Topic: Oh please, Bitcoin is NOT deflationary. (Read 6193 times)

This topic is about deflation, i.e. Bitcoin being not deflationary (as doubtful as it may sound). There is only one true religion on the definition of "deflation", all others being outrageous heresies or just blatant ignorance of terminology...   

And the opposing religions on the definition of 'inflation' take over the debate again.

Deflation is not about losing coins in particular or decreasing money supply in general. It is not the opposite of inflation in the sense of money supply expansion...

Well I think we can assume that the amount of people who lose coins will be pretty small, and therefore it will only be slightly deflation if it takes off as a currency.

Anonymity all over again.

Yes, among many others. Even pro-Austrians admit it (though they doubt some other negative effects of deflation). But, in the first place, debts aren't necessary (unless we consider taxes as debts) to run a business...

Nevertheless, it all boils down to producers profits

Isn't one of the problems with deflation fact that real value debt will increase?

Yeah, it's ironic to see how one argument given earlier ("each Bitcoin is 100 million Satoshi so you have a long way to go before we run out") and intended to prove you're wrong works against another ("it all depends on if they are destroyed") which is aimed at the same...

Hey I lost track of most of our running arguments, blame it on the ADD. I'll just concede my points for now as I'm sure they'll come back around if they were important. Am I oversimplifying by observing that if one bitcoin survived, that is all that would be needed? Because .0000000001.... etc? 1, or 1 million, or 21 million is more symbolic than anything in a digital world?

Sorry to argue back on your so insistent an objection, but actually everything doesn't depend on bitcoin destruction through lost passwords or hardware failures... It doesn't even depend more on this than on the amount of bitcoins presently generated. And as it is already happening, in the end it will all depend on economic issues...

And no, Bitcoin is heavily deflationary right now

We do not know if bitcoin is deflationary or inflationary, it all depends on if they are destroyed (password lost, hardware fail...) more than the amount bitcoins generated.

Bitcoin may now be inflationary but eventually it may become otherwise.

What if I told you: 1 bitcoin is worth 1 bitcoin :neo:

If the economy is expanding, then yes, it does mean just that. The economy will be expanding with prices going down as long as the negative effects of deflation are being offset by, say, technological innovations (as it was throughout the 19th century), credit and tax policies, etc. In short, as long as producers profits aren't diminishing...

Just because there is a fixed supply of bitcoin, that does not mean prices will have to keep going down.

No price can consistently and predictably move more than 'the' risk free rate of return, simply because that would provide a risk free profit that the market would adjust for. Bitcoin worth more in the future? I buy now and keep buying until the expectation of a further price rise is gone. Lowering today's prices of goods in terms of bitcoin and raising future ones in the process. The coins I bought I will spend tomorrow.

The Fisher equation isn't so bad after all in showing what is happening. MV=PQ, the supply of Money times its Velocity equals the Price times the Quantity of goods. We know M is fixed and Q is growing constantly. When we wrongly assume V to be a constant (as is often instructed) then the Price level would have to accommodate for the increase in quantity Q by going down. Deflation as some say.

But as I have shown, P can't move predictably without affecting people's decisions on postponing to spend. A predictable price drop tomorrow will cause less coins chasing after goods today (we are hoarding) and more coins thrown around tomorrow (we will spend). What happens is that today's Price level will lower and tomorrows Price level will go up, equalizing the price difference to within limits of the risk free rate where it can persist.

This effect of hoarding is exactly what Velocity of money means to say. Because of the fixed supply of coins and the growing economy, we can expect Bitcoins to be hoarded. The velocity of bitcoin is lower now than it will be tomorrow. The price level on the other hand will be stable within bounds. (Not keeping into account other demand fluctuations)

The problem I have with the Fisher equation is that it seems to describe money using independent variables. As you can see P and V are linked, so you cannot determine the change in a one of these two variables when you know the change in the other. There will be second order effects. In this case, a change in P will lead to a change in V now, which in return will reduce the change in P...

Economics, not an art...

There can no longer be "later" you refer to... If you don't buy today, the producer just won't sell tomorrow, because he will have to cut production and fire his staff... Is it really so hard to grasp?

Are you familiar with the gold standard and the raging bimetalism debate of the late 19th century? William Jennings Bryan...Cross of Gold speech ring a bell?


Economists say things like this as if they are real life. It's not that it isn't true, it's... "don't worry kids, we can eat next month, when people finally come back to shop for things again...maybe."

Deflation sucks... see pre-Keynesian history*

*Keynesianism sucks too.

All you are showing is the limits of the Fisher equation of exchange. The equation is a tautology, causing more damage than good in understanding money.

When I am saying people will hold on to their money now and spend it later, that can be interpreted as lowering the velocity now, and increasing it later. Then you will understand that that is consistent with a stable price level and an increasing quantity of goods.

And to this OP and every other mentally incapacitated troll

/end thread

Thanks for your support, will take Irving Fisher's formula into my arsenal of weapons against these cavemen...

(Hope you don't mind I shortened your thread, I am only replying to those points and not arguing your points.)

Let's separate "academic theory" with real world economics, so you understand what I say when I say btc is deflationary.

Simple question- Have bought a pizza with bitcoin this month? Would you?

Remember the guy who bought a $39k Porsche for 300 btc in May? Huffpo mocked that deal.... the car seller.

Would you sell your btc today to buy a house or major expense?

I doubt it, I wouldn't. It's not important because the 'real' economy is not relying on it. Pizza makers and realtors and car dealers still mostly don't care what btc costs.

But check with any btc accepting retailers you know and I bet they see biz drop off a cliff.

That is the only problem with a deflating currency. It kills trade, people will wait as long as they can to buy things cheaper if they believe deflation will continue.

This WILL happen, simple game theory, academics are out.

Whether it is long term or perpetual, not my place to guess for now. But right now, in the real economic sense, it is absolutely deflationary on its face.

Proof- will you think of something you need that costs $1,200, and allow me to sell it to you today for 1 BTC?

Assess your decision making process as you answer that question. That is deflation.

Ignore economists! Bad for your psyche.