Topic: Inflation and Deflation of Price and Money Supply - page 5. (Read 1424248 times)

i heared that but i dont know if this kind of trick is effective this time of crisis that affect the prices of all cryptocurrencies and also a paper money that we use for everyday's need. We witnessed that every crisis that effect us , it can make the value of crypto down or up.

Bitcoin and other cryptocurrencies have what fiat currencies cannot offer; fixed total supply. People are already beginning to realize the negative impact of excessive money printing out of thin air; it steals value from people as more money is continuously being created out of nothing. Crypto adoption at a wider scale might struggle to come to fruition, however, its something that is bound to happen.

overall US govs has been cheating all this time anyway - they have printed money so they inflated all funds of holders outside of the US, and then gave these printed money to the citizens
economically thats tricky, not cheating really, but we all know it is

The fault of inflation is not in business “monopoly,” or in union agitation, or in the hunches of speculators, or in the “greediness” of consumers; the fault is in the legalized counterfeiting operations of the government itself. For the government is the only institution in society with the power to counterfeit — to create new money. So long as it continues to use that power, we will continue to suffer from inflation, even unto a runaway inflation that will utterly destroy the currency.

It depends on the country if they already legalized the bitcoin or not but for those countries who do not use crypto currency, the government have no power to manipulate it because this is not under their belongings. They can only manipulate the value of the tax of it when the people convert it into fiat.

Its more of currency manipulation is the right term I suppose, Its not purely or 100% controlled by the government but of course significant contribution coming from them. By taking fiscal and monetary policies specifically these will undertaken by the central banks.
I hate so say that allegations recently by the US against China on its currency manipulations. In my opinion its just a counter moved by China to lessen the effect on the current Trade Wars in which it is initiated by the US.

Each state is trying to help its producers by taking various tricks, whether it is a deliberate depreciation of the national currency, taxation of imports with various duties, and much more.
It’s just that some states use legal methods, while others may cheat.

Not to mention that manipulating national currencies (eg. by printing money) is often done by purpose, to make own companies with their products cheaper than of its foreign competition. This is how China for years had been working as a factory for the world.

Yes. Inflation and deflation of the prices is controlled by the governmental bodies. This is not dependent only on the cryptocurrencies. Various financial activities that are taking place at the national and the international level determine the prices in a specific country. Moreover the economic growth is much relatable to the development in different spheres.

Price changes are merely a symptom of inflation. The original, first definition is an increase in supply of money ( claims on assets and GDP) relative to the supply of assets and GDP. Thus inflation in most economies has already happened to an enormous degree in the past 10 years. Price changes have mostly yet to happen, but could still be forestalled by a balancing deflation.

All goods, assets and incomes will always experience their own rates of price change, depending on their individual relationship with the changing base money.

Central banks have no power to control price changes, but they use various tools (interest rates, repos, QE etc..) as a means to supposedly target a certain price outcome.

These are the reasons there is so much confusion in the measure and definition of the word 'inflation'.

I think there's a chance that Bitcoin will fork into a low inflation rate (0.5% to 1%) and a zero inflation (current). Both Bitcoin chains remain Store of Value. In the low inflation chain, some portion of fees gets shifted to mining.

Who else believes that we'll still have inflation after all Bitcoins have been mined? It doesn't look as if the ecosystem will be able to sustain itself from fees alone, even if the technology would be two times more efficient each year...

Inflation is when prices rise, and deflation is when prices fall. You can have both inflation and deflation at the same time in various asset classes. When taken to their extremes, both are bad for economic growth, but for different reasons. That's why the Federal Reserve, the nation's central bank, tries to control them.

Which effects and human behaviour reflecting the markets in a recession : https://youtu.be/SV2wvInWDPA
Very interesting!

This is the whole problem that inflation turns from necessary to destructive for the economy. It is clear that with a developing economy, the amount of money from citizens increases, and they can afford to buy more. That is, demand increases, so there are more goods and services to meet it. Enterprises produce more products, the list of services provided to citizens is growing. Hyperinflation, which occurs when the state budget deficit and with a huge external debt, is a factor that destroys the economy of any country. A competent domestic and foreign policy is needed to keep inflation in balance and not get out of control. In our world, this is difficult to achieve because of corruption and destructive economic models between countries, which include sanctions, etc.

I posted this article in Altcoin Discussion. It's related to this discussion.

Original post: https://bitflate.org/post/2019/10/10/the-next-big-thing-in-crypto-using-inflation-to-create-stablecoin.html

This is my view of the next big thing in crypto. Bitcoin is digital gold. It has a limited supply of 21 million coins. Therefore, its price fluctuates. Stablecoins are cryptocurrencies designed to avoid price volatility. Existing stablecoins are issued by centralized authorities. This mechanism defeats the ethos of cryptocurrency. In order to access decentralized cryptocurrency, we need to rely on centralized authorities to issue digital stablecoins.

A New Look at Inflation

Cryptocurrency has started and become successful by embracing Austrian Economics. Bitcoin’s limited supply means every person on planet Earth can only own a small fraction of a bitcoin. When Bitcoin reward reaches 0 around year 2140, there will be no coin. If there is still demand for Bitcoin, its price will be: buyer demand / supply = infinite.

How do we address this conundrum? There is currently no easy way. For cryptocurrency to gain adoption, we can’t have a money system with limited supply. That is not how the world works. Even our universe inflates. To solve this paradox, we need to explore the role of inflation.

People lament about inflation robbing your purchasing power. But historically, economies tend to grow with currency inflation. It is hard to find past record of economies thriving with deflation. Inflation is bad when it is high and/or when money is printed without people’s knowledge and approval. Otherwise, it can be a force for growth. With cryptocurrency, we can design a currency with a known and deterministic inflation rate.

