Topic: Inflation and Deflation of Price and Money Supply - page 36. (Read 1457875 times)

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

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


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


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. 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. 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.

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?

https://banknoteworld.com/shop/Zimbabwe-Currency/?gclid=CI2EjLKiq9ACFfIK0wodR88AKA

HS

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

Both terms are equally meaningless when money is reduced to an intrinsically valueless digital abstraction. Some might take issue with the phrase "intrinsically valueless", but even the Bitcoin wiki (https://en.bitcoin.it/wiki/Myths#Bitcoins_have_no_intrinsic_value_.28unlike_some_other_things.29 jumps through hoops in an attempt to explain why bitcoin are intrinsically valuable, before finally acknowledging that 'value' is just an illusion created by supply and demand. Inflation and deflation have meaning only if you pull the wool over your eyes and force yourself to believe that something that really is intrinsically valueless actually has value.

Imagine for a moment that we wake up tomorrow and decide to: a) reject the myth of intrinsic value; b) recognise that there is no need to create digital abstractions of money as debt; c) acknowledge that there is nothing scarce about digital abstractions of money and no reason to set a cap on the number that can be created; d) allowed everyone to create their own digital abstractions of money on demand at the point of need.

What would 'inflation' or 'deflation' amount to under such a system? It would look like what it is: an illusion that keeps us focused on the numbers and worrying about an illusory reduction in our 'spending power', rather than the real-world problems those numbers represent. Supply and demand may generate an increase in the price of a commodity, but under a system that permits everyone to create digital abstractions of money on demand this would mean nothing whatsoever. It would only mean that everyone has an equal opportunity to get their hands on that commodity, whereas at the moment this right is reserved for those who possess enough fiat currency, a.k.a. other people's debt. The real issue here is not the illusory numbers game but whether there is sufficient supply to meet demand. The existing system 'solves' this problem by pricing people out of the market, rather than genuinely addressing the lack of supply that generated the price inflation in the first place.

HS

His definition stated there is the original dictionary entry for inflation from a hundred years ago.    This idea was blown away around the time of the creation of the Federal reserve.
I agree it is the most correct and accurate way to track inflation, the total money available to an economy.   If really there is no way to measure money then we are truly lost because prices only measures high street trend after the fact, its not really a predictive indicator of anything.  Money slips from one asset class to another and inflation goes untracked, when dollars are used all over the world they are following nothing nationally in a useful way

That would have to be a service extended by the credit card company ontop of the bitcoin standard.   I mean I can withdraw an email Ive sent with some services, but its not really part of the core protocol as I understand it but in some systems this is feasible.

I agree generally bitcoin as a service has to be more usable but its probably the companies on top that must do that

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?

Calling the "general" increase or fall  in prices "inflation" is just a misuse of the term.
The fact so many in the press and in the university / professional fields misuse this term show just how low is the understanding of economics.
Using the wrong terms end always in misunderstanding and fuzzy logic arguments.

We can measure the changing in the money base with a precise and not disputable number;
E.G. there are so many gold coins, so many bitcoins tokens, so many silver coins, so many dollar bills of with various values printed on.
And this can be measured consistently during the years (a gold coin coined yesterday is interchangeable with a gold coin coined today and so with printed USD, etc.).

The "general" level of price is measured using a basket of always changing goods and service.
In fact there are many baskets, one for consumers, one for industries, one for the group you are interested in (in fact you can measure different values in different places using the same type of currency for the same basket).
And the same basket have changing goods and services measured, because the services and goods offered by the market change with the time.
I remember a time, in Italy, when the inflation number was published by ISTAT (a government branch dedicated to statistics) and the number jumped up because they selected the tickets sold by two teams just promoted in an higher league to substitute the tickets of the teams demoted in the lower league at their places. And the team managers decided a large increase of the ticket's price that month.
Had they selected a different team the value would be different that month.
The same is done with goods: if you put an iPhone in the basket, and the next year the same model is no more produced, you can substitute it, but it is not the same thing you are measuring.
The same is for meat. If the law change and the meat must be produced in a cheaper way or in a more costly way, this will impact the price but will have nothing to do with the quantity of money.
Same for cars, gasoline (it changed a couple of time in my life), drugs, etc.

And some goods and services are notoriously kept out of these baskets: fuel, housing prices usually.

Wow its such a good explanation about BTC in terms of inflation and deflation.
a general increase in prices and fall in the purchasing value of money is called inflation but bitcoin we use only in online system than how we know that price id less or greater .

That can hardly be challenged. But how many people are actively using desktop wallets (apart from cold storage)? I, for one, am using a Coinbase wallet, and paying with Bitcoin is, in fact, even easier for me than filling out all the required fields for making a wire transfer. You just enter the address, set down the amount, and are pretty much done with that. On the other hand, expansion of Bitcoin payment cards as of late makes the process of payment for miscellaneous daily goods virtually indistinguishable from payment with your typical Visa or Mastercard (I think this is the way to go)...

