Inflation and Deflation of Price and Money Supply - page 59.

WynX

member

Activity: 77

Merit: 10

They would spend it on whatever they'd like

....to get more power potentially...
But I suggest that the superwealthy of today (in fiat) are not the same people that hold most of the BTC. Is the change of one group to the other not hampering BTC adoption (especially since you mention the wealthy control many things like public opinion)?

Ix

full member

Activity: 218

Merit: 128

Quote from: zipmaster on February 07, 2014, 12:18:26 AM

As a result, as currency deflates, the ultra rich find themselves holding excess wealth whose utility is of small effective value.

How can you think that when there is evidence all around us of what "ultra rich" do? They control media and therefore public opinion, they control government and therefore public policy. When quality of life is no longer an issue, it becomes about power. There is no magic spell that makes this work differently in bitcoin. If ultra rich are induced to spend more, what do they spend it on?

zipmaster

member

Activity: 85

Merit: 10

Quote from: WynX on February 06, 2014, 06:28:12 PM

Interesting, so I agree the divisibility of the currency itself is not a problem. Even the bit-wise convenient satoshi*10^-3 is more than enough.
Do you think the need for massive deflation for bitcoin when successful adoption of the coin *occurs*, is being hampered by the current distribution of the money supply? Simply put, everybody on bitcointalk (owning some coins) now are the future miljonairs? The rich in bitcoin now, are going to buy their own countries?

Does it really seem feasible to expect such a sudden shift of wealth?

No, with deflation I would think the shift in wealth to be minimal. The utility curve of money for individuals flattens out for larger wealths. As an example, the difference in net wealth of 100 million vs. 10 billion has the potential to change the actual quality of life by an amount which is much less than the difference between 10k vs. 100k. As a result, as currency deflates, the ultra rich find themselves holding excess wealth whose utility is of small effective value.

In a deflationary economy, wouldn't the ultra rich be induced to spend more since their wealth is less useful" to their own quality of life over time?

WynX

member

Activity: 77

Merit: 10

Interesting, so I agree the divisibility of the currency itself is not a problem. Even the bit-wise convenient satoshi*10^-3 is more than enough.
Do you think the need for massive deflation for bitcoin when successful adoption of the coin *occurs*, is being hampered by the current distribution of the money supply? Simply put, everybody on bitcointalk (owning some coins) now are the future miljonairs? The rich in bitcoin now, are going to buy their own countries?

Does it really seem feasible to expect such a sudden shift of wealth?

deisik

legendary

Activity: 3514

Merit: 1280

English ⬄ Russian Translation Services

Quote from: ZephramC on February 02, 2014, 10:52:11 AM

Quote from: deisik on February 02, 2014, 09:46:05 AM

Quote from: ZephramC on February 02, 2014, 09:17:46 AM

Quote from: deisik on February 02, 2014, 05:46:24 AM

And to correctly write down this number would require even more atoms (let alone making a transaction or handling it in some way, lol)...

You can write this number (its lower and higher estimate) quite easily. But you can not write all numbers from 1 to this number (without exhausting matter and energy in the universe).

I specifically mentioned 'correctly' which, I guess, is something different from the number's lower and higher estimates. The number of atoms in the universe is about 10^80 (if I'm not mistaken), so that to completely (read exactly) write down an arbitrary number with such division you would need about 10^80 digits, right?

It depends on the base

. I can write number 1234 using only 4 digits in base 10. I do not need 1234 digits. to completely (read exactly) write down an arbitrary number with such division you would need about... 80 digits. Right?

I meant decimal notation indeed. And no, it would require 10^80 digits. As I got it, when people say that Bitcoin is divisible, they usually mean a number of decimal places (the number of digits following the decimal point). So the number of decimal places in this context should be considered as equal to the number of atoms in the universe, i.e. 10^80 decimal places

Otherwise, it is not even figuratively close to infinity, just some trivial 80 digits after the point, lol...

ZephramC

sr. member

Activity: 475

Merit: 255

Quote from: deisik on February 02, 2014, 09:46:05 AM

Quote from: ZephramC on February 02, 2014, 09:17:46 AM

Quote from: deisik on February 02, 2014, 05:46:24 AM

Quote from: ZephramC on February 02, 2014, 05:41:56 AM

Quote from: zipmaster on January 30, 2014, 03:13:00 PM

One key aspect worth noting is that, up until the advent of virtual currencies, one large edge of inflationary over deflationary policies is the fundamental limit to how small your currency can be functionally made for transfer.

