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Topic: Will deflation be the fatal weakness of bitcoin? - page 5. (Read 10623 times)

legendary
Activity: 2030
Merit: 1000
My money; Our Bitcoin.
Useless reading. The author just avoids the topic. I repeat if someone missed my words:
The only true point why deflation was chosen as a feature of Bitcoin is to make early adopters (and Satoshi) rich.

There are several authors.  Read the whole thread. 
donator
Activity: 1736
Merit: 1006
Let's talk governance, lipstick, and pigs.

Useless reading. The author just avoids the topic. I repeat if someone missed my words:
The only true point why deflation was chosen as a feature of Bitcoin is to make early adopters (and Satoshi) rich.
Q: "Will deflation be the fatal weakness of bitcoin?"
A: No
legendary
Activity: 2142
Merit: 1009
Newbie

Useless reading. The author just avoids the topic. I repeat if someone missed my words:
The only true point why deflation was chosen as a feature of Bitcoin is to make early adopters (and Satoshi) rich.
ffe
sr. member
Activity: 308
Merit: 250
If you believe deflation is a problem, answer this question: Would you rather work and be paid with a deflationary currency (gold / bitcoin), or inflationary currency (USD / zimbabwe dollars)?

Answer this question: How would you rather pay your employees? With a deflationary currency, or inflationary currency? When I hire someone for a year, I'd rather not have to change their salary every week to make sure it stays around the same value. And as long as employees don't get paid in BTC, it's never becoming a mainstream currency, but stays a commodity.

That's you and your personal preference and also irrelevant to the whole market. Those who will want to deal with a currency that gets worth more over time will find a way to solve this "problem". Perhaps a solution is to peg the wage contract to some amount of purchasing power instead of a fixed amount of currency.
Yeah. Dollars for example...
donator
Activity: 1736
Merit: 1006
Let's talk governance, lipstick, and pigs.
Stocks are deflationary.  Aren't we told to keep our money in stocks to counter inflation & grow our money for retirement?  So if everyone is hoarding stocks & they are deflationary, how come they haven't failed yet?

Stocks are not deflationary, when the demand rises they just give out extra stocks.
They split the stocks sometimes.
sr. member
Activity: 247
Merit: 250
Stocks are deflationary.  Aren't we told to keep our money in stocks to counter inflation & grow our money for retirement?  So if everyone is hoarding stocks & they are deflationary, how come they haven't failed yet?
legendary
Activity: 2142
Merit: 1009
Newbie
The only way to solve this problem is to get rid of 21.000.000 cap.

The best way to solve it is leave Bitcoin alone and go make a different coin with whatever properties you think are superior, and then let them compete.

Smiley Already beta-testing and tuning new coin. But I need Bitcoin stay alive to keep cryptocoin ecosystem healthy.
legendary
Activity: 924
Merit: 1004
Firstbits: 1pirata
Guys sell your gold now! Otherwise eventually it will drop to 0 and will be worthless!

Gold itself could be used to produce components of electronical devices. Bitcoin useless without using it as an instrument of exchange. When the price goes up, ppl try to avoid to exchange their bitcoin for goods/services. So for bitcoin deflation equals death. The only way to solve this problem is to get rid of 21.000.000 cap.

hero member
Activity: 602
Merit: 508
Firstbits: 1waspoza
Why do you need to decrease salaries every week? Do you do increase them every week with an inflationary currency?

Because the purchasing power of the BTC will grow quickly after 21M, while the purchasing power of USD can be kept pretty stable by the controlled inflation.

In last 12 years USD lost about 30% purchasing power. This is "keeping pretty stable" for you?
legendary
Activity: 2142
Merit: 1009
Newbie
Guys sell your gold now! Otherwise eventually it will drop to 0 and will be worthless!

