Topic: Re: Bye bye bitcoin (Split: Morality of Bitcoin vs. Fiat Discussion) - page 3. (Read 5277 times)

Actually, a lot of governments pay for their tanks in U.S. Dollars or Euros, not their own respective currencies
In some countries, at least the presidential guards are paid in Dollars as well.

I've never seen your particular use of the word "fiat", but that may be a language issue.
If it's so attractive for them to hold it, I fail to see where they are forced. There's a huge difference between making a good offer that you willingly accept and forcing you to accept my offer.
Your whole argument is centered on the fact that "the government" forces you to hold their money. Which is clearly not the case. They force you to use it for certain acts like paying taxes etc., but it's perfectly legal for you to keep your live savings in whatever currency or commodity you prefer. It is highly convenient for you to keep at least a large share of your day-to-day savings in the greenback, which is why you actually hold on to your Dollars. But that's not being enforced by anybody. That the Dollar depreciates in value over time is a fact and probably even stated explicitly (actually, i'm unsure about the Dollar, but the Euro has a target inflation rate of 2%, which is no secret, but publicly announced). The choice is yours. No force involved.


Wrong again. If anything, taking value from you by force is robbery. This may seem like nitpicking on my side, but i think it is important to use the correct legalese when you accuse someone of something.


First of all, you're over exaggerating a lot here. Dollar inflation has been around 2-3% over the last decade, with spikes into the 5.x range and also short tendencies of deflation. That's a little worse than the situation of the Euro, but still a pretty stable currency for any practical use. Calling this "worth a tiny fraction of their original value" is like accusing someone of mayhem because he pinched you in the cheek.


I've been aware of the target inflation rate of 2% for at least the last 20 years of my life, which is even a little longer than the period of time where i had any significant income myself. The overall economic progress of the society i live in has given me access to a good school system, affordable, quality health care, decent housing, parenting needs for my sisters (i don't have kids of my own), a solid retirement plan for my parents, etc. I cannot deny, though, that over the last few decades things got a little worse where i live compared to the welfare state of the 70ies. Also, my own retirement plan looks grim, compared to what my parents could expect. But all in all, I cannot complain.

One of the key elements for the success of the economic system that made all this possible was a slightly inflationary currency which made hoarding a little less attractive than spending. That's just the kind of lubricant that keeps an economy's motor going.

If you think of profit in the very narrow sense of gathering more value, you might just keep to your theory of "inflation is theft". If you value your own quality of life over monetary accumulation, though, maybe you could get over it and think of that broader picture.


2008 did not happen because of fiat. Actually, fiat was not even damaged as badly by the outcome of the ongoing financial crisis as were other instruments of our economy. It got bruised, though, that's for sure.


I beg to differ. I'm (compared to the majority of the bitcointalk crowd) a longtime user and also holder of a tiny handful of bitcoins. I've never regarded bitcoin as a way of avoiding fiat. It can be complimentary currency, it's got benefits of its own, its elegant and useful in its own right, but the strength of bitcoin is not as a replacement of fiat money, but rather side by side with each other.

Lehman would not have gone under if it was typical.

http://www.prefblog.com/?p=2377

Its central issue was not leverage - it was AAA assets that were actually junk.

To call printing fiat money or inflation "theft" is injecting morality and emotion where it doesn't make sense.  Is it "theft" if a creditor can't repay their debts so the saver loses their capital?  Of course not.  Likewise its not theft if both parties have chosen to use fiat currency and inflation reduces the principal.  

You're contradicting yourself, surely?
If it has inflation, even if it is low, how can it also have deflation?

Anyway, your 'very low' inflation figures:
Total Bitcoins in existance: 11,856,350
Bitcoins created per year: 25*6*24*365 =  1,314,000
That is more than 10% increase in total Bitcoins in existance per year.

No - I mean what I wrote. Bitcoin is far below its real potential current value. Since the inflation of Bitcoin is very low - 10 BTC every 10 minutes - it is in deflation mode.

I think you mean the other way around.
Bitcoin may eventually be deflationary, but currently it is much more inflationary than USD, EUR or GBP.
(In terms of money supply, I don't think there is any meaningful measure of pricing inflation for Bitcoin, because almost nothing is priced in it.)

Housing is a good example of how increased money supply will lead to inflation, here house price inflation.
If banks and building societies start to loan more money, require lower deposits, lend to riskier customers, and so on, then more people will be able to afford to buy any given price range of house, therefore there will be more competition, therefore sellers will raise their prices and/or not accept the same level of discount.
Generally, as the amount of lending increases, and the cost of borrowing decreases, people will borrow more, and so buy more goods that they couldn't afford otherwise. They will replace their car now, rather than waiting another year, or two, for example.
Having mothballed production facilities, there will be a lag time before supply can catch up with demand, and in the meantime, prices will rise.
But at the moment banks aren't really lending more, but instead sitting on the money, plus people's uncertainty about the economy makes them more reluctant to take risks, so we aren't seeing those effects.
When the economy picks up, and banks lend again, it is hard to see how that won't translate to a jump in inflation.

