives of these tokens (for example, deposits and bank balances), which monetary aggregates of higher orders consist of, are quite countable, anyway. Further, I don't see particular difference between inflation of money and inflation of a particular type of money since it should be evident from the context that by money I meant exactly the same what you meant by a "particular type of money". If I wanted to use the term conceptually, I would obviously say "the concept of money" or "the property of money"...

In fact, I'm not very much inclined to engage in semantic gymnastics you seem to be looking for

painlord2k

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Quote from: HugoStone on November 15, 2016, 01:56:41 PM

Hi. I think you're locked in a tautology. If "transactional utility is the price of money itself" then it can only be determined in relation to that which it prices itself by, i.e. its own unit of currency or an equivalent.

My opinion is he used the wrong words.

"transactional utility is the price of money itself" SHOULD BE "transactional utility is the value of money itself"

As money is always acquired to be exchanged later for something else, its value is in the ability it confer to obtain some other good and service in the future.

This, in exchange depend on its features and how many people use it and how often.

Menger explained money as the "more re-sellable commodity" available in the market.
Mises, explaining the Regression Theorem, state gold (or any form of money) INITIAL value is the value of direct use at the time it is used for the first time as a mean on indirect exchange.
As gold started to be used as a mean of indirect exchange, the price (the exchange rate of gold measure in other goods and services) raised. This can be understood as the same quantity of gold was used before only for direct use (jewelry, etc.) now must be used for indirect exchange and some direct use. So the less valuable direct use must be ceased to free some gold to be used as a mean of indirect exchange.

painlord2k

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Quote from: deisik on October 10, 2016, 09:33:35 AM

This might work with gold as well as silver coins (arguably), works with bitcoin "tokens", but it doesn't work with fiat money. And not just because the majority of dollars (for example) exist only as digital money (that could still be accounted for somehow), but primarily because the amount of money printed or emitted by a central bank makes up only a small part of monetary equivalents or substitutes that flow through the economy. For example, credit money is created and destroyed by banks...

Are you sure that it is not you who doesn't quite understand economics?

I don't wanted to go in too much details, but in this regard "inflation" is not "inflation of money" but "inflation of a particular type of money"

E.G. if we talk about bitcoin we can measure the inflation (increase) of the number of bitcoin tokens
If we talk about gold, we can measure the quantity of gold available overground in monetary form (because non-monetary - jewels - has different value and uses)
Same for silver.
Same for USD (printed and electronics). In these case we have many types of measure Money Base, M1, M2, M3, etc. based on what we want measure and the definition of any of the previous).

But we can not measure the quantity of money "per se" because money is a property not a thing. Everything can be used as money, if it has the right features.
If gold appreciate too much to be used for everyday payments (E.G. the newspaper, the coffee, candies), silver start to be used as a substitute of gold for its own properties and take over the uses where gold it is too much difficult to use. This would cause an appreciation of silver over its current value (and price) so other metals (copper/nickel) could start to be used to allow very small transactions.
This happen because it is difficult and costly to make a gold coin small enough to be useful in small purchases (a tiny 1/10 ounce ~ 3g gold coin is worth more than 100$), a little less difficult is do the same for silver (the same 3g coin would be worth today 1,5$) and copper and nickel would be more versatile for small payments.

Bitcoin has not this problem because being immaterial can be divided with arbitrary precision.

But we can not measure with a single number gold + silver + bitcoin + other.... Because they are not the same thing.
You can make some equivalence, like 1 ounce of gold = 70 ounce of silver, but these are valid only in the moment they are done, because the ration between one and another always fluctuate depending the market demand and offer.

HugoStone

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Quote from: deisik on November 16, 2016, 04:02:39 AM

Quote from: HugoStone on November 15, 2016, 05:56:52 PM

Quote from: deisik on November 15, 2016, 04:31:48 PM

Quote from: HugoStone on November 15, 2016, 01:56:41 PM

Hi. I think you're locked in a tautology. If "transactional utility is the price of money itself" then it can only be determined in relation to that which it prices itself by, i.e. its own unit of currency or an equivalent. Assume for a moment that this "transactional utility" amounts to one billion US dollars. What is the 'value' of one billion US dollars independent of the value of one US dollar? What is the 'value' of one US dollar? One and one billion are literally just numbers. They do not have any inherent value in and of themselves, and they certainly doesn't soak up a mysterious quality called 'value' just because we put a symbol in front of them

