Topic: Why does Bitcoin subsidize saving? - page 2. (Read 8619 times)

It depends what you want that currency to be used for.

Store of value or a facilitator of trade?

The two ideals are indelibly mutually exclusive.

It's true that perfect money isn't deflationary, but it also isn't inflationary, it just is.

Money is just information. Who owes what to whom.

Ideally it would be invisible. Just like a designer would tell you the best tools are those that are "not in the way", that are invisible.

A giant computer network that's tracking all production, all consumption, all economic activity, would surely be dystopian but it could tell us exactly how much more we'd have to work in that factory before we're finally eligible for this nice Porsche car. This would be the invisible money I mean.

Something like Ripple comes close to this, especially when using "hours of unskilled labor" as the base accounting unit. People essentially print their money themselves here, and the interesting thing is you don't need to centrally control the money supply because everybody knows and agrees on how much hours a day has and what it's worth for them. Also, an hour today is still an hour in 20 years.

Of course concepts like this are inherently trust- and reputation-based though. So one (or more) cryptoanarchist came and didn't like a money being attached to identities that way, so they created Bitcoin which almost necessarily has to be modeled after a commodity with limited supply in order to allow for reasonable privacy, which is also the feature which made it almost instantly available world-wide.

So every approach to money has advantages and drawbacks. The perfect money can't exist. Thus I believe the future of money is parallel systems anyhow. If there's a problem that bitcoins become too scarce and unevenly distributed, people will substitute part of their economic activity with a Ripple-like system.

What about BTC over email, the Android wallet and the multiple card systems in development?

Those are some pretty big new services after just 3-4 years of Bitcoins lifetime. If we say Bitcoin has only been really known 2-3 years,
I'm not even sure Google added that many new features in their first 2 years!


Also BTC does not inherently increase in value over time - BTC ONLY become worth more if the economy is growing. So if a large number of people do nothing with their BTC and there are no new adopters the value would start to drop.

Maybe 10% of the people holding BTC can enjoy the free ride to some extent, but they still need to eat at some point which will chisel away at their fortune.

If any more than that in a stable BTC economy try to live from BTC deflation, the BTC economy would likely shrink as a result of their lack of productivity and hence the BTC value would drop.

If bitcoin fails due to the actions of speculators then it was meant to fail.

It was designed to attract such people. Personally,bitcoin got me interested and getting interested in the economics of how the world turns has opened my eyes. I was completely ignorant beforehand. Now I see that if you do not understand money you do not understand the world around you.

The alternative coin suggested here would not have done that for me.

The point has never been that early adopters should all run out now and invest immediately. The point is that there will rarely ever be a profitable opportunity for them to do so. Unless the money cartel starts churning, gets everyone hooked on bitcoins at low interest, then eventually calls in all the loans without recirculating the money. This is a far worse case and one that I think is guaranteed to happen if bitcoin insinuates itself into the world economy. There will be a new wall street and it will be just as effective as the old wall street, except that perhaps there will be new ownership. JP Morgan was a master at manipulating the economy before the advent of the central banking system in the US. Then he simply manipulated the government into central banking because it's a lot easier to keep the people happy if they can still put food on the table while their productivity is stolen.

I've been accused of being a labor theory of value proponent before and discussed it to death then, I don't feel like getting into it. Nor discussing the taint that Marx added to it. The LTV still requires an exchange of which there is none when discussing the point of a currency that accrues interest for doing nothing, so I also don't see how it even applies to the statement you quoted.

I don't particularly disagree or dispute any of the other points as they stand now (read: not the case in the future), but the Bitcoin economy is growing primarily on speculation. Without the massive hills and valleys, Bitcoin could have easily grown much faster and much harder. Instead, a large portion of the actual growth has been ways to separate bitcoin from it's volatility--e.g. BitPay.

Here's the gigantic hole in your theory:

Rich people gotta eat, too. (hint: you can't eat gold)

It goes much deeper than that. We are where we are today because of the history of gold, a history spread out over at least 5,000 years that bitcoin has tried to emulate in about 4. Acquiring vast sums of money should not be about luck, but it was the case with gold and is the case with bitcoin. But--this is only one side of the issue. Gold gains great power not because of what you can buy with it, but what you can do by NOT spending it. I think most people would agree that the wealthy (or a combined group of the not so wealthy) lending money to invest in new business and infrastructure is a good thing because both sides benefit.

But when gold is withheld and made artificially scarce, those without gold become paupers. This is when the gold-bearers can swoop in and take back the productivity of years of labor essentially because of deflation. The paupers can't afford to keep their durable goods because they need to buy food. They can't pass on wealth to their children, so their children have to go through the same insanity. Combined with the ingenious idea of Rothschild FRB, this effect can be maximized. Combined with central banking and it is government-mandated theft.

Again, that's only part of it and honestly it is the part that bothers me less.

While I've avoided mentioning it because I don't want to sound like I'm advertising, the link in my sig explains how a cryptocurrency could be created that solves the economic issues I have with bitcoin, gold, and modern fiat. It isn't about the initial distribution, it is about the ability of the people to create money at cost (or below cost in the case of the wealthy causing undue deflation). But it's also much more than that, though I haven't delved into what I see as being the economic result of such a currency. But it's freedom, in a word. Feel free to post questions in that thread though and you can be sure I'll give a long-winded response.