And I've always been saying that adding a grace period within which the payment can be reversed is a necessity if Bitcoin aims at going mainstream

Wider alt coin market is just ideas.    Stupidly fast coin transactions in some cases, trying to capture the betting market directly on its blockchain.    I believe there are stock exchanges using a blockchain if I remember rightly but its for record purposes.   Nothing wrong with trying to innovate right!

I thought maybe a reference to volatility and how you can profit from expansion in an option.  Ive seen Chicago traders doing such a thing but yep that is just random words, my interpretation is about as accurate as hieroglyphics on that one


Thats really not low inflation still [sorry I assumed PA, total its not as extreme], its expansionary and people shouldnt be expecting bitcoin price rises until it receives a much larger population.    Alot more diverse transaction spanning populations much then just techy people is required.
 I keep arguing its all about ease of use and bitcoin has to be pretty instant and simple like a touchpay debit card, the banks dont want us to suceed or to steal power away from the central bank economy.  Capitalism is all about competetive tendering and efficency so either bitcoin meets the mark or falls away into obscurity.   At least for small amounts it should be simple as can be seconds to do, but yet we still have accidental instances of fat finger transactions - this happens in normal business by an authorised professional on a terminal at work.  It should never be possible to overtip in a giant way on an irreversible transaction.    We are destroying value allowing such a thing, until somebody in power on this protocol clicks on that point I expect to be disappointed in btc growth for this and other reasons.

Low growth higher inflation should mean even maintaining current price is relatively optimistic.  Always currency is in contrast to other currency standards (or failure to keep a standard), real value growth is in comparison to gold which relies on nobody for its standard

The altcoin market is funny, and I have no idea how anyone can trade these coins.
If you look at exchanges, they de-list ten or twenty coins a couple times a month.
99% of coins are some pump and dump scheme.
Its actually amazing when any coin actually gains traction IMO.

Dogecoin has been sticking around for quite a few years already, and its monetary inflation is also capped in relative terms (while its transactions are as fast as a lightning). So I think it is a far better choice than some new kid on the block, which will most certainly disappear in a matter of a few months...

How many new coins made it through their first year?

Better off just switching to a different coin like Mintcoin (MINT) that doesn't have a cap but is limited to 5% new coins per year.

Removing the 21M cap would de facto mean the abandonment of future halvings. Strictly speaking, it is the primary outcome (i.e. not the cause) of this event if it should happen. If you look at it this way, your question becomes trivial to answer. Just in case, the extra coins will constitute the now constant reward that miners get for mining (i.e. their reward won't diminish due to now cancelled halvings). Are people against miners getting their reward today?

Why would they, en masse, be if this reward remains the same in the future?

1) Any group or individual to suggest to remove the 21 M cap should say who get the extra coins and how.
I think the people not getting the extra coins would be against it.

2) Any group or individual to suggest to remove the 21M cap (or change the inflation schedule) should convince the users to upgrade to their client (be it an HF or a SF).

3) I suspect every single vendor would contest the idea, the majority of the big stakeholders would contest the idea, even the normal users would contest the idea. Probably every miner would contest the idea (because it would depreciate immensely the coin they mine and the fees they collect).

4) If the plan would be enforced on the users in some way (with a SF using SW for example) , you would see a lot of people selling immediately their BTC for something else and/or a counter-fork being planned immediately by some other group.

Removing the 21M cap is equal to canceling of halving. When I started a thread just about that (long before the recent halving occurred), the consensus was that it would mean a hard fork essentially killing Bitcoin in less than no time...

Peeps had been threatening to sell their Bitcoin stashes immediately if such decision had to be made

If you mean market supply (i.e. amount of coins offered for selling), the price would go down indeed if it increases (provided there is no change in demand). But where did you get this idea from, namely, that the market supply (as well as velocity) is going to surge?

I mean the increase beyond and above what is set by the Bitcoin generation algorithm

You are right, I meant supply will increase, not inflation (which I agree is not a good terminology here, as we are not talking about price increase). I mean that supply of bitcoin is increasing, and the velocity of it should be increasing as well, as it changes hands (wallets) more often. The thing is: is demand increasing on the same pace as these 2?  Quicker? Slower? As there is no interest rate in bitcoin wallets, we would see a shift in price.

It seems that you are missing something (or just got something wrong). The inflation of bitcoin supply (personally, I would prefer to use the term "growth" to avoid ambiguity) in no way can increase in the coming years since it is constant for the next 4 years, and then it will be half as much after the halving in 2020. Supply of money is also irrelevant of the velocity of money. Here you obviously confuse the price inflation (which does depend on the latter) with the former...

Which in case of Bitcoin is fixed by the Bitcoin generation algorithm (so-called controlled supply) and equals 16.(6)% for the next 4 years cumulatively