The indefinite divisibility of bitcoin completely bypasses this incentivizing increasing monetary velocity as a result.

Bitcoin is not and never will be infinitely* divisible. Amount 0.00000001 BTC is currently the smallest unit. Value is currently expressed by 8byte (64bit) number of this units. This means there is space for 18 446 744 073 709 551 616 units. Considering maximum 21M coins, smallest unit would be ~1.14E-12 BTC. Effectively this means space for adding additional 3 decimal places up to 1E-11 BTC without change of data field.

We can estimate gross domestic product of planet Earth to be less than 1E14 USD (about 0.83E14 in 2012). If all the world economy was converted to bitcoins then 1 Satoshi would be worth 4.762 cents in current USD. This is too much for micropayments. Above mentioned "smallest unit" would be worth thousand times less. I consider this to be adequate (for the planetary phase of human evolution) :-].

* - not infinitely divisible. But division up to the number of atoms in the observed universe would be no problem. Still long shot to infinity.

And to correctly write down this number would require even more atoms (let alone making a transaction or handling it in some way, lol)...

You can write this number (its lower and higher estimate) quite easily. But you can not write all numbers from 1 to this number (without exhausting matter and energy in the universe).

I specifically mentioned 'correctly' which, I guess, is something different from the number's lower and higher estimates. The number of atoms in the universe is about 10^80 (if I'm not mistaken), so that to completely (read exactly) write down an arbitrary number with such division you would need about 10^80 digits, right?

It depends on the base

. I can write number 1234 using only 4 digits in base 10. I do not need 1234 digits. to completely (read exactly) write down an arbitrary number with such division you would need about... 80 digits. Right?
However there is a problem that the number of atoms changes constantly. (eg. by creation [meaning anti-anihilation] or by [products of] nuclear reactions).
My original argument was meant that even if Bitcoin were divisible to 10^100 parts it would be quite possible to use it with current computers by using 333-bit integral representation of the value counted in some "Quarkhoshis".

deisik

legendary

Activity: 3514

Merit: 1280

English ⬄ Russian Translation Services

Quote from: ZephramC on February 02, 2014, 09:17:46 AM

Quote from: deisik on February 02, 2014, 05:46:24 AM

Quote from: ZephramC on February 02, 2014, 05:41:56 AM

Quote from: zipmaster on January 30, 2014, 03:13:00 PM

One key aspect worth noting is that, up until the advent of virtual currencies, one large edge of inflationary over deflationary policies is the fundamental limit to how small your currency can be functionally made for transfer.

The indefinite divisibility of bitcoin completely bypasses this incentivizing increasing monetary velocity as a result.

Bitcoin is not and never will be infinitely* divisible. Amount 0.00000001 BTC is currently the smallest unit. Value is currently expressed by 8byte (64bit) number of this units. This means there is space for 18 446 744 073 709 551 616 units. Considering maximum 21M coins, smallest unit would be ~1.14E-12 BTC. Effectively this means space for adding additional 3 decimal places up to 1E-11 BTC without change of data field.

We can estimate gross domestic product of planet Earth to be less than 1E14 USD (about 0.83E14 in 2012). If all the world economy was converted to bitcoins then 1 Satoshi would be worth 4.762 cents in current USD. This is too much for micropayments. Above mentioned "smallest unit" would be worth thousand times less. I consider this to be adequate (for the planetary phase of human evolution) :-].

* - not infinitely divisible. But division up to the number of atoms in the observed universe would be no problem. Still long shot to infinity.

And to correctly write down this number would require even more atoms (let alone making a transaction or handling it in some way, lol)...

You can write this number (its lower and higher estimate) quite easily. But you can not write all numbers from 1 to this number (without exhausting matter and energy in the universe).

I specifically mentioned 'correctly' which, I guess, is something different from the number's lower and higher estimates. The number of atoms in the universe is about 10^80 (if I'm not mistaken), so that to completely (read exactly) write down an arbitrary number with such division you would need about 10^80 digits, right?