I didn't quite understand what you meant to say

Nevertheless, it looks like you trying to present it as a tautology when in fact there should be none. Transactional utility is a real utility objectively arising from the convenience of using money over barter. Money doesn't spoil like crops, you can easily transfer value with it, exchange an arbitrary amount of some goods for it and then exchange it for an arbitrary amount of other goods at the time when you see it most appropriate. All these qualities (and a lot of others that I didn't mention) make up what is called transactional utility and what essentially makes something into money (since transactional utility is as inherent quality of money). And as such, it can be separated from money (money token) and assessed in money (money tokens), just like any other utility of something useful can be valued in money

Hi. OK, let's go back to the round chunks of shiny metal. Do you accept that an inert metal is an inert metal and the mere fact that a group of people decide that an inert metal will serve as their 'currency' does not mysteriously transform that inert metal into something else? It remains, as it always was, just an inert metal does it not? It does not 'store' anything other than a perception and, in this sense, our perception that it 'stores' a mysterious quality called 'value' is actually a misperception whereby we literally attribute human values to a mere object. For example, if I were to melt down one of these round chunks of shiny metal and create an idol in the form of an animal, would that idol become a 'store' of something called 'divinity' if I began to worship it? If I were to melt down a large number of these round chunks of shiny metal and create lots of idols, would I be able to 'transfer' this 'divinity' to other people? Or would I simply be deluding myself and others?

Well, it seems that now I see your point. You basically claim that all value exists entirely in our heads. But this has been known for a few centuries already. The whole subjective theory of value, which is acknowledged by many scholars as reliably and coherently describing the economic interactions among people, is based on that. After all, our mind itself may be no less subjective, imaginary and illusional than the hierarchy of values it has to deal with...

It looks like you have just reinvented the wheel, mate

Hi. OK, hitherto you've consistently claimed that there is an 'objective' quality to 'value', that something can be said to have "intrinsic value", and that this 'value' can be transferred as if it were a thing. As for me, I have consistently claimed the opposite and never at any time have I asserted that this was a new idea or that I 'invented' it. I did ask you some questions though, but you haven't answered them. The most important question is this: if 'value' is subjective and illusory then why do we permit a small subsection of the population to create 'value' in the form of 'money' and tell us that it exists as a 'debt' and needs to be 'earned'?

How do you conceptualise the 'value' of bitcoin? Do you think "Oh, one bitcoin is worth one bitcoin" or do you think "Oh, one bitcoin is worth X dollars/euro/pounds"? I suspect that you (and most others) think in terms of the latter rather than the former. There is no reason, however, why we should not think in terms of the former and stop pretending that these numbers mean something. Then we can dispense with the illusion that bitcoin need to be mined and existing currencies need to be issued by banks as debt. Virtual 'coins' can and should be created on demand as they are needed - we can literally make it up as we go along.

Here is my proposal: https://bitcointalksearch.org/topic/a-proposal-for-the-evolution-of-bitcoin-1678904

HS

deisik

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Quote from: HugoStone on November 15, 2016, 05:56:52 PM

Quote from: deisik on November 15, 2016, 04:31:48 PM

Quote from: HugoStone on November 15, 2016, 01:56:41 PM

Hi. I think you're locked in a tautology. If "transactional utility is the price of money itself" then it can only be determined in relation to that which it prices itself by, i.e. its own unit of currency or an equivalent. Assume for a moment that this "transactional utility" amounts to one billion US dollars. What is the 'value' of one billion US dollars independent of the value of one US dollar? What is the 'value' of one US dollar? One and one billion are literally just numbers. They do not have any inherent value in and of themselves, and they certainly doesn't soak up a mysterious quality called 'value' just because we put a symbol in front of them

I didn't quite understand what you meant to say

Nevertheless, it looks like you trying to present it as a tautology when in fact there should be none. Transactional utility is a real utility objectively arising from the convenience of using money over barter. Money doesn't spoil like crops, you can easily transfer value with it, exchange an arbitrary amount of some goods for it and then exchange it for an arbitrary amount of other goods at the time when you see it most appropriate. All these qualities (and a lot of others that I didn't mention) make up what is called transactional utility and what essentially makes something into money (since transactional utility is as inherent quality of money). And as such, it can be separated from money (money token) and assessed in money (money tokens), just like any other utility of something useful can be valued in money

Hi. OK, let's go back to the round chunks of shiny metal. Do you accept that an inert metal is an inert metal and the mere fact that a group of people decide that an inert metal will serve as their 'currency' does not mysteriously transform that inert metal into something else? It remains, as it always was, just an inert metal does it not? It does not 'store' anything other than a perception and, in this sense, our perception that it 'stores' a mysterious quality called 'value' is actually a misperception whereby we literally attribute human values to a mere object. For example, if I were to melt down one of these round chunks of shiny metal and create an idol in the form of an animal, would that idol become a 'store' of something called 'divinity' if I began to worship it? If I were to melt down a large number of these round chunks of shiny metal and create lots of idols, would I be able to 'transfer' this 'divinity' to other people? Or would I simply be deluding myself and others?