Gold itself could be used to produce components of electronical devices. Bitcoin useless without using it as an instrument of exchange. When the price goes up, ppl try to avoid to exchange their bitcoin for goods/services. So for bitcoin deflation equals death. The only way to solve this problem is to get rid of 21.000.000 cap.
hero member
Activity: 938
Merit: 1002
Why do you need to decrease salaries every week? Do you do increase them every week with an inflationary currency?

Because the purchasing power of the BTC grows quickly because of deflation, and the purchasing power of USD is kept pretty stable by the controlled inflation.

Although I get your point, it's still volatility. I don't see why deflation would be faster than inflation in the ideal case. Also, Bitcoin money supply is inflating like crazy at the moment, but the price is still increasing. So I'll re-phrase your argument to make it clearer for me:

"As an employer, I would prefer to pay salaries in a controlled currency, because exchange rate changes could be harmful to me otherwise."

I'll argue that, as an employer or an employee, I'd prefer some kind of contractual local control there, rather than an alien authority. It will be fairer for me as an employee, and more predictable for me as an employer. Sure, it would involve something I wouldn't have to deal with with State money, but technology can alleviate the burden here too.

Guys sell your gold now! Otherwise eventually it will drop to 0 and will be worthless!

 Kiss
legendary
Activity: 1148
Merit: 1008
If you want to walk on water, get out of the boat
Guys sell your gold now! Otherwise eventually it will drop to 0 and will be worthless!
full member
Activity: 147
Merit: 100
The problem of deflation in the classical sense stems from the lack of granularity of paper money.
You can't practically spend less then 1 cent.

Bitcoin is a new monetary instrument, trying to explain it with classical economics is like trying to disprove Einsteins relativity with Newtonian physics. You just can't.

There is no reason why both systems can't co-exist, just like in research you can use Newtonian physics for placing a satellite in orbit and you have to use Einsteins relativity to make GPS work.

All monetary policy (paper money) has one thing in common.
They want the whole universe to revolve around "their" policy.
Just like when String theory came out, the only reason so many scientists where against it is because it devalued their own knowledge of how the universe works.
They didn't want an opinion outside of their own framework.


legendary
Activity: 1148
Merit: 1008
If you want to walk on water, get out of the boat
Inflation problem is solved with putting the money, u don't need right now, into business or bank accounts. Every person who have basic knowledge of economics would choose inflationary currency.

OOooohhh I see, so what you're saying is if I had any clue about economics I'd know that in order to get the greatest benefit for a society out of an economy(i.e. making a small gang of psychopaths rich when they steal by counterfeiting) I'd want to make a self sacrifice and use a currency that makes me poorer over time. And in order to protect myself from getting poorer I'd want to expose myself to counterparty risk by giving my money over to someone else in the economy (i.e. basically the same small gang of psychopaths) and allow them to do with my money what ever they want in order for them to pay me just barely enough interest to cover the inflation rate, if that.

I see, yeah, that makes a ton of sense to me, where do I sign up?

 
You got to be joking. Roll Eyes

No self sacrifice here. Part of my money (USD) is stored in the bank and if I claimed it and bought something I use every day I would get more qty of that items. People usually forget that technological progress makes things cheaper and cheaper to produce. This works against inflation, so whole system is in a balanced state. If USD was deflationary currency the system would be unbalanced.
MMhh.... no? What are you saying is false.
hero member
Activity: 938
Merit: 1002
I'm not trolling. Perhaps I'm failing (I'm not so good in economics) but here is citation from http://en.wikipedia.org/wiki/Deflation

Economists generally believe that deflation is a problem in a modern economy because they believe it may lead to a deflationary spiral. Historically not all episodes of deflation correspond with periods of poor economic growth.

Quoting Wikipedia adds to the fail though.

What do you think is the mechanism that causes the deflationary spiral?