I'm only playing devil's advocate for demurrage. It isn't my idea, and I have hotly debated it with jtimon and the others behind it in the past because I don't think it will be a successful idea and I think they're wasting their time.

I agree that a currency offering perfect information is a huge, unbelievable boon, but it can't overcome the faults of the other economic properties of bitcoin. And, if you ask my biased opinion, I would say that Decrits would have a significantly better chance of being the currency that people will use for trade. And there is no reason it couldn't facilitate the storage of wealth, either. You just aren't going to earn interest for doing so in a steady state economy (though you will in an expanding one), but nor will you lose value. Since it would have all the same valuable properties of a cryptocurrency, new people to the cryptocurrency market may fear being left holding the bag for bitcoin and avoid it altogether. Pure speculation though, of course.

Listen, Etlase2, I have similar concerns.  And I have expressed them here, over and over again, from my very first post.  But your proposed solutions are laughable.  Would it be better if early adopters invested instead of saved?  Probably.  Will Bitcoin fail if they don't?  Perhaps.  Does this mean we should re-distribute Bitcoins on a per capita basis?  LOL... no.

The thing to consider, is that the Bitcoin economy could easily end up being worse off if a bunch of incompetent early adopters were to take your advice, for instance, to invest, and end up giving half a million Bitcoins to a ponzi scammer, in a botched attempt at "investing".  So, why not let the market work, instead?  Why not allow those who are competent investors to see a rising price as a signal to invest, and let everyone else just hoard in the mean time?  That's called rational self-interest.  That's called specialization.  That's called an 'economy', for christ's sake.

I mean, in your economic understanding, do you have absolutely no concept of failure?  Is there no consideration for the fact that doing things, even doing beneficial things with the absolute best intentions, could end up making us worse off?  When I asked whether you were promoting the labor theory of value, did you even consider the relevance of the question to your arguments?

Regardless, these are the facts:

• Bitcoin rewards early adopters, because it needs to attract users.
• Bitcoin subsidizes mining, which is consumption, because it needs protection.
• The total Bitcoin supply is limited, because it needs to have economic value.
• This supply currently inflates at 30%+ per year, and therefore does not even remotely subsidize savings.
• Despite everything, the Bitcoin economy is still growing.

If you want to argue any of these, go right ahead.  That would at least be a discussion grounded in reality.  But I think, by now, we all understand the reasons for all of them, and they have been discussed to death.

Ok, so your issue is with 1) crony-capitalism...

And:


2) what you assert is not an equitable initial-distribution mechanism in bitcoin.

Fair enough. I think damn near everyone on here agrees with you on #1, and #2 is an interesting discussion point (ie; what *would* be a fair initial distro mechanism?).


I personally disagree with your other points about the societal benefits of a demurrage currency system. As you point out, the goal of a currency is to allow a steady state to emerge within which people make rational capital allocation decisions based on business dynamics. I assert that with a currency system that truly offers perfect information (eg; bitcoin (and note that no other money system ever proposed has credibly offered perfect information)), people don't have to speculate about the supply of money anymore, so those dynamics merely become the backdrop on which economic activity happens, not a fundamental input; ie, people simply decide to invest based on whether they think they can put capital and labor together to yield more than the sum of their parts. What's happening to the money supply being fully well known, the only effect should be on price (which everyone is subject to on both sides of the equation).



Keep it up. Good discussion.

Gold is not a fiat currency.

wtf wtf? Why are you here if you think that there isn't something wrong with fiat? What is it that you think is wrong with it? Do the trace amounts of cocaine on bills bother you immensely? Can you manage to form complete sentences without help?

An atrociously asinine argument. But I'd expect nothing less from someone who will quote one sentence and attack that instead of comprehending the bigger picture. You don't get it, won't get it, refuse to get it because it's not in your best interest and doesn't fit the little picture of the world that you've painted for yourself.

Are you really arguing for labor theory of value?

Doing nothing is quite productive sometimes.  Thanks to decades of Keynesian mal-investment, now is one of them.  Your problem seems to be that you are looking at the price of Bitcoins going up and you see the Bitcoin economy "doing nothing" and you mistakenly assume that this is somehow a fraud.  When, in reality, Bitcoin is going up in value because doing nothing is actually more productive than what most fiat currency economies are doing right now.

wtf?

Well, if we want to just play a game: if the money supply is M and then everyone's money doubles to M*2, then inflation has had absolutely no effect other than forcing everyone to update pricing.
If governments said "there will be X dollars created for each citizen" and paid out government employees in new money each year up to the amount of the increase in population (and the rest was brought in by taxes--and FRB was outlawed), then inflation would have virtually no effect on pricing or saving. Or hell, even if the government just created the money period, even if they create inflation, the new money goes to the bottom/middle of the chain (gov't employees and contractors), rather than supporting the trickle down reagonomics that has worked oh so well, we'd actually have something closer to keynesian economics I think. When the lower rungs get money, they spend it (or invest via saving) and the upper rungs benefit by being the employers and producers, when the upper rungs get money, they get million dollar bonuses and such.

