Topic: Why does Bitcoin subsidize saving? - page 5. (Read 8583 times)

There is no incentive for people to start using such a currency. The only way to make people get it is by forcing them to. Tricking p

The purpose of this seems to be to spread wealth to the "laborers" by incentivizing those with money available to save into consuming more than they otherwise would. The laborers need to have access to fulfilling, goal-oriented jobs. That is the solution to that problem, not a currency noone has any incentive use that encourages people to consume and pollute.

Spend now or spend later, what difference does it really make?
People make better decisions after considering things from a number of different perspectives.

This is just time preference semantics though. Spend now or spend later, what difference does it really make? jtimon et al make some pretty decent arguments for their demurrage currency where holding currency is actually actively discouraged by the demurrage fee, and thus potentially reducing wasteful activities by investors trying to turn a quick profit now rather than thinking about the long-term. https://bitcointalksearch.org/topic/ann-freicoin-demurrage-crypto-currency-from-the-occupy-movement-crowdfund-89843

Unfortunately, there is little incentive for anyone to actually use a currency with demurrage when there are other, non-demurraging currencies available. And in fact I don't think a demurrage currency can ever be successful unless it exists in a vacuum, e.g. by government mandate. Anyone looking for the quick profit now will just take bitcoins or something else and refuse freicoins.

There isn't just "not spending" and "spending" everyone has different willingnesses and the tighter you are the better shit people are going to have to offer you. It incentivizes them more the tighter you are because you aren't some magic ascetic who doesn't want a spaceship, better health, amazing palaces, etc. And if you are I still don't care, I'll build palaces for other people.

You would spend them if there was something you wanted or needed enough. Most of what we all spend our money on is dumb honestly. Why would an economy need to incentivize people to spend? Is it possible to set one up that does not do this? Because it would lead to better outcomes if people saved more and wasted less in my judgement.

Your arguments are all based around the fact that people save *more* coins/money. You assume that if I have 20 BTC today, I will put in effort (and thus produce something) to acquire 21 BTC tomorrow.
However, that is not what is happening with bitcoin. The problem with a deflationary currency is that I don't actually need to have MORE of it to be more wealthy. Just having the SAME amount is enough for that.
Since the currency deflates, my 20 coins will be worth more tomorrow *anyway*, so I'd better not spend it and I don't need to bother getting more either. Just sit on my coins and watch my wealth grow.

By not spending them, I am not encouraging others to actually produce anything to gain more coins. Someone willing to produce something for BTC quickly discovers that all his potential customers are postponing their purchase, because for the same amount of BTC they can by X-times more of the product in a week from now.
The only thing worth producing in bitcoin is: more bitcoins. Which is not really production, but merely burning energy. Someone élses energy if you get lucky...

Bitcoin doesn't subsidize saving.  In the long run, Bitcoin is neutral with respect to saving.  And, in the short term, Bitcoin subsidizes consumption (mining).

This is why entities looking for financing shop around, and why General Finance Corp (GFC) was formed to help them shop around. Already many operations that were initially started up using 1%/day loans from General Mining Corp (GMC) and General Retirement Funds (GRF) have been refinanced at half that rate, in DeVCoins, thanks to General Financial Corp, and also several obtained refinancing from the Brits, denominated in UKB (United Kingdom Britcoin), the Canucks (denominated in Canadian Digital Notes) or the (Galactic) United Nations (denominated in United Nations Scrip).

The more altchains the better, to provide all the more options for those seeking financing outside the sandboxes of Old Money factions/groups...

-MarkM-

Or he who wants to build an empire can loan the money, earn lots of interest, then cause deflationary swings by withholding money from the market (credit crisis) and benefit in the same, sadistic way that banks do now by profiting handsomely off of the bankruptcy of others.

As the saying goes, it's hard for a man to understand an argument when his livelihood depends on not understanding it.

During hyperinflation in Zimbabwe people would get paid for their work and then run as fast as they could to the exchange to trade it for food, because if they walked there the prices would be higher. Inflation was literally happening by the minute.

During a 3 year period they dropped 25 zeros from their bill and still ended up issuing 100 trillion dollar bills. As your "t" approaches zero and people seek to dispose of the currency as quickly as possible the currency itself collapses and you end up with piles of it littering the streets.

I would say that the desire of a population to save money is evidence of strength in the currency.

