Topic: Inflation and Deflation of Price and Money Supply - page 49. (Read 1456828 times)

Bah. I've said what I needed to say, and I'm done.  The root of our disagreement is not that you haven't repeated your claim often enough, and I don't suspect that anything I write will cause you to think beyond repeating it yet again.

Because that's what defines a debt: a liability.  The promised execution of your part of a contract.


I'm affraid *you* have an erroneous grasp on the concept of money.  But again, read Rothbard.
Money is not "an honest man's promise", although this is a very common misconception.

Money is a valued asset, that is mainly used as an intermediate asset to store the value of the two halves of an exchange: the first half where you did something for someone else and obtained it, and the second half where you hope that others are going to do something for you.

It is easy to see where the "debt" concept comes from: you think that when you "do something for someone, society OWES YOU a return".

There could be a giant ledger, where all someone does for someone else, is valued, noted, and is a "credit" on the name of that person, which can afterwards make a claim on his contribution to society to "get something back".

However, that collectivist/communist vision is NOT what money is about.  Money is not the big ledger of what you've done for others, and what you're entitled to to get back.

Money provides a similar macro-effect, but doesn't WORK that way.  Money is rather based upon a free society, and not a collectivist-communist "organiser of all actions", which means that at every single interaction, you have to cover your valued actions for others against stuff others may want.  Because if you don't, nobody's going to care about what was the good you did to society.

Money is a means to not to have to do "good for free".  It implements the function to claim back your contribution, but not with an enforcible debt of society towards you (which is not possible in a free society), but rather with your owning of a desired and rare asset.  The desire of others to possess that asset is what replaces the "debt of society towards you" but the responsibility to have it have value to make that claim, is entirely your speculative business.

Indeed, if money were to be a ledger of what good you did to society, then it would be strictly forbidden to *produce* money because that would give you the right on a claim without the beneficial action to society.  It would be cheating in the ledger.  This is what seigniorage is about.  For money to implement "just return" it has to be a pure collectable.

And now you see that "digging up gold" would violate the "ledger of the debt of society towards you for former good deeds".  And that is what it does, btw.

So no, gold is not a debt.  But a rare asset of which not much can be produced, has similar effects, when accepted as money, as your debt-driven "ledger of all good deeds". 

Yes, the issuer still HAS TO give the holder of the bond something, at a given date.  
The bond is an asset, which is a debt of the issuer (government, company issuing the bond).

As an asset, you can try to trade it.  The one accepting the trade is accepting an asset (the bond), which is also in this case, a debt, and is probably the main reason why the person accepting to trade something (say a car) in exchange for the bond accepts it as a value carrier: he can cash in on the debt when the bond expires ; or he can trade it further.  In as much as such bonds are easily traded before they expire, they become money.


No, this isn't a debt anymore, because the original issuer (you) doesn't engage in doing anything with it anymore.

You created an ASSET, a piece of paper.  If people want to do something to obtain ownership of that paper, then that's their business.  It is a piece of paper that isn't worth anything in court (contrary to a bond): you cannot enforce anything.  Now, if you are a famous artist, and you swear on your mother's head that you won't sign more than 5 such papers a month, then these autographs may become collectables.  People may collect these assets as if they were famous paintings.  They may get value.  But they are not a debt at all.  You created an asset (a piece of paper).   Your friend was a nice, gullible man who did work (moving furniture) against an asset, your piece of paper.

But is not a debt anymore, because it doesn't contain the defining property of debt: liability !


You've just created some assets.  They are not "debt", because by definition, they do not engage in any liability.  You can desire to possess them, or not.  Nobody is obliged.  You could just as well have decided to have created paintings and issued those.  Your pieces of paper are just slightly less artistic assets than paintings you could have issued.

These assets are not debt.  And btw, you didn't do anything for society.  You just got seigniorage.  Your first piece of paper with IOU got you a free move of furniture from your friend.  His problem to be gullible :-)  

The day he would like you to move his furniture, and you tell him to shove his piece of paper where you think, you make him see the difference between a (worthless) asset, and a real debt :-)  If you had issued a bond, the guy would just go to court and you wouldn't tell the judge to shove it.


Finding "more money" does not do ANYTHING for society.  It does something for the creator of it: seigniorage !  It devaluates the rest of the money in circulation, that's all it does.

Really, read Rothbard now.  He considers all those issues and he's a much better writer than I am :-)

Ugh.

Start with a bank loan.  It says who will repay it (the payer), who they will repay to (the payee), and how much they will repay (the payment).  Very clearly a debt, no arguments from anyone (I think).