I don't deny that there are leeches and there are producers in a society, and producers absolutely should be rewarded, but they will be rewarded without having the economic system simply slap them in the face with free money, as the current system provides and is the reality of why everyone on these boards thinks inflation is a terrible idea. Also because of the FDIC, and now the bank bailouts, and every other attempt that governments have made to intervene, the bankers are well aware that they can do whatever-the-fuck-they-please with this government given gift of creating money and they have no real risk. The middle class takes the risk by being forced to invest all of their money at the behest of bankers or render it effectively worthless in 10 or 15 years.

What a proper system should do is keep a relatively stable value of money so that the middle class can hedge their bets with both non-invested savings as well as invested savings, looking to achieve the "steady state" where overproduction and consumption is NOT encouraged because of the dwindling value of the currency. Because of how sick and twisted things have gotten, the bankers ARE the producers. Just look at all the megacorps that exist nowadays. Producing and banking are one in the same. Controlled by the same people. This is a terrible thing for society.

Investing would do a hell of a lot more to stabilize a currency than holding money. Money needs to circulate to be useful. I fail to see how holding money promotes trade; this is the exact opposite of what any bit of common sense would suggest. And it doesn't increase the value of the economy, it artificially increases the market cap on the exchange. This is not the same thing. And this was incredibly evident when all it took was maybe 100k BTC to take the price from $32 to $10. You mention the word interest again as if something useful was done, but nothing was. Again this is the same mechanism that banks use with FRB. Doing nothing to get something. That you think this is any different is the typical bitcoiner mentality and it is wrong. The only risk you take by holding BTC is that people get sick of this game, not any real investment risk. It is a stock, but no corporation that produces anything is behind this stock. Stocks don't do anything useful after they have purchased equity in a company (except perhaps give you voting power, but that is irrelevant here), and bitcoin doesn't even have that.

People are born into poverty because we haven't figured out how to stop those with the gold to stop stealing our productivity from us. For all the advancements we've made, we are still only one step away from a feudalist society, and those in power want to keep it that way. Just like those with lots of bitcoins have no issues with earning non-productive interest, because they'd rather be the ones with gold than the ones actually fixing the problem. Your third sentence is a total strawman, so I won't even bother with it.

I am well aware of this. If I were an honest person, which I try to be, it would behoove me to explain to people why bitcoin is not the answer and to shoot down those that unintentionally or intentionally try to promote a system that is dishonest, which I believe it to be. Can you fault me for that, even if you disagree? I am the one wasting time with absolutely no potential beneficial repercussions for myself here. I don't want any more slaves.

@Coincomm, Will you STFU already ?

@People, stop reply to one line brainfart.

Define "equitable distribution."


Holding Bitcoins doesn't guarantee profit.  It is a risky act that helps to stabilize the currency, promote trade, and increase the value of the economy.  The "profit" gained by doing so (or loss perhaps) can be considered the interest earned by the original resources used to purchase the Bitcoins to begin with, invested in the Bitcoin economy as a whole.


People become slaves to debt by being born into poverty.  Bitcoin doesn't cause this, and has no obligation to prevent it.  It is, in fact, encouraged by the "democratic" per capita demurrage schemes you are promoting, which subsidize the creation of consumers at the expense of savers.

You are free to start an altchain at any time.  You are not a slave to Bitcoin.

It has nothing to do with definitions. Saving money consists of earning it and then not doing anything else with it.

I am not ignoring the fact that people don't want their savings to devalue, it is not the topic of this thread. Inflation doesn't inherently cause savings to devalue--unfair, unequitably distributed inflation does. I am also not arguing that bitcoin needs to be fixed, I am arguing that it is flawed. It is flawed in a very similar way to keynesian fiat currency--it has a mechanism for unfair, unproductive profit that is ripe for abuse. This is how people become slaves to debt or to an elite. You can talk all you want about how bitcoin will become the next gold or whatever and I won't disagree that the possibility exists, but I will vehemently argue against anyone who thinks bitcoin will become a true, alternative currency that will be any better than the ones we currently have.

Well said and agreed.

Meh.  Bitcoin was designed to gradually stop inflating.  As a result, it attracts the interest of people that don't like inflation, people that don't like seeing their savings erode over time.

I personally don't believe any sort of economist much more than I believe witch doctors. * At least Austrians tend to promote smaller government.

* Except Steve Keen, to some extent.  He does some really good work of the "trying to understand what is happening" variety, which I sadly see as very lacking among economists in general.

Kjj, that is a beautiful point. I hadn't even thought of this!

Every "deflationist"/"austrian economist"/what-ever should memorize that one.

In both scenarios, inflation/deflation, what pays best is simply the highest possible interest rate at the lowest risk/investment possible.

Only in deflationary economies no government gets to manipulate the market.


As for Etlase2 I think he is an economist student or something, I just argued with him in another thread which derailed in similar fashion as this one.
Pity him and the other economists.