ZephramC

sr. member

Activity: 475

Merit: 255

Quote from: deisik on February 02, 2014, 05:46:24 AM

Quote from: ZephramC on February 02, 2014, 05:41:56 AM

Quote from: zipmaster on January 30, 2014, 03:13:00 PM

One key aspect worth noting is that, up until the advent of virtual currencies, one large edge of inflationary over deflationary policies is the fundamental limit to how small your currency can be functionally made for transfer.

The indefinite divisibility of bitcoin completely bypasses this incentivizing increasing monetary velocity as a result.

Bitcoin is not and never will be infinitely* divisible. Amount 0.00000001 BTC is currently the smallest unit. Value is currently expressed by 8byte (64bit) number of this units. This means there is space for 18 446 744 073 709 551 616 units. Considering maximum 21M coins, smallest unit would be ~1.14E-12 BTC. Effectively this means space for adding additional 3 decimal places up to 1E-11 BTC without change of data field.

We can estimate gross domestic product of planet Earth to be less than 1E14 USD (about 0.83E14 in 2012). If all the world economy was converted to bitcoins then 1 Satoshi would be worth 4.762 cents in current USD. This is too much for micropayments. Above mentioned "smallest unit" would be worth thousand times less. I consider this to be adequate (for the planetary phase of human evolution) :-].

* - not infinitely divisible. But division up to the number of atoms in the observed universe would be no problem. Still long shot to infinity.

And to correctly write down this number would require even more atoms (let alone making a transaction or handling it in some way, lol)...

You can write this number (its lower and higher estimate) quite easily. But you can not write all numbers from 1 to this number (without exhausting matter and energy in the universe).

deisik

legendary

Activity: 3514

Merit: 1280

English ⬄ Russian Translation Services

Quote from: ZephramC on February 02, 2014, 05:41:56 AM

Quote from: zipmaster on January 30, 2014, 03:13:00 PM

One key aspect worth noting is that, up until the advent of virtual currencies, one large edge of inflationary over deflationary policies is the fundamental limit to how small your currency can be functionally made for transfer.

The indefinite divisibility of bitcoin completely bypasses this incentivizing increasing monetary velocity as a result.

Bitcoin is not and never will be infinitely* divisible. Amount 0.00000001 BTC is currently the smallest unit. Value is currently expressed by 8byte (64bit) number of this units. This means there is space for 18 446 744 073 709 551 616 units. Considering maximum 21M coins, smallest unit would be ~1.14E-12 BTC. Effectively this means space for adding additional 3 decimal places up to 1E-11 BTC without change of data field.

We can estimate gross domestic product of planet Earth to be less than 1E14 USD (about 0.83E14 in 2012). If all the world economy was converted to bitcoins then 1 Satoshi would be worth 4.762 cents in current USD. This is too much for micropayments. Above mentioned "smallest unit" would be worth thousand times less. I consider this to be adequate (for the planetary phase of human evolution) :-].

* - not infinitely divisible. But division up to the number of atoms in the observed universe would be no problem. Still long shot to infinity.

And to correctly write down this number would require even more atoms (let alone making a transaction or handling it in some way, lol)...

ZephramC

sr. member

Activity: 475

Merit: 255

Quote from: zipmaster on January 30, 2014, 03:13:00 PM

One key aspect worth noting is that, up until the advent of virtual currencies, one large edge of inflationary over deflationary policies is the fundamental limit to how small your currency can be functionally made for transfer.

The indefinite divisibility of bitcoin completely bypasses this incentivizing increasing monetary velocity as a result.

Bitcoin is not and never will be infinitely* divisible. Amount 0.00000001 BTC is currently the smallest unit. Value is currently expressed by 8byte (64bit) number of this units. This means there is space for 18 446 744 073 709 551 616 units. Considering maximum 21M coins, smallest unit would be ~1.14E-12 BTC. Effectively this means space for adding additional 3 decimal places up to 1E-11 BTC without change of data field.

We can estimate gross domestic product of planet Earth to be less than 1E14 USD (about 0.83E14 in 2012). If all the world economy was converted to bitcoins then 1 Satoshi would be worth 4.762 cents in current USD. This is too much for micropayments. Above mentioned "smallest unit" would be worth thousand times less. I consider this to be adequate (for the planetary phase of human evolution) :-].