Now consider a bearer bond.  The payee has been abstracted away, but still a debt.

Next, say I take a piece of paper and write "IOU" on it and sign my name, then trade it to a friend for help moving furniture.  Now both the payee and the payment have been abstracted away.  Is that a debt?  I would say that it is, even though it doesn't say what I owe, or to whom, and no court would compel me to trade anything in particular to get it back.

Now say that a group of us get together and decide together to define a unit of measurement, and print a bunch of these IOU notes in various values, and with no specific final redeemer.  Again, I would argue that these represent debt that has been fully abstracted.  No named payer, no named payee, no fixed payment.  Since they have no final redemer, they represent that you have done something good for society in general.  And they have no fixed value beyond the abstract UOM printed on them, leaving the bearer and the present redeemer to negotiate the terms of trade.

Now consider another group developing the exact same scheme, but using gold instead of notes, and weight instead of printed denominations.  Is the essence changed?  Of course not.

Now the man that finds gold in his yard hasn't created a "debt against the earth" or anything silly like that.  He has done something good for society: he has found more money.

Now, if anyone prefers to consider debt only to exist when a specific person is bound by threat of violence to a specific performance, I can't stop them.  Nor can I if they prefer any other combination of un-abstracted properties.  I won't even say that they are wrong.  But I will say that they will have a much harder time understanding money in that system.

I would like to add something to this discussion.

In the end it becomes semantics of course.
If you say that blue is the color of blood, then blue can be red :-)

It is funny but many years ago I also thought that money was debt, and I defended it in the same way as kjj is doing.  And then you come to such extensions of the concept of "debt" that you start realizing that your argument doesn't hold anymore.  Then I read von Mises and Rothbard.  And then things became much clearer ;-)

I went to say, against the solid argument "but a guy who digs for gold in his garden, and finds some, to whom does he have debt ?" and I started arguing something of "debt against the earth" or other nonsense.  That's when I knew I was in fact wrong :-)

The  core property of the word "debt" is that you have no choice but to do what your debt claim you signed, says, and the only exception is when you can't  or when you are a scammer, and law enforcement can be put to work to make you pay off your debt.  

However, the properties of "having earned it in return for something else" (or found it, or made it, or got it through a gift...), "having the right and possibility to trade it, to exchange it for something else", "having the right to hold it indefinitely (not having to give it back)", "not engaging in anything such as interest".... is nothing else but part of the definition of PROPERTY, ownership.

If you redefine debt as being a subset of the properties of ownership, and leave out its core definition of "having engaged and being forcibly obliged to do what you engaged to", then the word debt has become empty of meaning.

Then red is blue.

But it is true that modern monetary systems are full of debt-related assets, and for a long long time, government-issued bank notes where a theoretical debt of the government to issue gold for it (although practically, they couldn't and did everything to escape their obligation - being the law enforcement agency, they could get away with that scam, of course).  This is how the confusion between debt and money set in.  It is a very common confusion.  I can only point to Rothbard to get a clear view on it.  It is mindbogglingly clearly written.

Money can normally be made by people.  If you can find gold, or if you would in one way or another, be able to make gold (by nuclear transmutation of peanut butter, say :-) ), then you can do so.  It is ONLY the special thing of fiat money which is forbidden to make, because that's the very property of fiat money that only gets its scarcity by law enforcement forbidding to make more of it, except some privileged elite.  It is what is fundamentally wrong with it.

What makes an asset (something you own) "money" is the fact that it can very easily be traded for most or all other assets and that it is mainly, or exclusively used for that purpose.

No.

Maybe you are confused: kjj: "Money is debt.  This includes dollars, bitcoins, and even gold."
This is correct: Debt can be money.

I'm not claiming that he is wrong.

I'm saying that you can develop a better understanding of the world by drawing the line in a slightly different place.


You are aware that you are making my point here, right?

He (dinofelis) is correct and can demonstrate it intelligently.

Look, the meme that floats around the net saying "money as debt" is bogous (they can't even stand up and say money is debt).

Let me try another angle: Debt can be tradeable, it can have a high or low interest rate and a long or short maturity. The more tradeable, the lower interest rate, and the longer maturity, the more money-like it is. Debt that is tradeable, has zero interest, and will never be paid back, is equivalent to money. That is, you lend something to someone, get a paper that says you will never get the principal back an never any interest. Why would you hold it? It turns out it still has value, as long as it has good money qualities. This is the same as gold, when you use gold as money. You give something to someone, get the token (the gold coin), and you are promised nothing, but you can trade the gold.