Well, it seems that now I see your point. You basically claim that all value exists entirely in our heads. But this has been known for a few centuries already. The whole subjective theory of value, which is acknowledged by many scholars as reliably and coherently describing the economic interactions among people, is based on that. After all, our mind itself may be no less subjective, imaginary and illusional than the hierarchy of values it has to deal with...

It looks like you have just reinvented the wheel, mate

HugoStone

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Quote from: deisik on November 15, 2016, 04:31:48 PM

Quote from: HugoStone on November 15, 2016, 01:56:41 PM

Hi. I think you're locked in a tautology. If "transactional utility is the price of money itself" then it can only be determined in relation to that which it prices itself by, i.e. its own unit of currency or an equivalent. Assume for a moment that this "transactional utility" amounts to one billion US dollars. What is the 'value' of one billion US dollars independent of the value of one US dollar? What is the 'value' of one US dollar? One and one billion are literally just numbers. They do not have any inherent value in and of themselves, and they certainly doesn't soak up a mysterious quality called 'value' just because we put a symbol in front of them

I didn't quite understand what you meant to say

Nevertheless, it looks like you trying to present it as a tautology when in fact there should be none. Transactional utility is a real utility objectively arising from the convenience of using money over barter. Money doesn't spoil like crops, you can easily transfer value with it, exchange an arbitrary amount of some goods for it and then exchange it for an arbitrary amount of other goods at the time when you see it most appropriate. All these qualities (and a lot of others that I didn't mention) make up what is called transactional utility and what essentially makes something into money (since transactional utility is as inherent quality of money). And as such, it can be separated from money (money token) and assessed in money (money tokens), just like any other utility of something useful can be valued in money

Hi. OK, let's go back to the round chunks of shiny metal. Do you accept that an inert metal is an inert metal and the mere fact that a group of people decide that an inert metal will serve as their 'currency' does not mysteriously transform that inert metal into something else? It remains, as it always was, just an inert metal does it not? It does not 'store' anything other than a perception and, in this sense, our perception that it 'stores' a mysterious quality called 'value' is actually a misperception whereby we literally attribute human values to a mere object. For example, if I were to melt down one of these round chunks of shiny metal and create an idol in the form of an animal, would that idol become a 'store' of something called 'divinity' if I began to worship it? If I were to melt down a large number of these round chunks of shiny metal and create lots of idols, would I be able to 'transfer' this 'divinity' to other people? Or would I simply be deluding myself and others?

There is no such thing as 'value', only the illusion of it. We are literally playing a numbers game and pretending that a self-referential symbol actually means something. A symbol is just a symbol though. Can you breathe a symbolic representation of air? Can you drink it? Can you do anything with it at all without pretending that it is something more than what it actually is?

Imagine that a global currency were to emerge and replace all existing currencies. What would the 'value' of that currency be in the absence of any other currency to establish equivalence? This gives the game away, doesn't it? The 'value' of one unit of currency would be equal to itself and mean nothing whatsoever.

If we stop pretending that things and digital abstractions have 'value' then we see the futility of pretending that they have to be issued as debt or earned in any conventional sense. Instead, we can pretend that they mean something else altogether and stop playing the numbers game. What I am saying is that we do not need others to delude us when we can delude ourselves in a way that benefits everyone, not just a minority. We do not need governments or banks or even bitcoin miners to create symbols on our behalf. We can create them ourselves.

