Topic: Inflation and Deflation of Price and Money Supply - page 39. (Read 1424741 times)

Hoarding = Insurance.

It is never evil to have supplies and reserves that could be used in an emergency.

Stupid keynesians wants us to have 0$ in our pocket and constantly take loans after loans. Its an evil economic theory.


I rather prefer to have 1 mountain of gold than to have 0$ in my pocket.

Some people see a lot of potential in bitcoin and consider it as a long term investment (I do)

and some play trading with the increase and decrease of the price to make daily profit.

Thanks for the explanation

Why do a lot of people go for bitcoin when these, too, go under inflation and deflation of price and money supply?

What is the difference? I really don't get why people are crazy about bitcoin. 

Must be noted that Bitcoin Days Destroyed" give the same result if 1 Bitcoin ten days old is moved ten times in a day or just one (the last movement).
The number of transactions is at least as much important.
The BDD is more interesting as an indicator for the mobilization of more or less coins kept as savings.
People have incentives to mobilize coin (and exchange them with something else) when they expect the value to fall or, the reverse, someone give discount to buyers with bitcoin for loading bitcoin in exchange for an asset he believe will depreciate.

Good question! Bitcoin days destroyed are a better indication of how much real economic activity is occurring on the bitcoin network since it was realized that total transaction volume per day might be an inappropriate measure of the level of economic activity in Bitcoin as someone could be sending the same money back and forth between their own addresses repeatedly. So, if a person hoards some bitcoins for a year or more, the value of bitcoin days destroyed will be more. Similarly in the case of those wallets, whose owner lost his/her private key(s) and are unable to withdraw them anymore! This will lead to the gradual price rise. But if everyone starts selling bitcoins sooner, then the total number of bitcoin days will also reduce leading to lowering of BTC/USD price. This eventually influences in the inflation and deflation towards total monetary (=bitcoin) supply.

RealBitcoin spoke about price of bitcoins expressed in fiat money.
If you mean prices (of just about anything) expressed in bitcoins then you are speaking about price deflation. This means that some consumers will hold off some of their spending. Whether this is bad or good thing can not be decided.
It depends where you put boundary between responsible saving and selfish hoarding. And where you put boundary between "only the best goods and investments should survive" and "economy and investment should be stimulated by gradually destroying value of people's money (bitcoins) and forcing them to spend and support consumption".

Think about situations and goods where prices go down (computers, smartphones, ...). Is it a healthy market? Would it be healthy market if prices went down much faster?

Yes that measurement is somewhat accurate (although I`m not sure how accurate) of the money velocity.

The slower the money velocity the higher the price.


I`m not sure we can talk about a consumer base in bitcoin yet, we are too few to make any study on this.

If bitcoin price goes down, thats bad for anybody who holds bitcoin obviously, and prices go down. Only good for loan takers, because they get chep loans.

If price goes up, then its good for holders, and consumers, because they get the same stuff cheaper. However loan takers get fucked as their loan size is increased too.

So when prices go down, its a bad thing because consumers will hold off on spending because it might be cheaper tomorrow?

Does this price inflation and deflation depend fully on Bitcoin days destroyed? I guess it also plays an important role because one may send his own coins between different addresses trying to show the network that several transactions are being made?

The prices of btc keep on increasing and decreasing regularly accordingly as we can see. But, the supply of money is to be maintained as same. The changes in prices whether increase or decrease can give a big profit or loss to the person. Here's why
(1) You buy one btc today for 24000inr and then btc price decreases, you are certainly in a loss. You can be in profit too on the reverse case.
The differences in prices of different currencies isn't uniform too,e.g. 1btc is 328us$ and also 24,000inr. But ,328us$ isn't equal to 24,000inr.

Come on, Genius ?    Its not that clever and they really didnt invent the system in effect.   Its just an elaborate raffle, if I hold up a lovely brand new car 5 litre Turbo, it does 200mph.  It looks amazing, two tone paint work, all chrome leather seats whatever but to make its cost is 50,000 dollars.   Alot of people want it, then I go sell raffle tickets worth 1 million dollars Iam a genius but more accurately a salesman exploiting, obscuring a misunderstanding in the terms by those hoping to win.   Nothing special, this is done all over the net, TV everywhere people use the viewers poor maths to take advantage.   1 person wins, a few people gain from the system, the salesman gets his cut but in the main its raffle owners who get to spend a free 900k