* - not infinitely divisible. But division up to the number of atoms in the observed universe would be no problem. Still long shot to infinity.

ascalon

newbie

Activity: 12

Merit: 0

Quote from: zipmaster on January 30, 2014, 03:13:00 PM

One key aspect worth noting is that, up until the advent of virtual currencies, one large edge of inflationary over deflationary policies is the fundamental limit to how small your currency can be functionally made for transfer.

The indefinite divisibility of bitcoin completely bypasses this incentivizing increasing monetary velocity as a result.

Good post. Most people who argue against Bitcoin miss this point.

zipmaster

member

Activity: 85

Merit: 10

One key aspect worth noting is that, up until the advent of virtual currencies, one large edge of inflationary over deflationary policies is the fundamental limit to how small your currency can be functionally made for transfer.

The indefinite divisibility of bitcoin completely bypasses this incentivizing increasing monetary velocity as a result.

ZephramC

sr. member

Activity: 475

Merit: 255

Quote from: deisik on January 30, 2014, 02:53:52 AM

Quote from: Lloydie on January 30, 2014, 01:53:47 AM

Falling prices will lead to greater efficiency instead of wasting scarce resources. See Japan. Stagnant GDP but super clean cities, machinery not needing replacement for 15 years, wonderful food, low unemployment. Deflation is ok

How come? If we take this source, the rate of unemployment in Japan had been steadily raising through 90s and on, peaking twice in 2004 and 2009...

You can say that high unemployment also leads to greater efficiency (only the best of the best are doing things) instead of wasting scarce resources (people's workforce and free time). Wink

deisik

legendary

Activity: 3514

Merit: 1280

English ⬄ Russian Translation Services

Quote from: Lloydie on January 30, 2014, 01:53:47 AM

Falling prices will lead to greater efficiency instead of wasting scarce resources. See Japan. Stagnant GDP but super clean cities, machinery not needing replacement for 15 years, wonderful food, low unemployment. Deflation is ok

How come? If we take this source, the rate of unemployment in Japan had been steadily raising through 90s and on, peaking twice in 2004 and 2009...

deisik

legendary

Activity: 3514

Merit: 1280

English ⬄ Russian Translation Services

Quote from: Lloydie on January 30, 2014, 01:53:47 AM

Falling prices will lead to greater efficiency instead of wasting scarce resources. See Japan. Stagnant GDP but super clean cities, machinery not needing replacement for 15 years, wonderful food, low unemployment. Deflation is ok. If their population levels weren't declining I think their GDP might even be slightly growing. Now they've got Abenomics to screw things up by trying to create GDP growth. Growth in what? Speculative assets? Why is growth necessary for a shrinking population? No wonder Abe's popularity is falling. Since, Abenomics, Japan's current account deficit has only been getting wider. Imports growth is outstripping exports growth.

It is not population shrinking that actually matters here but rather age distribution skewing, i.e. more elders and less young productive hands. So things become yet more complicated, and to keep their standard of living, they have to increase productivity that would possibly lead to GDP growth (since Japan's population is not that much shrinking as it is aging)...

Lloydie

full member

Activity: 140

Merit: 100

Quote from: crimsonskies on January 30, 2014, 01:40:51 AM

The long term viability of bitcoin as currency interests me, because ultimately, it is this quality that will sustain or derail it after all the speculation has moved on to more interesting pastures.

The theory of money, therefore, is an important one to contemplate for those interested in the long game.

Money theory can be complicated... and controversial.

Let's add this thought to the mix:

"Enter, bitcoin, a cryptography-based currency and technology developed by someone with the pseudonym Satoshi Nakamoto. It has been designed to have a limited rate of growth in the total quantity of currency, up to a predefined cap. There can never be more than 21M bitcoins. The Quantity Theory says that this will make prices of goods measured in bitcoins stable.

One problem with this theory is that the real costs in terms of land, capital, and labor to produce things is steadily falling. Every productive enterprise is constantly seeking to drive cost out of production. If a currency had a constant value, then prices in terms of this currency would be falling.