HS

deisik

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Quote from: HugoStone on November 15, 2016, 01:56:41 PM

Hi. I think you're locked in a tautology. If "transactional utility is the price of money itself" then it can only be determined in relation to that which it prices itself by, i.e. its own unit of currency or an equivalent. Assume for a moment that this "transactional utility" amounts to one billion US dollars. What is the 'value' of one billion US dollars independent of the value of one US dollar? What is the 'value' of one US dollar? One and one billion are literally just numbers. They do not have any inherent value in and of themselves, and they certainly doesn't soak up a mysterious quality called 'value' just because we put a symbol in front of them

I didn't quite understand what you meant to say

Nevertheless, it looks like you are trying to present it as a tautology when in fact there should be none. Transactional utility is a real utility objectively arising from the convenience of using money over barter. Money doesn't spoil like crops, you can easily transfer value with it, exchange an arbitrary amount of some goods for it and then exchange it for an arbitrary amount of other goods at the time when you see it most appropriate. All these qualities (and a lot of others that I didn't mention) make up what is called transactional utility and what essentially makes something into money (since transactional utility is as inherent quality of money). And as such, it can be separated from money (money token) and assessed in money (money tokens), just like any other utility of something useful can be valued in money

HugoStone

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Activity: 42

Merit: 0

Quote from: deisik on November 15, 2016, 01:05:02 PM

Quote from: HugoStone on November 15, 2016, 12:23:10 PM

Quote from: deisik on November 15, 2016, 11:59:51 AM

I don't quite understand what you mean to say

It looks like that your point hinges on the assumption that "digital abstraction", the term which you seem to use to describe both fiat currencies and Bitcoin, has no intrinsic value. If that is being the case, I can only say that you are pretty much wrong on this. Money, even in the form of "digital abstraction" as you call it, does have intrinsic value. Just in case, it is called transactional utility which is an inherent quality of money, i.e. something without which money can't exist

Hi. First and foremost, modern money doesn't really exist at all, does it? It's just a number stored as a voltage on a suitable medium

It is irrelevant whether there is a real physical token representing money or it exists only virtually, in the form of digits, or as a magnetic field on some stratum, or whatever. The concept of money is independent of its actual implementation. Gold coins are considered as money only as long as people consider and use them as money...

Otherwise, they are just round chunks of a shiny yellow metal

Quote from: HugoStone on November 15, 2016, 12:23:10 PM

Let me ask you this though: when the money markets determine the value of the dollar (or yen, euro, sterling, etc.) do they determine it on the basis of its "transactional utility"? What proportion of the 'value' of one dollar (or one bitcoin) represents its "transactional utility"? In other words, how is this "transactional utility" itself valued? Put a value on it for me.

Price is what you pay, value is what you get

Market price is determined by the balance of market supply and demand, obviously. Ultimately, the value of money is determined by the amount of goods that a given amount of money can buy. Transactional utility is the price of money itself, the price of the convenience it provides over direct barter. It depends on a few factors such as inflation (depreciation) rate, its universal presence as well as acceptance throughout the world, and things like that. It roughly equals a market interest rate for borrowing money which has a negligible inflation rate, provided there is such a market in the first place. If you want a definite figure, then it is around a few percent per annum in case of major currencies

Quote from: HugoStone on November 15, 2016, 12:23:10 PM

What applies to the dollar, yen, euro or bitcoin must apply equally to all currencies. What is the value of the "transactional utility" of Zimbabwe's currency?

Zimbabwean currency is only called a currency. It is not money since it doesn't function as money (for example, it doesn't keep value)

Hi. I think you're locked in a tautology. If "transactional utility is the price of money itself" then it can only be determined in relation to that which it prices itself by, i.e. its own unit of currency or an equivalent. Assume for a moment that this "transactional utility" amounts to one billion US dollars. What is the 'value' of one billion US dollars independent of the value of one US dollar? What is the 'value' of one US dollar? One and one billion are literally just numbers. They do not have any inherent value in and of themselves, and they certainly doesn't soak up a mysterious quality called 'value' just because we put a symbol in front of them.

You recognise what I'm saying here when you observe that gold coins "...are considered as money only as long as people consider and use them as money..." and if people do not then they are merely "round chunks of a shiny yellow metal". In point of fact, gold coins have always been nothing more or less than round chunks of a shiny yellow metal. Their fundamental 'quality' as round chunks of a shiny yellow metal is not altered by the fact that people prefer to lock them away in vaults rather than throw them into ditches or play tiddlywinks with them.

What I am saying is that what we think of as 'value' and 'price' is just a constantly fluctuating illusion. If we accept that it is an illusion then the question to be asked is why we permit other institutions to determine the nature of that illusion for us, rather than determine it for ourselves.

https://bitcointalksearch.org/topic/a-proposal-for-the-evolution-of-bitcoin-1678904

HS

Topic: Inflation and Deflation of Price and Money Supply - page 35. (Read 1424685 times)