Topic: Why does Bitcoin subsidize saving? - page 4. (Read 8619 times)

Keynes for the win

It is astonishing to me that you would consider earning money to be "doing nothing" but destroying goods to be something worth encouraging.

I am not going to argue with the inane definition of investment that you've created to suit your own purposes. If you want to treat bitcoin itself as an investment, fine, but then it is a currency-like commodity, not a currency. And then you have the same issues of lack of production that a lack of putting money to use will incur.

Earning interest for doing nothing is exactly what banks do when they print money, but you want to suck on that same teat because you believe you're entitled and you must rationalize this in some other way.

Yes, saving is investment with Bitcoin. When you save Bitcoins, you've investedwhatever productivity you exchanged for the Bitcoins you saved.

Yes, it is. Except it's just not the banks that do it. If I work at a factory, I produce value. That is value that I "deposit" into the economy. I am fully entitled to "withdraw" based on that production and destroy/consume some of the value I created. But if I save, instead of withdrawing that value, I leave it earning interest in the economy.

The most useful and beneficial investment is usually to labor to produce exactly what people most want without consuming any of the value you produced. That is, saving.

How do you produce without investment? It is investment, after all, that is the problem that the OP has brought up. Saving is clearly not investing by any stretch of the imagination when it comes to bitcoin. In a typical fiat economy, saving is investing because banks are putting your money into investments. Here, that is not the case. It is not encouraging spending that we're looking for, it is encouraging investment. If investments are sane (which they are not when the people who control money printing leverage themselves a thousand times over), then production and spending will follow in a similar, sane manner.

Investment - Production - Consumption

I mentioned in the other thread where I was rabidly attacked by Realpra that regardless of consumer debt, government debt exists and forces us to work harder and longer and produce more than necessary because we are tied down by that debt, regardless if we have any of our own debt. It is a vicious circle that can only be escaped by getting rid of the notion of a currency based out of debt. So yes, bitcoin solves that problem--somewhat. Lopsided distribution based on luck still leaves an awful lot to be desired. The great majority of bitcoins can only enter the economy via debt. This is the same problem with gold and goldsmiths and moneylenders and what have you. Rather than any particular economic merit, it is only the luck of the mine that makes you rich. It is a silly concept that spawned thousands of years of servitude, and one that has no business being echoed by something touted as the future of money.

Ok, corrected it was partly based on debt because at some point the expected return was higher than the interest payments.


Only overextended spending is bad. The reason why overextended spending is so bad in the fiat economy is because of debt and the tendency for the controlling entities to issue more currency the more debt there is and in order to pay off debt. This can simply not happen in another system.

I am not talking about spending strictly from a consumer standpoint but from a "prosumer" standpoint. For a money system to support such an economy it is beneficial to encourage spending.
It is my belief that if bitcoin were to implement demurrage, even on a voluntary basis economic growth would shoot through the roof. A mandatory system would require too drastic changes to patch it in now but if bitcoin misses this train another cryptocurrency which has this feature from the start will overtake it in my opinion.

Not true. The spending was not based on debt, the spending was based on expected future revenue from selling a house. That would exist in any economy.

I try not to. If you can show why that makes a difference, please do. Spending is not inherently good, more spending can change the type of goods an economy produces such that it's producing short-term consumed goods rather than long-term investment goods. That can be bad.

I am not trolling, but feel free to push that orange ignore button maybe there are enough ignorant asshats out there so I can get into the red territory.

Definitely time for this:

I think it's time for this:

lol

No that was because the spending was based on debt and the currency was based on debt.
Don't ever apply the idiocracies of the fiat economy to anything else except itself. 

If you can make a car efficiently enough to sell it for $15,000, you can make that same car and sell it for $30,000. The reverse is, of course, not always true. But it's not always false either.

The concern is not "overproduction" but insane production. For example, just prior to the mortgage crisis, the economy was insanely overproducing luxury goods. This was largely because the overvaluation of homes was stimulating spending. This spending was bad spending and the economy still hasn't recovered from the harm this overspending did. The economy should not have diverted scarce resources to producing luxury goods that people incorrectly believed they could afford.