As we shall see below, the value of bitcoin will be anything but constant. Without a mechanism for responding to increased market demand by creating more currency, there is a fatal flaw."

excerpt from: http://monetary-metals.com/bitcoin-gold-and-the-quantity-of-mone/

Falling prices will lead to greater efficiency instead of wasting scarce resources. See Japan. Stagnant GDP but super clean cities, machinery not needing replacement for 15 years, wonderful food, low unemployment. Deflation is ok. If their population levels weren't declining I think their GDP might even be slightly growing. Now they've got Abenomics to screw things up by trying to create GDP growth. Growth in what? Speculative assets? Why is growth necessary for a shrinking population? No wonder Abe's popularity is falling. Since, Abenomics, Japan's current account deficit has only been getting wider. Imports growth is outstripping exports growth.

crimsonskies

newbie

Activity: 6

Merit: 0

The long term viability of bitcoin as currency interests me, because ultimately, it is this quality that will sustain or derail it after all the speculation has moved on to more interesting pastures.

The theory of money, therefore, is an important one to contemplate for those interested in the long game.

Money theory can be complicated... and controversial.

Let's add this thought to the mix:

"Enter, bitcoin, a cryptography-based currency and technology developed by someone with the pseudonym Satoshi Nakamoto. It has been designed to have a limited rate of growth in the total quantity of currency, up to a predefined cap. There can never be more than 21M bitcoins. The Quantity Theory says that this will make prices of goods measured in bitcoins stable.

One problem with this theory is that the real costs in terms of land, capital, and labor to produce things is steadily falling. Every productive enterprise is constantly seeking to drive cost out of production. If a currency had a constant value, then prices in terms of this currency would be falling.

As we shall see below, the value of bitcoin will be anything but constant. Without a mechanism for responding to increased market demand by creating more currency, there is a fatal flaw."

excerpt from: http://monetary-metals.com/bitcoin-gold-and-the-quantity-of-mone/

Ix

full member

Activity: 218

Merit: 128

Quote from: billyjoeallen on January 29, 2014, 07:34:56 AM

The velocity of money is decreasing because the Fed is intentionally decreasing it to dampen inflation. They are doing this by paying risk free interest to member bank deposits, effectively paying banks not to lend out their bail-out money. The bail-outs were intentionally designed to re-capitalize zombie banks without causing inflation from the fractional reserve money multiplier. It worked, and all they had to do was counterfeit a trillion dollars and give it to the very people who failed at their one and only job: lend money to people who will pay it back.

This was a patch job to a badly failing system that is still failing, but it was a brilliant patch. The most brilliant thing about it is that they managed to get away with it with no more consequence than some hippies occupying a park.

The body of the economy needs the protein of capital formation, but doesn't get it because of zero interest rates. So like the Grateful Dead song, it keeps truckin; livin' on reds, vitamic C, and cocaine. Meanwhile, the muscles (industries) atrophy. This is not a fixable problem The patient is dying, too weak for the surgery (correction/bust/depression) that would save it by re-allocating capital to the places it could be used it most productively.

Eloquent post.

billyjoeallen

legendary

Activity: 1106

Merit: 1007

Hide your women

The velocity of money is decreasing because the Fed is intentionally decreasing it to dampen inflation. They are doing this by paying risk free interest to member bank deposits, effectively paying banks not to lend out their bail-out money. The bail-outs were intentionally designed to re-capitalize zombie banks without causing inflation from the fractional reserve money multiplier. It worked, and all they had to do was counterfeit a trillion dollars and give it to the very people who failed at their one and only job: lend money to people who will pay it back.

This was a patch job to a badly failing system that is still failing, but it was a brilliant patch. The most brilliant thing about it is that they managed to get away with it with no more consequence than some hippies occupying a park.

The body of the economy needs the protein of capital formation, but doesn't get it because of zero interest rates. So like the Grateful Dead song, it keeps truckin; livin' on reds, vitamic C, and cocaine. Meanwhile, the muscles (industries) atrophy. This is not a fixable problem The patient is dying, too weak for the surgery (correction/bust/depression) that would save it by re-allocating capital to the places it could be used it most productively.

WynX

member

Activity: 77

Merit: 10

Yes, interesting case. Yet it would not be fully representative of the current (fiat) monetary systems. By observing the system, you change the system (hint at quantum properties (i.e. wave-particle duality)).

Topic: Inflation and Deflation of Price and Money Supply - page 59. (Read 1425063 times)