Topic: Inflation and Deflation of Price and Money Supply - page 53. (Read 1424972 times)

The price is linked to future price expectations and supply and demand

Bitcoin is an inflationary currency in the sense that the number of bitcoin is rising : 11m today to 21m in 2140 but the number of users and the wealth it represents is going up faster so the price should appreciate

So in a sense, are the deflation and inflation of BTC kind of like stocks?
Since it's effected by current events relating to BTC.
And also it's ran by supply and demand?

I agree, trade is necessary for it to be money. Time is needed for people to trust it. As more and more business accepting BTC for money, the better is for the whole system.

Trade is necessary for it to be money, but does not command the value. The value comes only from the willingness to hold.

Greetings everyone,

...little confession here, I think I may be a Keynesian ... but I have thick skin so you can beat me up.  While I despise them, I see the genius of the Federal Reserve system.  I also believe that the federal reserve system is like a dinosaur now as we stand on the brink of a crypto-currency era.

Every economy needs two types of money: one to store value, and the other for daily trade.  Clearly for today's world we use fiat currency for daily trade and a host of assets to store value: gold, real estate, bitcoin, etc.   

Bitcoin is designed to store value and/or appreciate value.  Some have mentioned above how the rate of manifestation of Bitcoins is growing so much slower than the adoption and demand for Bitcoin, and is the situation that is leading to Bitcoin's rapid appreciation in value.  That appreciation affects human behavior and so we hoard Bitcoin rather than trade freely with it.   This is not a weakness of Bitcoin, simply the way it is designed.  It's purpose now, whether we all like it or not, is "value storage" not "trade facilitator".

Agree or disagree, but there is a huge opportunity in the crypto-currency world right at this moment.  We need a cryto-currency that is designed for daily trade.  It can be just as fair and open and free and anonymous as Bitcoin, but it does need to incorporate some of the, I dare say, "Keynesian" design attributes of our common fiat currencies.  With crypto-currency, we have the ability to take the art out of the FED chairman's job and solve the problems of currency/price management with computer code.

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.

Adding to the money supply is easy, but there is a need for a mechanism to pull down the money supply when economic conditions dictate.  So, we would need a reserve bank of sorts to store a valuable asset (like Bitcoin) and then sell off that asset when needed as a means of pulling the trading crypto-currency out of circulation when needed.

Does anyone have other ideas for actively managing the money supply of our new crypto-currency world?  Could we manage money supply in a decentralized way?  Could we make every client their own little central bank?

Can anybody explain to me why, in an environment in which BTC is expected to appreciate further, anybody would use their BTC to spend?


For example, if I have 10 BTC, I can use that to buy something worth $5,000 today (just making numbers up). However, if I wait until it goes up, I can use my 10 BTC to buy something worth $10,000 a month from now.

Because I'm expecting the value of my holdings to appreciate rather rapidly, as many in the BTC community are, a rational person would hold rather than spend their BTC.

However, if everybody is under the assumption that BTC is still undervalued, everybody will hold their BTC in anticipation of further appreciation.

But because the value of a BTC depends on how many people are using BTC each day, and how large their spending is, nobody will be spending BTC. This will either cause the BTC ecosystem to collapse (if their was an economy that only used BTC), or the value of BTC to collapse.

I'm sure it has been addressed, but I skimmed through this thread and didn't see much. Thanks again for the help.

Current US inflation is approximately 2.1%

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When the government is lying and printing like there is no tomorrow, people expect a lot of inflation which fuels inflation

Precious metals and Bitcoin are a good edge against inflation if you manage to protect it from those who want to steal it..

It is sometimes hard to read all the posts but congratulations to you if you did

Inflation is probably 5-10%/year in the US at the moment and heading higher, protect yourself and your family!

Woh..it was such a great post. People like me can learn so many things. Everything is described properly here. You must have deep knowledge about the subject. 

Exactly, that is how the hyperinflation is ignited, when everyone tries to get rid of the coins as fast as possible.

If inflation soars anyway, ......

Guys, I found a great article that clearly explains the relationship between money supply and demand for liquidity and how that affects asset prices. He basically shows how QE hasn't had much of an effect on inflation so far due to the low demand for credit since banks weren't willing to lend to anyone. He also proposes the idea that the current change in market sentiment coupled with excess liquidity in the market will lead to stock price inflation over the next year or two.

http://seekingalpha.com/article/2309905-qe-to-propel-market-treacherously-higher-after-taper-ends

What is happening in Argentina is a movement from inflation to hyperinflation.
People now believe inflation is ingrained in the currency and it is a continuous policy of the government, so they are freeing themselves from Argentinian Pesos whatever be the actual currency supply expansion.

Specific good/service prices increase can not be foretell from currency inflation because the Central Bank and the government can not control or foresee exactly where the new money will flow after they give it away.