Topic: Inflation and Deflation of Price and Money Supply - page 62. (Read 1425163 times)

No, actually the 1% hold a lot of assets, which are being driven up by the debt based system. Most of the 99% own a tiny amount of assets per person in comparison. They are creditors but not in any meaningful way.

The 99% will never be able to become the 1%. This is the system. It is unfair and it has been in place for the last fifty years.

99% of people you meet liking inflation indicates you are probably working in finance, economics or government. Real people with real jobs hate inflation. Especially the millions of unemployed people in the US and Europe.

Debt is just a civilised version of slavery. Maybe we don't need debt. At least now we have a choice in an alternate monetary system called bitcoin.

You have demonstrated a perfect example why many do not know how to use percentages properly. 60% - 58.8% - looks good, fooled the people, but the actual amount is what more important.

99% of the people i've met thinks inflation (in their mind CPI) is good as it makes the debts appear smaller and it is the creditors who suffer. Creditors are those who have a legal future claim on money. Hence those who lend out money as debt have a claim for that debt to be repaid in the future. What 99% do not understand is that they are also creditors, i.e. those who have insurance policies, pensions, savings.......people have a legal future claim on that money and they also suffer from inflation and not just those who lend the money out.

Economists are the types of pseudo-intellectuals that create mathematical models, which almost never work in the real world. Anyway, as far as my understanding goes, today we live in a debts-driven-and-debts-stimulating society, where inflation has a soothing effect. Let's say the GDP is €1 trillion, inflation is 2%, debt is €0.6 trillion, which is 60% of GDP,  and economic growth is 0% then next year GDP reads €1.020  trillion and debt is still €0.6 trillion, which has magically become 'only' 58.8% of GDP. Isn't that great ?! No, it isn't, because someone needs to pay the bill, at the end of the line. Debts do exist in the real world, but they are anonymous, transformed, transferred, disguised and encapsulated within the totality of the money-system and this results in an intrinsic value of contemporary conventional currencies; each coin (real or virtual) hides this shared debt proportionally.

Now, wouldn't the world change all that if we gradually change into a debts-discouraging society driven by a deflationary currency like Bitcoin?

Just stumbled onto this thread. Just don't listen to crappy economists in the (neo)-keynesian camp, politicians, news channels, or read newspapers. They all talk a load of tripe.

Inflation - increase in money supply, also known as monetary inflation. E.g money supply in UK £1000, fiat increase in money supply £100, new total money supply £1100 = inflation 10%.
Deflation - decrease in money supply, also known as monetary deflation. E.g money supply in UK £1000, fiat decrease in money supply £100, new total money supply £900 = deflation 10%. Note:- deflation on it own is bad for the economy but price deflation isn't. If price were falling faster than deflation then brilliant as purchasing power goes up. The government do not like it as the GDP goes down and leads to recession but that's a myth.

Price inflation - increases in prices of goods/services over a year. Tend to be lower than inflation due to currencies fluctuation and productivity. It would include 'increase' in price where the price remains the same but the good got smaller. E.g £1 for 200grams bar of chocolate and the following year £1 for 180grams bar of chocolate.

Price deflation - opposite of price inflation.

RPI - retail price index - weighted measured index of goods and services according to politicians desire to fool the people into thinking how brilliant they are.

CPI - consumer price index - weighted measured index of goods and services according to politicians desire to fool the people into thinking how brilliant they are and taken to another level of treating the people like idiots. In UK it doesn't include TV licence and council tax (another one but can't remember) thus Labour (ex-dictator Gordon Brown) were always boasting how low the CPI was, while council tax and TV licence were going up above CPI almost every year and wages kept up with CPI, thus slowly we all got poorer, then dolled out tax credits and fucking up the country.

My creation - personal price inflation - i kept a record for 2 years of the cost of food, energy, clothes, rent, everything i spent while i was a student and worked out my personal price inflation. It was 2 times higher than the RPI and just under the inflation itself. Took my spreadsheet to my professor and denounced the government official 'inflation', RPI as a load of bollocks. Needless to say my professor was shocked.