The amount of spending doesn't so much determine how much production takes place in terms of how much human effort is expended. People who need jobs will work whether they're making 100" plasma TVs or running a soup kitchen.

We can increase spending dramatically by paying people a million dollars a day to dig trenches with teaspoons. But we only want to encourage *sensible* spending.

No.

You simply can't get the same amount of production with less spending. Modern production is exclusively driven by demand, overproduction more or less is a thing of the past.

It doesn't matter, it's production that builds the economy, not spending. If we can get the same production with less spending, that's better. So just encouraging spending is not what you want.

go for it

Somehow I doubt that's your actual motive.

People are attracted to bitcoin precisely because it has no mechanism to implement demising returns on saving.

I suspect you're more interesting preventing the spread of the idea that it's possible to have a currency which is not intentionally devalued because of how popular this idea is one people hear about it. Bob forbid that people could store their deferred consumption themselves instead of losing large parts of it to rent-seeking assholes.

Bitcoin has no mechanism to implement demising returns on saving.

Every economy has that:
Gold: Physical wear, increased storage space higher cost of guarding.
Fiat money: Inflation
Barter economy: Depreciation of goods
IOU trust network alas ripple: Increased counterparty risk.

With bitcoin the fundamentally best strategy to reach highest economical authority is to never spend them ever, which is obviously not feasible.
I don't speak out against the fixed supply, but it needs some mechanism to encourage spending for luxury like demurrage for example.
A concrete scenario for many bitcoiners is to save them for cases where they are either overvalued (from their personal perspective) or to save them as an insurance against economic turmoil while at the same time doing nothing to prevent that scenario from occurring.

The main reason I am opposed here is the self interest of bitcoin hoarders to justify their own behavior and keep up the public perception of bitcoin.

I struck out your baseless assertion.  Your one sentence is trivially true, but being merely a roundabout definition of "want" and "need", it is devoid of other content.  It certainly does not follow from that sentence that more spending is better, nor that the lack of spending is evidence of a flaw in anything.  Nor does it say anything about what the real level of spending is or should be.

Here is the fundamental flaw of bitcoins economic model in one sentence:

Spending because of a need is fundamentally less than because of a want.
(I would be surprised if this gets any insightful answers)

You have to look at and understand all aspects of a currency before deciding on what you think will happen. Investment has always been the tool that takes underutilized wealth and puts it to use. Whether or not it is put to good use may strongly depend on how the currency functions. Investors in a demurrage currency will look for long-term, renewable investing rather than short-term, resource dwindling gains. When gains are likely to be realized, investors will have to be very conscious about what to do with those gains and must realize that overproduction is only going to lead to a larger loss due to demurrage if more investment cannot be quickly found. So rather than promoting overproduction (and therefore overconsumption), investors are forced to stop and think about the diminishing returns that comes with a currency that has demurrage, or they will quickly find themselves penniless.

But yes, no one is going to use a currency with demurrage when there are alternatives, imo.

Even if this were true (it is a hasty generalization), the expected outcome on encouraging a high time preference is that either: 1) investment dwindles and there are very few "goal-oriented jobs" and people without money suffer (though this may be somewhat specific to bitcoin and the lack for need of a banking system); or 2) consumption rates will eventually equalize and it will just be older people that consume more now that money will have no meaning sooner rather than later.

If the value of money stayed relatively stable with some inherent risk of loss due to investment (a problem "avoided" by things like the FDIC), investing/saving/consuming could potentially equalize much quicker to something of a steady state. Overproduction/over-investment would be much riskier without governments/banks being able to print money.

Many of the problems attributed to fiat currencies that bitcoin supposedly solves are really just problems of government mismanagement, and not something that bitcoin inherently solves. Over-investment leads to over-production/consumption, but this is encouraged by inflating currency and government controls. Do you really think that a deflating currency is going to support a steady state, or will it support under-investment and under-production? Why utilize money to produce when the act of doing so will likely devalue it (more in circulation) and there is risk, when merely holding the currency provides a near-guaranteed return? Investors are going to have quite the pickle.

Another aspect of demurrage currencies is that they encourage loans of little to no interest rates. So borrowers may prefer such a currency, hence, Freicoin *might* find its niche.