Thats all the FED has done, they over leveraged and the raffle is yet to be settled but they already have charged ticket prices and the money is spent.   The amount of lustre attributed to holding dollars is unparalleled, its not a unique product and value is momentary.    To unwind now would take the same taxes but no services by government, an army only locally militia based and so on.  Feasibly it would take decades to pay back even with no spending I believe, its not possible and growth to meet the cost is not likely without some dramatic move like USA gov copyrights power stations using nuclear fusion for a great free energy export

Not a central bank but competing banks with varying schemes of investment and capital reserve would improve reliability.  They would be more justified then merely operating the worlds most powerful army as a qualifier.
As we have now, all banks report to one and its a top down system less independent, less able to adapt to change and more subject to fracture under pressure

This is definitely not an option, in effect this would be taking a distributed ledger and injecting a lethal dose of centralisation

That is the case with any monetary asset.  That is the fundament of any speculative asset (of which a monetary asset is a specific case).


Probably.  As fiat money does.  (the Reichsmark being the schoolbook example, but there are many others).

In fact, "being backed by something physical" only makes the asset a proxy of the physical thing.  But physical things can also be speculative.  The only thing that limits the down side value of a physical thing, is its supposed inevitable consumption value.  But in as much as a physical asset has only his consumption value, it doesn't have any monetary value or use.  The extra demand for monetary use is what increases a physical asset's price, and that increase is exactly its monetary value.   When a physical asset falls back to its consumption value, it has lost all use as a monetary asset.

So the only difference between a "non-backed" and a "backed" asset is that BESIDES its monetary use, a backed asset is a proxy of a consumption value.

On the other hand, a backed asset has the problem of rising the price of an asset that is also a consumption good.  That consumption then becomes difficult or impossible, because of the price distorsion.

All this indicates that it is much better to have non-backed monetary assets over backed monetary assets.  Non-backed monetary assets cannot perturbe the consumption of something, and backed assets can just as well loose all their monetary value.

In fact you can do that yourself.

Consider "food" as a backup of a monetary asset.  If that were true, that would be a disaster, because the price of food would increase much because the extra demand for food as monetary asset.  Nobody would be able to eat a decent meal at a decent price !

Let us consider that the price of bread is multiplied by 50 because of its demand as a monetary asset.  So instead of, say, a bread having teh value of $1 (I'm using the $ as a unit of value measurement here only), it would cost $ 50.  Nobody would eat bread any more.  But you can use bread as "money".  As it is backed by its "food value", you know that in the worst case, your bread can only drop down to $1,-, because people will still want to consume it at that price.

Now, consider that you have an altcoin, "breadcoin".  It is worth $49 because of offer and demand.  If you want to "back it up" with something physical, it is sufficient that for each breadcoin you own, you also buy a genuine bread.  As such, the day that the breadcoin hyperinflates, and looses all value, you still have your bread left.  As when you were using physical bread.

Nope, just abhorrent stupidity amongst the sheeple.

If demand and supply increases an equal amount, the price will not change.

You are wrong, because in real life money supply inflation do not turn in a proportional prices increases across the board.

Some prices increase, some decrease, other stay the same.
The increases and decreases happen with a variable delay.
Sometimes the increase is proportional to the increase in money supply, but often it is lower or higher.
Sometimes some price increase then fall down.

It is not so easy.

Inflation is positive price change, deflation is negative price change. I think nothing differentiates inflation and deflation of price and money supply. A recession is usually defined as 2 quarters of negative GDP growth. However for the 2008 recession, the beginning was defined as the peak of Employment and steady job loss after and the multiple negative GDP growth followed.

Some miners, even the majority of the hash rate could change the rules THEY follow.
But they can not change the rules I and others follow.
Their out of protocol rules bitcons would not be considered valid and rejected. Like 3 and half dollar bill round and pink.

1) Like gold or the USD. People accept USD just for what they think is worth. 1 pack of milk cost now what? 2$? (I'm in Italy). Tomorrow nothing prevent the price from being $20 for the same pack of milk.

2) They could take control of it or at least try. It would cost a lot and would be a total loss, because  the value would plummet.
The problem, for them, would be they were forced to play the game by the rules and not by force. And anyone else would see it and smell the blood int he water.
As powerful as they are, they could not prevail against the market forces rallying against them.
Others could finance more computing power to take the control back from them.