GDP- gross domestic production - formerly known as aggregated demand (Keynes) and still what it is. GDP has nothing to do with growth, that is a myth. Politicians use it to fool the people into thinking how brilliant they are. GDP=P+G+I+(X-M).....private consumption+government spending+investment+(exports-imports). Lets play with some numbers. Assume G, I, X, M are the same and prices of goods/services went up and the consumer had to spend more - P goes up, hence GDP goes up - politicians and people cheering that the country is growing (growth). All because of increases in prices, hahahahahahaha, 99% of the people fall for this crap all the time. GDP is useless and don't ever forget that. The next time politicians go on about the GDP and growing economy and 'we all better off', try not to throw your TV out of the window.

I'm afraid you got it all completely wrong. Most prices (except high tech gadgets) are typically very rigid downward and mild, non-destructive inflation encourages putting money to use from passive cash to active capital form. Deflation on the other hand encourages being passive, holding on to cash, not investing, not taking loans and is as such quite devastating to any economy. Japan is a typical example where deflation alone has crippled a very healthy economic growth for decades.

any quantity of money is sufficient for the money supply. prices adjust. inflation discourages capital formation, which, along with technology improvements, is what increases productivity, wealth and the standard of living for everybody. Capital formation is being destroyed by the fiat currencies and global productivity is slowing because of it.

If said "In inflationary system like we have today it's suggested that 2% inflation is "healthy" for the economy."
true, why we don't have inflation of bitcoins? Please correct me if i am wrong.   Bitcoins numbers will not rise in the far future. But demand will increase what can happen after that...

Unfortunately adoption of btc isn't at a level where meddling from humans is off the table, the economy in this regard is still a baby per say so until everything stabilizes and it's adopted on a wider scale we'll never know what will become of it.

I agree with the first bit you mentioned though, human entity can not be trusted.

This chart isn't accurate. There isn't exactly 52560 blocks in a year, and there never will be.

It is one of the dangers of deflation that people often don't take serious of fully understand. Once it sets in, it will go into ever deepening circles. Also note, that even 2% deflation is not a one timer...

In inflationary system like we have today it's suggested that 2% inflation is "healthy" for the economy. I can't imagine if inflation was 10% or more.

Can someone calculate or explain what % of deflation will be with Bitcoin currency once it stabilizes? I think If it's relatively low around 2% deflation then it's manageable and economy will have time to prosper. If deflation will be at much higher rate then economy will truly hurt because no one will be wanting to buy anything and it will be unprofitable for companies to produce goods because from the moment it's produced to get to shelves for customers the goods would decrease in price drastically.

Hope someone can explain this to me.

YEAAAH!

>>> It allows for rules to dictate how the Money Supply 'grows/shrinks/stays the same' so that no Human Meddling can take place.


Human meddling can take place.   As long as the majority of miners agree to change how bitcoin is mined, then bitcoin can change.   This is a very real possibility in the future when mining becomes less profitable.    I suspect the 21mil limit will be removed at some point.  But other changes may be necessary to prevent the 51% consolidation problem.

Bitcoin is a new 'Way of Money'.

It allows for rules to dictate how the Money Supply 'grows/shrinks/stays the same' so that no Human Meddling can take place.

When reviewing the Keynsian economic model the main criticism I see, is that 'The Government' or some other human entity cannot be trusted and just prints their way out of trouble.

What if you take the Keynsian logic and apply it to a crypto-currency, so that a mathematical rule is used, AND CANNOT BE FAKED by greedy humans, to regulate the money supply.

So.. What I am saying is,

If it were possible to tell how much the economy had grown, and if it were also possible to judge the Velocity of Money accurately, THEN would it be ok to grow and shrink the money supply in a cryptographically secure mathematical way across all TXNS, sort of like Friecoin but with increase as well as decrease, so that we had Price Stability ?
 