Some points:

1. Bitcoin is currently in deflation not inflation (the little BTC inflation is defined by the protocol with 25 bucks for each block)

2. Printing fiat money is theft for sure because the inherent inflation (printing money is inflation) takes the buying value from all existing money of the same fiat sort

3. The statement 'little inflation drives the economy' is not the full truth. It implies that people are scared of loosing their money and put it back into the economy circulation. The bad side is that it also implies interest which feeds people who already own enough fiat money. And the real negative point with that again is that it creates a steady money flow from the poor debted people to the rich wealthy ones. More worse - if the state is debted (the current case) then the whole economy is threatened just by the inflation mechanics. -- One may argue that the Bitcoin deflation has a similar problem because the early adopters profit from the deflation value increase. That is true. But it is not a similar problem because the deflation slows down and may stop some day. Then nobody makes profits just from owning the Bitcoin anymore.

4. One very big problem is the equity covering quote for banks. In Germany it is 7%. That means if a bank has 7000Euro in its safe the bank is allowed to credit 100.000,- Euro to debitors. Inherently the money multiplies many times over a credit chain with multiple banks. This creates a big imbalance between real money and credited money with the well known risks - Lehman Brother was a typical szenario. With Bitcoin this is not possible - you cannot create virtual money - you own the Bitcoin or not - finish.

How would QE lead to inflation when there are so many factories to pick up demand?  Japan has had close to zero interest rates and humungous debts for over 20 years now and their inflation rate is very low.  My assumption is that prices are held down by the enormous supply of industrial production from China.  Here in the UK, there is huge spare capacity in factories.  you could print a billion pounds and prices of industrial goods would probably not rise.

Hmm in fact, they may well already have printed a billion    Its probably why house prices are rising - there are no enough houses to go around and the market is held back by crazy planning/zoning laws.

I actually agree with this. There are many areas for improvement in Bitcoin, and it is likely that a better method of transferring money will be developed in the future.

It is certainly an oddity. Eventually all the QE must lead to inflation, surely?
But at the moment banks are simply sitting on the extra money to build capital reserves, and are not lending it out, so most of it isn't really entering the economy.
I fear there is going to be a nasty rebound at some point.

The interesting question is how much?  In the 70s inflation was much higher than the 80s but growth was much much higher.  Today we have massive amounts of currency sloshing about and very low inflation.  I wonder how high inflation would need to go before that money was considered better invested in industry than sitting in government bond accounts.

Standard economic theory, which you may or may not agree with, says that a small, relatively constant, amount of inflation is the best answer for the economy. Large amounts of inflation, or fluctuating inflation, is bad, as it deflation.

If one person has savings in the bank, someone else has debt in the same amount.  Sometimes, people have no way to repay their debts because the economy sucks.  When that happens, inflation reduces the principal so the saver can at least get some money back.  It also forces the saver to spend their cash which boosts the overall economy.

If my understanding is right, then inflation is good for everyone under certain circumstances.

Out of curiosity, where did you get the average lifespan number. Is there some kind of database of all historical fiat currency & its gold exchange rate somewhere, or something?

Yes, I understand that you're arguing the specific point.

And again, for clarification, I point out that you're trying to say that government does NOT force acceptance of their fiat for goods and services, and the reason you give for this isn't because the government doesn't use their fiat for all their interactions, but essentially that no given individual must of necessity interact with them. That when they acquire their goods and services, they don't overtly hold guns to people's heads as they hand over the check.

Alice wasn't just representative of an individual. She was also representative of any given society as a whole. And every society MUST interact with its government.

Please think about this very carefully:

What do you think would happen if the government requested bids for an interstate highway and every contractor refused to accept their money, demanding gold instead? What do you really think would happen if every gun manufacturer in the country suddenly refused to sell arms to the military, or to policemen? Do you *honestly* believe they'd just throw up their hands, shrug and say "oh well," and voluntarily expire as a "sovereign" entity? The very thought is ludicrous, and I'm sure you could dig up a historical example or two of exactly what happens when a government is denied in such a manner.

So your phrase "you are not forced to accept fiat for your goods and services" doesn't apply to society--it applies to me personally. Currently. Thanks. That changes everything.*

Is that all you were wanting to point out there?


*Yeah, that was snippier than it needed to be. Sorry.

No, actually we are not forced to use USD.   For some things, yes.  Many countries ask for their taxes to be paid in their currency, but freely allow other moneys to circulate.  Banks in Austrailia handle many currencies.  Banks in US handle only USD, true.  But that does NOT force us to use USD.

The glass here is either half empty or half full, depending on how you look at it...

I'm not arguing your general point, but your specific one.
You said:You are not forced to accept fiat for your goods and services.

And yet, you don't see how a system that encourages debt over savings could be problematic?

Let me see if I'm getting this.

My assertion is that fiat currencies are inherently bad. A scam. Theft.

The supporting argument I'm making is that due to government laws and actions, including legal tender laws, taxes and government spending, individuals are forced to use and accept their fiat, and hence society is coerced into using it, which is how the scam is enabled. I provided the examples of paychecks, obligations and the purchasing of tanks and staples.

And your response is that no one is literally forced to accept fiat for goods and services because no one ever has to sell the government anything.

Is that the entirety of it?



So... that's a "yes"?