Topic: Inflation and Deflation of Price and Money Supply - page 38. (Read 1457838 times)

If Hayek's good money (neither price inflated nor deflated) becomes true with blockchain tech, what's response form crypto world?

 

I think we will see more inflation of the Bitcoin in the nearest future if some new regulatory instrument won't come into power. The more and more people trying to enter the bitcoin industry as miners or traders. If their number will be equal we will see the stable prices but if not, well, I think the price will go down cuz and inflation rate will increase.

Great OP. Explains every little detail what causes inflation and deflation

Inflation is when the value of Bitcoin decreases when the total supply of Bitcoin increases

The Bitcoin is a native response that gives the life , to the  degenerated financial system. He returns money  to their natural role as a medium of exchange. It takes the authority of politicians to artificially manipulate the economy.

BTC has future, because it is best as this proxy, if the algo is really impossible to break.

I think the problem is that it's hard for cryptocurrencies to adjust for these factors in realtime.  The rate at which currency is created is set in the code that defines the cryptocurrency itself.  Wouldn't any formula have to rely on a central authority to determine the value of factors like "money velocity" and "adoption rate?"

Bitcoin's decentralization is awesome.  But it in one way its the most centralized currency ever: One person decided the exact amount currency that would exist, and the exact moment it would be created.  For the entire life of the currency.

We need a cryto-currency that people won't tend to hoard.  It needs to hold it's value day to day, but generally decrease in value over the long term in a similar way as fiat currency.  The job of the FED can be accomplished with an open formula for all to see so that it is fair and people know what they are getting.  Money supply can be controlled in real time in response to several factors like "money velocity", "adoption rate", and whatever other economic factors that must be accounted for to keep prices relatively stable, yet slowly inflating.

I dont think it will push up the demand for bitcoins...there is currently no reason to change...
Inflation is a term much maligned in today’s media, but correctly managed it is not necessarily a bad thing.  The European Central bank has as one of its objectives the management of inflation within the Eurozone area and this management is generally accepted as maintaining the inflation rate as close to 2% as is possible.  If inflation begins to rise above this magic figure then the ECB imposes credit restrictions via interest rate management and reels in economic activity back.

The cashless policy that developed countries are trying to establish is one reason that will push up the demand for bitcoins.

It depends on how many deals are made and you provided some reasons for making those deals and reasons that can increase buy and sell.

I think that would be headline inflation, we know the literal amount of coins.   We do not know the amount of coins circulated exactly in business (not just transfers), we do not know the exact number of users regularly or genuinely requiring bitcoin and so holding onto them. 
If the amount of new users exceeds the new supply of coins via mining, I think we can assume deflation.  The cost of money rises in deflation


The technology sector has deflation for decades now, its naturally making each product more cheaply and refining utility to give more for the price.  So prices fall continually unless or until they raise higher production costs with a new feature in demand.   I think its linked to moores law

Also relevant is hedonic regression which is misconstrued by government to explain rising prices.  The reported inflation figure given is always adjusted by a dept basically politically motivated, everybody here knows how they pay much more over a decade for the exact same goods regardless of apparent low inflation

Yes it's natural , it's called disinflation, a shrinking inflation rate, just like with bitcoin.

The inflation of bitcoin now is hovering around 8-9%, while after the halving , it will go to ~4% ,and so on shrink until 0

Hello

I think that inflation is not so natural. To cause inflation should be more difficult over time, while deflation should be natural and should be caused when no new inventions reach the market.

I explain myself, with gold:

Inflation
When gold started to be valuable, there be lots of it on the surface, on the rivers on many places. Now, one needs to mine 1 ton of dirt to have one ounce of gold, and it will be more difficult over time. That is natural, because once a valuable commodity is extracted, it is more scarce in the source and more difficult to get from it.

Deflation
When the market is empty from products, the market needs all of them, and only small number of sources are available, then, the prices go up. But after a while, more and more people have the product and the market begins to saturate. Eventually everyone who is interested in that product have it, so the people starts saving. That causes deflation, because prices needs to drop to attract people that has been not interested on the product at current price.

But then, someone invents something new, and because it is new, it can create a new market, and attract new people that wants it. That reduces deflation to the point that prices start increasing for a while. The equilibrium of new inventions and saturated market is what should mainly control the prices and the availability of money (something valuable and scarce), and the more and more scarce source of the resource should intervene less and less over time in the inflation/deflation cycle.

   
   

The important point is that the "price of money" is depending on this demand for store of value (in that particular monetary asset).  That demand will vary according to the mood of people, and also according to the kind of monetary asset that is mostly "in" (that is, what people speculate that others will still want to accept, and at what price, later when they will want to get the value back).
As such, the value stored in a monetary asset is normally fluctuating.  One day there may be a high demand for money, and money will be worth a lot ; the next day, there may be a much lower demand for that kind of money, and it may become almost worthless.
In a fiat system, this is mainly stabilized, essentially by imposing monetary monopoly (merchants are obliged to accept that type of money against their goods and services), and by introducing feedback mechanisms with the central bank, buffering the money offer against the money demand.

This information is very useful to me who are beginners, because I've learned at this forum,

Economics subject looks more exciting here than books. Tongue
Definitely if the value of BTC is high, there will be less BTC needed for a commodity as long as the price is not getting higher too.

Value of a store of value  depends of various elements
- Aceptance
- Good and services which can de acquired
- expectations about future prices

Yep, bitcoin is for hoarding and storing wealth. You can spend it, but bitcoin holders will be promoted financial convervativeness.

There is Doge for the keynesians, it is inflated forever and its worthless, just like fiat

What are you trying to interpret by saying "Hybrid System"?

As if you want the Bitcoin protocol to be divided into two parts: One for spending and one for hoarding?

Grow up dude! Your comment is not making any sense at all...