Topic: Inflation and Deflation of Price and Money Supply - page 40. (Read 1424741 times)

No monetary system is perfect. Bitcoin too has its flaws. I have two primary issues with BTC.

1) Its value is derived purely by supply and demand in the market place. It is like a piece of art. It is only worth what someone is willing to pay for it.

2) What's to stop a wealthy consortium or a country like China from taking control of it. And if this were to happen, since it is not backed by anything physical, would its value fall to zero?

Inflation is a tax from the government. 

Because government is highly in debt, the only reason to survive is to inflate. And we will see a lot of inflation in 2-3 years.

You are making a number of assumptions with that.

The first assumption is that the miners and developers will be fine with a system that does not generate the number of additional bitcoins that are generated today to pay miners. Do you think miners will be fine only generating money from transaction fees? And if so, do you feel they will accept a low transaction fee? If not and the transaction fee goes high, how do you feel that will affect desire and need for bitcoins?

The miners are apparently in control of the bitcoin protocol as shown with the current BIP situation. The small handful of miners who constitute over 50% of the network have decided on which modifications to make to bitcoin as far as the blocksize goes and are running with it.

How many bitcoins there will be in the future is really up to them. They have shown that they control the network. The developers are a distant second to them. However both have more control than the bitcoin userbase based has.

Secondly, you are not assuming any lending. All major currencies used in the world today have a fractional reserve system. There is no way to prevent a money multiplier or fractional reserve system arising when it comes to any asset or currency.

You can take someone's bitcoin on deposit, lend it out to someone else, they can buy something from yet another person and if you can get that person to deposit their bitcoin with you, you can lend it out to someone else. Re-lending the same coins increases the money supply.

If bitcoin did become popular, you would have bitcoin lending. And all currencies in the past (tally sticks, gold, etc. tally sticks were mostly a system of credit in any case) and current currencies have/had borrowing and a money multiplier. It has not happened with bitcoin (except in a tiny part) because people are afraid to lend. Due to the pseudo-anonymous nature of transactions, people don't trust to lend their bitcoins out. If bitcoin really became popular, you would have lending and bitcoin would be affected by the same inflation rates caused by ease of lending that other currencies have.

It is not the quantity of dollars in the world that causes inflation. It is the ease to which people can get dollars.

Simple example: If anyone can go to a bank and borrow as much as they want to buy a house, what happens to the price of houses?

There will be deflation when the national debt keeps increasing. We need to shrink the money supply by paying off the debt to have deflation. If the money supply expands, we get inflation, if it contracts, we get deflation.  Isn't the money supply expanding every time the debt increases? Besides the money supply contracting, is there anything else that will cause deflation and vice versa.

I don't know what "anti-inflation" is.

What I know is Bitcoin inflation is already known, it is a decreasing function going to zero in 120 years.
In less than a year it will be less than 5% per year.
In the next 5 years it will be less than 2.5%.
In the next 9 years (maybe it will be less than 1.25%
No way to change the schedule without support from the overwhelming majority of the network (good luck at getting that - anyone seriously proposing that will be gifted with a lot of rope and a nice schematics about how use it)

What I know is the USD inflation can go from sub zero (today) to 40% (November 2013) or 35% (2011) or 50% (2009).
it is just a political decision of a cadre of people in power asking themselves "To Fuck or not To Fuck the other 99.9%? This is not our problem"

so in the real world the bitcoin's anti-inflation is a lie.

yeah sure ... unfortunately or fortunately i'm human being and by default its in our nature we judge quickly and always in hurry ...
ok i will double check thing before i believe on something..

Yes. I fully agree with him!

Excellent post! Very interesting and informative 

its ok. just understand what they say and what they mean to say, and don't judge quickly and don't take too much seriously what they say wrong things.

I'm curious, what is the fundamentals of fiat? Fear? Violence? Ignorance? 

okay .. i understand .. may be that time my mind dont understand it.. u clear my ambiguity by telling in easy way ...
thanx 

Define inflation.
Price inflation is down? In what classes of investments? Houses? Stock? Bonds? Commodities?
Money Base inflation is down? I have charts showing the exact opposite and they are drawn using Fed and ECB data (I dare not to look at the BoJ data).

Actually that is the biggest problem with using technical analysis on BTC to predict the future price fluctuations, the lack of targeted liquidity on the market. For example, when you trade EURUSD you are not excepting huge movements of the price due to the presence of the Fed and the ECB which can intervene whenever they want and stabilize the currency by buying.

I am financial manager and I am forex trader. I can see the fundamentals of fiat and I can see the trend when it has one reason; instead BTC doesn´t fundamentals, up and down as a casino.

One reason to hold BTC is inflation, but as the gold, the inflation is falling, then, the gold price is down

One reason why BTC up and down sharply is because there little amount in the market. I mean, is easy to move the price.

 

Deflation is worse than inflation. Look at Japan. Deflation decreases money velocity, people tend to hoard instead of spending and spending is crucial to the growth of GDP.

Yeah that makes perfect sense. It's about the difference between price and value.

bitcoin kurs make depresiative now, but we must have faith if btc will up and increase again later

he already explained it, he said that bitcoin prices goes up or down by means of how many coins that buyers bought. and also depends on market price.

Thanks a lot for the thread. Its quite informative. Its interesting to know about the relationship. Reading it for the first time.