Do you really not see that you are just going around in a circle?

It is not interesting to me if you choose to draw a line that divides some debt-like things from some other debt-like things.

If you have a hammer, that is not debt.  If you have bread, that is not debt.  If you have a car, that is not a debt.  If you have a knife, that is not debt.  If you own a book, that is not debt. If you have a can of milk, that is not debt.  If you have wood, that is not debt. If you own petrol, that is not debt.  It is *ownership of an asset*.

Monetary assets, whether they also have a direct use (dollar bills to burn them, gold to make juwelry or to use industrially, like petrol, wood, milk...) or not (bitcoins), are just assets you OWN.  They are not debt.  Nobody can be forced to give you anything, or work for you, because you are the owner of a piece of wood, a piece of gold, a bitcoin, or some milk.  Nobody is liable to anything to you because you own a car.

However, if you have a debt asset (if you have lend your car to someone, and you have a piece of paper where that person engages himself to give you that car back, plus some petrol), then that person is liable, has a debt, and if you OWN that debt, then that asset can also be "money".  So debt is a specific kind of asset, and yes, it can ALSO be money.

If you have a government bond, then the government owes you stuff, and that bond, which is a debt of the government, can also be money.  It is an asset which is a debt, and being an asset, it can be traded for other stuff, and hence become money.

But money is not debt per se, and most of the time, it isn't.



You should read Rothbard: http://mises.org/sites/default/files/What%20Has%20Government%20Done%20to%20Our%20Money_3.pdf


No, debt means that somebody is liable.  That he has engaged himself in doing something or giving something.  Otherwise the word "debt" only means "property" or "asset".

If you have a debt, then you are not free to do as you please. 
If you are holding a debt liability of someone else, then that person is supposed to act, and can be enforced to do so, unless the debt is really beyond his capability.

If you took a loan at a bank, then you are not free to decide not to reimburse it.  It can be that you are broke.  But the bank will first take all you have (or most of what you have).  You have no choice.  THAT is a debt.

If I have gold, then that gold is not a liability to anyone.  Nobody can be FORCED to do anything for that gold.  Most people will CHOOSE to do so.  But they are free.  They could also choose to do something to get my car.  But my car is not a liability either.

Before going into whether or not your system is "right", I note that it is not useful.  Basically, your argument reduces to defining itself.

In the sense of a platonic ideal, money is an abstract IOU.  It is useful only in the sense that it can be redeemed for something else.  In the real world, some (but not all) of the things we use as money have uses other than exchange.  For example, dollar bills can be burned for heat, light, or amusement, and gold has industrial uses.  Bitcoin is a closer approach to the ideal, since it doesn't really exist.

You could claim that since money isn't a claim on a specific thing, or from a specific person, that it doesn't qualify as debt.  But this is just a matter of definition, and not a universal one because plenty of people would draw that line in a slightly different place.  You can certainly choose to define debt in a narrow sense that excludes various categories of similar concepts, but what good does it do you?

By recognizing money as an abstract form debt, you are able to quickly purge from your mind all sorts of silliness.  It is a more useful way of thinking about things.

Now in the broadest sense, an "asset" is merely something useful, which can be "useful for use" or "useful for exchange".  This obviously includes goods, money, in any form, and debt, again, in any form.  Saying that money is an asset isn't an argument for or against including it in the category of debt.

And debt most certainly is speculative.  If it wasn't, why would something like FICO exist?

All of this applies to gold too.  That gold is a physical thing does not change anything.  You get it by doing something useful for someone else, and you expect to be able to trade it later for something useful to you.

No, this is a fundamental misunderstanding.  Money is not debt.  Debt can be money.  But money is not debt.  It is true that most modern fiat money systems are debt-based money.  But that is not universal.

Money is an asset, that is speculatively tradable for useful assets, and can serve as intermediate exchange medium and store of value.

The trade-in of money is purely speculative.  Nobody goes to jail because your monetary asset didn't hold the value you speculated it was going to hold.

Debt, on the other hand, is the "second part of an exchange".  If I exchange 2 apples for an egg, and (first part) I give you 2 apples, then (second part) you OWE me an egg.  That's enforcible because we had a contract: you owe me an egg.  There's no speculation here, the agreement was an egg.

The liability "you owe me an egg" can become an asset by itself.  This is how written liabilities become assets, which can become monetary assets.  The value of a written debt liability is of the order of the value of the debt by itself.  This is how debt can become money.  But it is just ONE KIND of money.  Material assets are another kind of money.  In our modern monetary system, things become funny because the debt liabilities which become money, are often debts expressed in that money itself.   Modern fiat money systems are debt-based.  But not all monetary systems need to be debt based. 