I concede that it's hard to discover causality in real world cases like the great depression, but you should always assume that there is a lot of bias towards easy explanations and centralized intervention and then covering the asses of those who intervened.
legendary
Activity: 1148
Merit: 1008
If you want to walk on water, get out of the boat
Quote
Economists generally believe that deflation is a problem

Sorry but this "deflation is bad" thing is false. The deflationary spiral is just lol. It's the same as saying: "Why buy a computer today? Tomorrow there will be one more powerful, so wait for tomorrow! But next week there will be a even better computer!!" I suppose that no one buy computers today? Mh, false, everyone buy them

While if we look at inflationary currencies we see that tons of them failed all around the world. Post WW1 Germany? Zimbabwe? These 2 nations had such a heavy inflation that money was good as fuel for fire...
legendary
Activity: 2142
Merit: 1009
Newbie
Inflation problem is solved with putting the money, u don't need right now, into business or bank accounts. Every person who have basic knowledge of economics would choose inflationary currency.

OOooohhh I see, so what you're saying is if I had any clue about economics I'd know that in order to get the greatest benefit for a society out of an economy(i.e. making a small gang of psychopaths rich when they steal by counterfeiting) I'd want to make a self sacrifice and use a currency that makes me poorer over time. And in order to protect myself from getting poorer I'd want to expose myself to counterparty risk by giving my money over to someone else in the economy (i.e. basically the same small gang of psychopaths) and allow them to do with my money what ever they want in order for them to pay me just barely enough interest to cover the inflation rate, if that.

I see, yeah, that makes a ton of sense to me, where do I sign up?

 
You got to be joking. Roll Eyes

No self sacrifice here. Part of my money (USD) is stored in the bank and if I claimed it and bought something I use every day I would get more qty of that items. People usually forget that technological progress makes things cheaper and cheaper to produce. This works against inflation, so whole system is in a balanced state. If USD was deflationary currency the system would be unbalanced.
legendary
Activity: 1106
Merit: 1001
Inflation problem is solved with putting the money, u don't need right now, into business or bank accounts. Every person who have basic knowledge of economics would choose inflationary currency.
I'm unsure if you are trolling or epic failing.
If you are trolling then 0/10
If you are failing then epic fail.

I'm not trolling. Perhaps I'm failing (I'm not so good in economics) but here is citation from http://en.wikipedia.org/wiki/Deflation

Economists generally believe that deflation is a problem in a modern economy because they believe it may lead to a deflationary spiral. Historically not all episodes of deflation correspond with periods of poor economic growth.

Trust me... inflation is no picnic.

Also, deflation might pose a problem to Bitcoin as a currency, but not as a commodity. In general, commodities with a fixed supply tend to do better than those without, because they are, in a sense, deflationary.

There are a bunch of solutions to this "problem" of Bitcoin deflation, when it finally becomes one (around 2020, by the way, until then, Bitcoin is inflationary). One of the solutions that I like best is to use Bitcoin as "backing" for other cryptocurrencies that will, in fact, be inflationary. That way Bitcoin acts like a gold standard for cryptocurrencies of the future.

But I agree with previous posts, OP should do even minimal homework before launching into this tired argument. There's a whole thread on deflation where all of these issues have been dealt with to death.
hero member
Activity: 938
Merit: 1002
Answer this question: How would you rather pay your employees? With a deflationary currency, or inflationary currency? When I hire someone for a year, I'd rather not have to change their salary every week to make sure it stays around the same value. And as long as employees don't get paid in BTC, it's never becoming a mainstream currency, but stays a commodity.

Why do you need to decrease salaries every week? Do you do increase them every week with an inflationary currency?

Most your arguments are based on volatility, not deflation. These can be solved by futures contracts, which are already being used for other currencies/vehicles. Also, most arguments about deflation is anti-symmetrical with inflation, and their solutions are anti-symmetrical as well, so usually either one is not better.

As such, I fail to see any difference between increasing salaries and decreasing them. Care to explain? Are you talking about the psychological hazard (which makes sense actually, but it's circumstantial) or a real economical problem there?
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