So that MV= PQ could be set correctly ? If we want P to stay the same, and can change M to do so..

No meddling Humans to muck it up. Just Maths. Would that not work ?

I am discussing this very thing in another post.. https://bitcointalksearch.org/topic/market-driven-money-supply-382204

In a cryptocurrency, we can potentially design methods of money movement and rebalancing of value that are neither "inflation" nor "deflation."

A currency sketch that I've been working on - but have put aside partially finished for the moment - involves using the history of each coin to enforce a restriction on who can have it next. The underlying goal is for the entire money supply to eventually visit all or nearly all (a high ratio, over 50%) the accounts before it can start revisiting previous accounts. I am pleased with the concept because it presents the idea of money velocity and its incentives in a specific, targeted way that makes money "homing" or "heat-seeking" - serendipitously, you can expect money to come to you somehow as the other options for it close off. This money also presents the basic rationales for economic activity that are in capitalism - spend within your means, provide goods and services, invest in real assets, etc. - the key difference being that it naturally leaks out of capital pools and into the hands of the masses.

In the full writing, I also discuss some attacks and ways to stop them, and incentives for speculators to enter such a currency. It does not attempt to solve environmental sustainability, governance, or other issues, just the idea of "income equality."

A very good explanation.

I agree with all of that.

The term "sticky" in reference to wages, prices, etc. is a short run phenomenon. Further, that phenomenon may not need to exist (even in the short run) in the future, if the prices/wages can move freely. But, that's speculative. Clearly, there is some degree of stickiness in the very short term. My point is technology is making this less necessary (imagine pricing that varies - I can envision this, imagine wages that vary based on something - if you're paid in Bitcoin, this is already necessary).

I think that Bitcoin prices (for goods and services) will stabilize at some point in the future. The current problem with Bitcoin prices stabilizing is simply a function of Bitcoin exchange rate volatility. In other words, it all stems from domestic currency valuations. As is, the existing currencies (like the dollar), are over-supplied and under-demanded. This liquidity that central banks pumped out is sloshing through our system and not being utilized much. On top of this, governments and people remain in debt. Right now our system is use to the way it is.

Bitcoin can act as a slow moving, deleveraging medium. Something that is sorely needed within our world economy that is held afloat by too much debt. As more people move towards cyptocurrencies as an alternative to the dollar (and other currencies), the existing problems (with domestic currencies) will most likely worsen. But, I believe, the hope is the bleed out will be slow enough to happen with the potential increasing for new technological advancements that could spur economic growth. It's quite possible, that a slow movement from central banking to cyptocurrencies, the world won't notice the absolute devastation that could occur if we don't find an alternative to the current reserve currency (and others like it). Bottom line, the world's currencies (and governments, and arguably people) are heading for horrible, leverage-driven scenario if nothing is done. I also think that technological advancement may actually be in Bitcoin (and others). Look at the companies that have already been created. I think, as more learn about cyrptocurrencies, more jobs are possible, more growth is possible and new ideas (that we can't envision based on these new currencies) are possible. Cyrpoto currencies provide a bit of hope.

I think cyptocurrencies could potentially act as a world currency down the line. If it ever gets to that, I also have thought for a long time that a basket of cryptocurrencies may actually be the real answer, not simply Bitcoin. But, our system doesn't work that way. Bitcoin will be first. Litecoin is following. But, there's a lot of these and they are quite different.

For me, the key is that the supply is either fixed or set with very, very low growth. I don't see the issue with prices falling "if" we can envision a world where decimals matter more and more. The problem with deflation is when wages fall faster than prices. I highly doubt that will occur. But, that's the true fear with deflation. I trust markets to equilibriate, if they are provided with no interference. The great thing about cryptocurrencies is it appears it would be tough to intervene (at least currently). 

There's potential for a better world ahead.