BTW to discuss deflation there is a dedicated thread https://bitcointalksearch.org/topic/deflation-and-bitcoin-the-last-word-on-this-forum-11627


It would be a lucky rock clearly. Other people first need to produce something and sell it to earn bitcoins.


If it is meant for bitcoins as a result of deflation, then the velocity of money would not decrease (because there would simply be a high demand for bitcoins), and people will not start settling bills by other means.

What's wrong with deflation and bitcoins being "too valuable" anyway? He who wants to starve and be "rich" will hold bitcoins, and he who wants to eat and be "poor" will buy some bread (from a farmer who is happy to be paid in valuable bitcoins). In another words, the market will find an equilibrium.

It depends on the individual. If a person's income is derived directly or indirectly from the exploitation of others they tend to remain deliberately obtuse when it comes to certain basic facts of economics.

Knowledge and wisdom!  Jr Member is extremely lucky to have such an erudite, learned Economics 101 tutor. 

It's a pleasure watching you gently correct and educate the board's Keynesians and Marxists.  Under your guidance, they'll come around.

+1000

People underestimate the importance of this.

Right, but it's important to remember that saving is a form of investment. When you save money, you have invested whatever productivity you contributed in order to get the money you saved. What that productivity produced earns interest in the economy as it makes possible further production.

For example, say I work at an auto factory. I help make cars. My productivity produces cars. Say I save some of the money that I earned. I have invested in the form of those cars that I made that otherwise wouldn't get made that are now earning interest as people use those cars to do work and produce goods. My income has been invested in the economy as I save that money and it earns interest because it produces goods that increase the demand for the money I saved. Deflation is the interest my productivity earns.

With a sensible monetary system, saving is a form of investing. Deflation is interest on invested productivity.

I agree all around. It's stupid to encourage people to consume when immediate consumption isn't needed. It's flat out idiotic to discourage saving.

Hardly seems apparent to me that under-investing is the standard mistake. From looking around here I'd say people need to be encouraged to cut it out (if you were into meddling that is).

But the idea that people need to be encouraged to consume seems like an unfunny joke.

True. I guess the point is that consumption will happen no matter what; we can't survive without consuming. Investing, however, will not necessarily occur. Therefore one could argue that encouraging investment is more important than encouraging consumption.

I think what you're missing is what happens when the money supply dynamics are both WELL KNOWN and WELL DEFINED. Such is the case with bitcoin, but NOTHING else.

Note that if an economy switches from inflationary to deflationary, yeah, people will stop spending as much because suddenly they can retain and even grow purchasing power by leaving money sitting around, and they don't know if the deflation is going to get more or less extreme, etc.

But what if the money supply dynamics were perfectly defined and everyone knew what they were? Enterprising people would still be able to put labor and capital together to yield something that's worth more than the sum of the price of each. Thus, business would still happen, and investors would still invest.

It's the macro uncertainty that makes people hoard in a deflationary environment. If a deflationary money supply is the economic framework on which the economy is built, and it CANNOT BE CHANGED, and everyone knows how it works, normal activity simply takes place against that backdrop and the nominal price/compensation numbers just change.

Again, the key is the money supply dynamics being well defined and well known. I think people miss this point so often because bitcoin is the only money supply system ever proposed that truly offers perfect information.

Well observed Timo.

If velocity of money is lower than needed to lubricate trade, then people will start settling bills by other means, e.g. trade of debt and alternate currencies.

By living very shortly before starving to death/being hanged by an angry mob?

(I know its a joke  )

No it does not; anyone can pick up a rock, this action produces nothing.
If you picked up a bunch of rocks that would have been hard to do, but your rock pile would still be worthless simply due to the cost of moving it from you to the seller of the car.

Compare to Bitcoin, to earn BTC you need to work, perhaps building said car - something valuable. If you do not buy the car you made there is more competition to sell cars cheaply and someone somewhere gets a car they would not otherwise have had.

Once YOU need a car (or something else) your BTC are easily transferred and if most are saving like you, you will also pay a cheaper price.


All of this is backed up by the fact that the BTC economy is growing; helping businessmen transfer wealth and new BTC businesses spring into existence every week it seems.

There may still be a BTC economy financial crisis in the future if people invest in something like a housing bubble (like both today AND the great depression!). This is neither caused by inflation nor deflation, but simply bad allocation of human resources.

You cannot avoid this, without experimenting, no one can really know what a good investment is.