Gold is not a debt.  Gold is an asset, a material asset.  Nobody is *required* to give you anything against gold.  If people do so, it is their free choice.  The monetary value of gold is speculative.  On the other hand, the liability "you owe me an egg" is not a matter of choice on your part, and can be enforced.  It is a debt.

You can base a monetary debt system on gold, but that doesn't make gold a debt.  You can "cover" issued money by gold.  In that case, the issued money is "covered" by gold, in that it is a liability of the issuer: he is liable to exchange physical gold for the issued money.  This is the origin of the fiat system of course.  The issued money is debt based in this case.  The gold itself not.  Gold is an asset.

Debt is money (in the sense that it's volume depresses the value of the currency unit, just like excessive printing of bank-notes), and money is also obviously money.

The powers that shouldn't be have supplied the world with money in the form of 1/10 banknotes and 9/10 debt.

It does not have to be like this, the reason being the absolute fact that pure money have no use-value whatsoever. So everybody could load up value in reserve in the form of money, there is no limit. House, car, dog, etc plus a corresponding wealth in money is possible, it is just as possible as having those things and no money, or those things with debt to the roof. For the real economy, the important thing is that you have the house and the car, that is resources that you use, which can not be used by others.

The number of units of account that you acquire thusly is of no relevance, it is the value that the money have. The volume of money existing in the world is always 1.

Don't listen to other people on this matter, it might confuse you.

Why the situation is like it is, drink some dominator under the table, and ask.

Imagine the world 50 years from now.  Most BTC has already been generated.  Most worldwide commerce is using bitcoin.  The value of 1 BTC is about one decent, but small, office building, say close to 1 million dollars today.

Now think carefully and give me a scenario where 1 BTC can double in value in a reasonably short time.

Basically, what you describe couldn't work.  But it also couldn't happen, so there isn't much point in losing sleep over it.

i really agree with you.. Money is big debt .. depend on asset

I'm talking about the real world aplication of your "system"
It could even work in a system constructed from 0, but what would happen with the real system? basicly all companys are fueld with debts. If I borrowed 100 BTC to buy machines and the machines cost 50 BTC when I pay it back, I made a big loss. and what a about demand that would lower a lot, since noone will buy things they don't realy need.

There are levels of debt.

Money is debt.  This includes dollars, bitcoins, and even gold.  This is highly abstracted debt, not a call on any specific thing, or from any specific person.  Under barter, you trade value for value directly.  With money, you trade value for a claim on value, or money.  When you spend the money, you complete the barter that you had half-completed earlier.  Money is a token of debt from society in general, it represents that you have done something good for society, and that society has not yet done something good for you in return.

When people talk about how the dollar is debt based, they either mean this, and only this, or they are morons repeating catchphrases that they don't understand.  This is heavy shit, and it is possible to go decades with the fuzzy "money is debt" meme in your head, but without understanding what it really means.  I know, I was there.  Please read, and re-read the paragraphs above and below until it makes sense.

Deflation is the natural state of an economy when money is honest.  A dollar held is an investment in society.  You are leaving resources available for others to use, even though you could take them for yourself.  When you redeem your dollars in the future, it is normal to find that society has invested the value that you left unclaimed in improving production of useful things, and even to have invented new things.  Better production means that products are easier to produce, thus cheaper.

So, with honest money, like bitcoin, it is natural that one bitcoin should be able to purchase more value tomorrow than it does today.  We call this deflation, and it should be obvious that deflation is not a problem under that system, nor is the debt.

The problem with the dollar is that some people are able to produce new claims on wealth, without creating new wealth.  They are then able to acquire wealth, and at the same time diminish everyone else's stored claims to wealth.  This is called inflation.

The root problem is that the dollar is a political currency, meaning that imperfect people are in charge.  If we could round up some angels to run things, the dollar could be sound, even deflationary.  But angels are in short supply, so Satoshi decided to set a fixed generation curve.  As long as we keep it difficult for bitcoin to come under political control, we'll be OK.

how can any debt based economy survive a endless deflation? the problem is the system based on debt, not the inflation

I would like to point out something that I wrote in the other thread, but may actually belong more here:

https://bitcointalksearch.org/topic/m.9539997

What is somewhat missing in these discussions is the velocity of money (in this case, of bitcoins), which is the inverse of the (harmonic) average of the average *holding time* of a bitcoin before buying something with it.

I also thank!