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Topic: Will deflation be the fatal weakness of bitcoin? - page 6. (Read 10623 times)

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.
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.
legendary
Activity: 1078
Merit: 1002
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)?

Of coz inflationary currency. Deflation leads to unbalanced economics in which even a small factor could crash the whole system. Bitcoin will raise to 100$, 1.000$, 10.000$ just to fall to 0$ at some point.

I'm sorry, but that's just idiotic. Who in their right mind would want to work for money they know will be worth less over a period of time just because you say it's going to help the economy when they have the option of working for money that will be worth more over time?  Roll Eyes

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
legendary
Activity: 1148
Merit: 1008
If you want to walk on water, get out of the boat
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)?

Of coz inflationary currency. Deflation leads to unbalanced economics in which even a small factor could crash the whole system. Bitcoin will raise to 100$, 1.000$, 10.000$ just to fall to 0$ at some point.

I'm sorry, but that's just idiotic. Who in their right mind would want to work for money they know will be worth less over a period of time just because you say it's going to help the economy when they have the option of working for money that will be worth more over time?  Roll Eyes

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.
legendary
Activity: 2142
Merit: 1009
Newbie
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)?

Of coz inflationary currency. Deflation leads to unbalanced economics in which even a small factor could crash the whole system. Bitcoin will raise to 100$, 1.000$, 10.000$ just to fall to 0$ at some point.

I'm sorry, but that's just idiotic. Who in their right mind would want to work for money they know will be worth less over a period of time just because you say it's going to help the economy when they have the option of working for money that will be worth more over time?  Roll Eyes

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.
legendary
Activity: 1078
Merit: 1002
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.
legendary
Activity: 1078
Merit: 1002
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)?

Of coz inflationary currency. Deflation leads to unbalanced economics in which even a small factor could crash the whole system. Bitcoin will raise to 100$, 1.000$, 10.000$ just to fall to 0$ at some point.

I'm sorry, but that's just idiotic. Who in their right mind would want to work for money they know will be worth less over a period of time just because you say it's going to help the economy when they have the option of working for money that will be worth more over time?  Roll Eyes
legendary
Activity: 1078
Merit: 1002
Besides, if the merchants are more comfortable doing business in more traditional currencies, no one's going to force them to use bitcoin.  It seems to me that most of the talk about inflation/deflation becomes irrelevant as soon as we let go of the idea that currency has to be a monopoly.

Merchants are more comfortable doing business in more traditional currencies, because the deflational nature of Bitcoin doesn't allow them to sell their stock at a profit (as explained above), not because they don't want it. If the merchant still would ask 100 BTC for that car in order to make any profit, nobody would buy it, because it's above the market-value in USD.

So how will Bitcoin ever become adapted by the mainstream when most merchants can't use it, unless they pay their suppliers in USD? I do not think Bitcoin will ever become a monopoly, but it seems it could never function well if it was, and that seems not a good sign...

The mistake you're making here is assuming that because you can't find a solution other wont be able to either. And that's just not the case. Just because you don't see how this "problem" can be solved that doesn't mean there aren't merchants out there who know how to solve this problem. A clear example are merchants trading highly volatile commodities. These merchants must find a way to protect themselves in case they can't sell the commodities they bought at a higher price in case the spot price falls. How do they do it? The use futures contracts to hedge their profit, something that can be done with any good. If I car may fall in price, a car salesman can buy/sell a futures contract and protect his profits, problem solved.

BTW in case you didn't notice, bitcoins are consistently getting worth more and most likely never will. There will always be period when they get worth less because of people trying to diminish their balance sheets.
legendary
Activity: 2142
Merit: 1009
Newbie
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)?

Of coz inflationary currency. Deflation leads to unbalanced economics in which even a small factor could crash the whole system. Bitcoin will raise to 100$, 1.000$, 10.000$ just to fall to 0$ at some point.
legendary
Activity: 1136
Merit: 1001

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)?

Conclusion: We all want to spend money that is worth less and less each day, but this is only looking at half the story. We would rather work for a currency that appreciates in value. The more a currency is debased, the less work gets done. And isn't that exactly where the world is today? Flush with depreciating currencies which led to low productivity (high unemployment), declining GDP, etc.

 
legendary
Activity: 2142
Merit: 1009
Newbie
Till now, bitcoin seems the perfect currency in in the free world, it has many advantages as we can see. Such as convienence, decentralization, no worry of inflation, except for the boring blockchain file lay in system partition.

But to me, I think I treated it as gold as many others did, so maybe we will hardly to use them, just holding to see price up, obviously it will cause the deflation, and then the bitcoin will not be currency any more, but like treasure.

But it is not treasure, and let's consider this situation, one day, bitcoin has been granted, and suddenly a big catastrophe attacks somewhere in the world, and destroyes all, people die, bitcoins of those people then lose forever, so the price up, others will hold their bitcoins more tightly, and no bitcoins are in the circulation.