Deflationary versus Inflationary

Economies always have deflationary and inflationary assets. People often overlook this. Gold, real estate, moat, competitive advantages are some examples of deflationary assets. Inflationary currencies serve as a medium of exchange. They are used for transactions. Bitcoin was created in response to the 2008 economic crisis. It exists and thrives because of quantitative easing, a type of inflating monetary policy.

Existing stablecoins are inflationary digital currencies. They are pegged to fiat currencies. In the future, there will be two kinds of cryptocurrencies: deflationary and inflationary. For cryptocurrency to gain more adoption, we need a better kind of inflationary digital currency.

Bitflate - Digital Native Decentralized Stablecoin

Bitflate is a new kind of cryptocurrency. It is a Bitcoin fork with an inflation rate of 7% per year. In its first four halvings, Bitflate blockchain will create 19.3 million coins. After that, its supply will inflate at 7% per year. Here’s the block reward schedule for the first 10 halvings:

0: 50
1: 25
2: 12.5
3: 6.25 (end of halving)
4: 6.65 (start of inflation 7%)
5: 7.02
6: 7.51
7: 8.04
8: 8.60
9: 9.20
10: 9.85

With inflation, there will not be a pressure to push price up too high. Bitflate blockchain uses Proof of Work. It issues a deterministic and limited number of new coins. Therefore, price will not drop too low. The goal of Bitflate is to create a digital token that people can use for transactions.

Bitflate price will not be as stable as pegged stablecoins. It has significant advantages: digital native and decentralized. Bitflate will be more suitable for transactions than deflationary cryptocurrencies. It opens a new gateway to financial possibilities. In this future, we, the people, are in control.

PS: Bitflate is now trading on Unnamed Exchange (https://bitflate.org/exchange/). Join our discord community (https://discord.gg/utnEyp8) for update.

if they think it's not normal of course they will complain, but what we have seen up to now seems to have become a normal thing, inflation does occur from year to year everyone might know that, and maybe as you say maybe some countries poor, but for developing countries I think that's acceptable, I live in developing countries, and yeah I often hear the news when the price of goods goes up every year, and it only happens a little later then as usual, so I think they can accept it.

Or perhaps its market makers taking profits?

Think about it - I own a shop and buy a tomato for $1.00, now I need to sell for $1.35

In the case of market makers its a bit on the reverse side - I sold a tomato for $1.35 now I need to repurchase it for $1.00


Also read the top post - something about supply and demand and all that jazz.... uhm If someone is buying a BTC does that warrant demand > supply because to actually demand and buy 1 BTC there has to be an equal supply of 1 BTC sold... so demand always equals supply??

With regards to BTC replacing FIAT, it will likely need to be used in a large amount of trade invoicing.  I'm not 100% sold on whether or not that will actually be a good thing for the price of BTC in the long-run.  Typically, you don't want to use something that has high appreciation in order to pay for goods and services, so if BTC does become a replacement for FIAT in terms of invoicing trade, that means that people likely aren't expecting any additional returns. 

On a separate topic, while BTC could be a hedge against inflation, I'm a little worried about the other side of the coin.  I'm talking about deflation.  I haven't looked into it as much, but my understanding of the inflation and deflation are along the lines of:

Inflation: Becuase it eats away at your cash, you are essentially incentivized to spend your money as it will be worth more now than in the future.  This spending will presumably lead to growth, job creation, etc., but can also have negative impacts such as borrowing, since the money your returning in the future could be worth less.  Maybe this ultimately is why we have boom and bust cycles, where people borrow too much and this eventually leads to a recession or economic collapse

Deflation: I guess if you think about it as the opposite of inflation.  People believe their money will be worth more in the future, or that goods and services will be cheaper if they hold off on their purchases until next year.  Could this lead to a situation where people hold off spending, which decreases growth, and leads to an economic death spiral? 

I don't know which is worse, the possibility of hyper-inflation or depression

Its an interesting idea but we have a opposing possibilities here.   First Bitcoin is expanding in price because the rate of change in FIAT is greater then BTC which has a reducing amount available each year.    Presuming both have at least equal demand for payment usage, etc.
     However there is also the idea that Bitcoin as an emerging technology and not yet established by its own revenue and regular business quite yet, like many internet type startups its actually benefiting from the loose monetary outcome which allows cheap financing to occur and encourages risk based investment.    The base rate being so low right now, establishes the safest money with little returns and especially if we consider personal inflation experienced might be far higher then measured or stated by government for GDP purposes.  
  This low base rate encourages risk taking, what could happen is as dollar falls it actually becomes more difficult to gain interest in risky projects.   The flow of excess easy money from base rates that do not match or surpass inflation could reduce, this brings us back from inflation to a currency standard in decline.   Many people presume well Dollar will pass its business onto BTC but thats not a given, its not even likely imo.  

What I think is most likely is that if we are talking about Dollar being replaced, is that another FIAT standard takes over.   This could be another nation with alot of trade done or it might be an agreed standard similar to EURO.   EURO is weak but it is at least backed by Germany in part, so I don't see that as failing so much but it might be challenged and not seen as worthy as taking over from dollar.    The point being if BTC loses its source of excess dollar funding it could be more challenged in price, not directly inversely proportional to Dollar decline.   I don't believe it will be that simple, alot of money will likely go into gold and many different standards.
   The ultimate result of inflation, loose standards and debt which fails to repay its principal value is a deflationary effect, this could be a harsh winter for BTC.

I don't think that scenario is any time soon but inflation means instability and its hard to predict the outcomes, there's not a certain winner.  Likely all of society will suffer some losses, inflation especially when its out of control is not a positive.