 

A fixed-supply currency is deflationary relative to prices if its use in the economy (or the economy it's used in) expands.  It will slow the economic expansion rate thanks to sticky prices, wages, and contracts, which might be good.  Sudden deflation results in crops rotting while people starve, so inflation to offset deflation is not always bad.  The money supply should expand with the economy that uses it, as measured by a basket of commodities so that all our numbers on things stay the same and the price signal reverberating through the system can be accurate.  The economy is an artificial intelligence algorithm that needs an accurate price signal as Eric Drexler (nanotechnology guy) described in his Agoric Papers.

In free markets without democratic government using votes to spread the wealth, the wealthy have always had ways to slowly increase their percent share of the wealth and thereby control other people more effectively.  They plan ahead better.  This is great for the biosphere because it causes feudalism and population decrease through widespread misery, except for the wealthy who usually only break even thanks to slowing the general economy of strong middle class buyers.  Bitcoin is a boon for the wealthy, even having its roots in creating more wealth for the wealthy (control of other people) in exchange for no work except to bet on the right programmers to do their bidding.  Early adopters also get wealthy in exchange for promoting it so that the wealthy can learn about it and drive up the price.  Securing control of your assets for all future time is securing a debt that society owes you.  But society leaps ahead only when the polarizing state of wealth is ended with debt erasure, freeing the masses.  Bitcoin is doing this. It is a debt-erasure of dollar-backed assets.  You spend your dollars on it and dollars flood the economy, devaluing themselves.  It is going to erase our old debt structures.  But it is enabling the next one.  Satoshi and Hayek liked the idea of competing currencies, but I doubt if they had debt erasure in mind as a way to re-democratize society.  Litecoin is not a bad bet to make.  Silver was a way to take control back out of the holders of Gold.  There's a great theory as to symbolism in the Wizard of Oz (oz = ounce) as speaking of the times in which it was written, where silver was the original color of her shoes and she only needed to tap them to get back home, away from the enslaving path and promise of the gold (yellow brick) road, and the fake (fiat) green (emerald) city.  Oiling industry (tin man), and making farmers smarter (scarecrow), and giving courage to the voters.

You're assuming a monetary authority is biasing the method of inflation or deflation, whereas I was describing a situation where no one is biasing the method of inflation and deflation.  So the problem is with the central authority, not inflation or deflation. A non-biasing method of inflation and deflation is possible now thanks to cryptocurrencies electronically capable of handling the details everywhere.  As an example to indicate it's not inflation and deflation that is the problem, but a bias from a central authority, consider bitcoin transaction fees, which are not inflationary or deflationary, but bleed wealth from the group of high-frequency transactors to low-frequency transactors.  You may think it is only fair to charge the people who use the nodes most to get charged, but the ones who use the system to store wealth are getting a great benefit without paying for it. The transactions add legitimacy and security to the wealth that is stored.  My estimate is that the fees can't be more than 1 Satoshi per transaction AND equitably function as the world's monetary supply (At $20 T world currency supply,  1 satoshi = $0.01), such as smart phones being used 2 or 3 times per day to buy stuff like $1 of a kilogram of vegetables in a Peruvian marketplace, without having a noticeable long-term biasing effect at the expense of the poor for the benefit of the wealthy (as detailed in my previous post).  The poor spend a higher percentage of their net worth each year, and in smaller transactions.  But the existence of all the small frequent transactions give legitimacy to the value of the large bitcoin holders, and ad security to the infrequent large transactions that a 51% attack will wait for.  So although the nodes and the core programmers look only at the network costs, there is more to it than that if you want an equitable coin.  So inflation and deflation per se are not a problem except for stickiness.  Central authorities making bad decisions is the problem.  1% per year may not sound like much to bleed from the poor to the wealthy, but I think it matters.  To say "it's not as bad as credit card" and "this is a great service to the poor" does not solve the problem and make the coin closer to ideal.