No curculation, so it can be called curreny?

The only true point why deflation was chosen as a feature of Bitcoin is to make early adopters (and Satoshi) rich. If Bitcoin succeeds in the future it will be just a side effect. Unfortunately, probability of such event is very low. So deflation will rather be fatal.
hero member
Activity: 504
Merit: 502
The main goal about bitcoin in case it had no other goal is to put a end to freely printing money whenever you want more ie. every country right now. If there is other great things about bitcoin, and we all know there is, then thats just part of the bonus.
legendary
Activity: 1078
Merit: 1002
But then you're asking merchants to change the way they have been doing business for decades, which seems unlikely to happen.

Why does it seem unlikely to happen? I think it's very likely, almost certain to happen.

So how can Bitcoin solve this problem for merchants?

Bitcoin doesn't need to solve anything.
hero member
Activity: 504
Merit: 502
The deflation is not a problem

Once the price is High enough to Support the economy of people trading In It, ”deflation” or rise In price will be very slow.

Now the price has risen very fast, From 0 to 11 In a couple of years.

Lets say price one day reaches 10,000 price will rise much slower From there.


Yep, exponential growth wont be linear and there will be a cutoff point where bitcoin will start to represent small percentage gains/losses.

Right now its in the exponential growing stage and totally understandable that people want to hold on during the growth.
member
Activity: 66
Merit: 10
The deflation is not a problem

Once the price is High enough to Support the economy of people trading In It, ”deflation” or rise In price will be very slow.

Now the price has risen very fast, From 0 to 11 In a couple of years.

Lets say price one day reaches 10,000 price will rise much slower From there.
hero member
Activity: 504
Merit: 502
People tend to spend shitload of funnymoney($$$) on useless crap they dont need.

What we will start to see with bitcoins is that people will start spending bitcoins on stuff they really need rather than pure impulsive buying which is exactly why we are all in this shitstorm economy due to creditcards and impulsive buying of useless crap.
legendary
Activity: 924
Merit: 1004
Firstbits: 1pirata
People need somewhere to stash their wealth thats safe from government interference and inflation. As long as that exists bitcoin will never die.

^this, don't mind the gov shills guys, they will keep doing their shitty and worthless jobs while getting paid with the "monopoly" money.

sr. member
Activity: 354
Merit: 250
There is one weakness of it, which I hope someone can invalidate. Suppose I'm a car-dealer and I buy 1 car for 100 BTC from my supplier. By the time I can sell it to a customer, I can only ask 95 BTC for it, because of deflation. Now everyone argues that isn't a problem, because the prices at my supplier also have dropped with the same amount, so I can buy a new one there for 95 BTC, and again have 1 car in stock, and don't suffer any losses. But if I did absolutely nothing I would still have 100 BTC, so why should I work hard as a car-dealer instead of hoarding?

I can't see why this would be good for Bitcoin. People said that it's good because it forces merchants to keep their stocks low, or produce goods only on-demand. But then you're asking merchants to change the way they have been doing business for decades, which seems unlikely to happen.

So how can Bitcoin solve this problem for merchants?
I don't see why that seems unlikely.  The car-dealer will realize that buying stock he can't sell at a profit is a bad investment, and will adjust his practice accordingly.

Besides, if the merchants are more comfortable doing business in more traditional currencies, no one's going to force them to use bitcoin.  It seems to me that most of the talk about inflation/deflation becomes irrelevant as soon as we let go of the idea that currency has to be a monopoly.
hero member
Activity: 686
Merit: 500
Wat
People need somewhere to stash their wealth thats safe from government interference and inflation. As long as that exists bitcoin will never die.
member
Activity: 111
Merit: 100
Bitcoin as it exists today will fail.  Bitcoins are constantly being lost.  Yet there will never be more than 21,000,000 created.  Someday the last bitcoin will disappear and there will be none left.

A sufficient solution may be to raise the number of digits used. Then mining can continue for a while (since mining stops before 21 million coins due to rounding issues, but could continue when precision is increased). As long as we have a few satoshis, we have enough for everyone in the world due to infinite divisibility.
sr. member
Activity: 451
Merit: 250
Bitcoin as it exists today will fail.  Bitcoins are constantly being lost.  Yet there will never be more than 21,000,000 created.  Someday the last bitcoin will disappear and there will be none left.

For example, say Satoshi is dead and nobody knows about his bitcoin wallet.  Nobody knows Satoshi except his Mom.  And maybe his Mom doesn't know anything about Satoshi's cryptocurrency habit.   Whatever she does with Satoshi's computer probably destroys the bitcoins.

Gold is different.   It too is constantly being lost but it can be found again.  There was just a story about a ceiling full of gold being found in a house in France.  Gold never disappears.

When government fiat fails the people left just create a new fiat.  Because people still want to trade whatever they use for trade is currency.  Similarly bitcoin will eventually be replace with something else, something people like better.
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