This thread is getting unfocused, so I'll only reply directly to people who make some attempt to address the argument in the OP.
To everyone else arguing against GWP as a measure of wealth, I suggest reading up on how it's calculated and how much disagreement there is among economists about GWP. To those saying only the rich are getting richer, the poor are getting poorer, I'll leave you guys with an image showing the poorest people in the world have seen their lives improve vastly over the past 40 years. This is the graph of extreme poverty over time from the wikipedia article on poverty.
This means that instead of investing in the stock market, I can just hold bitcoins and expect similar growth. I get the advantages of: liquidity, no fees, and maybe no taxes on gains. The more people do this, the less resources are invested in productive endeavors, and the lower GWP is.
Money has minimal use value, and the only effect on saving on the total economy is that the remaining money units appreciates in value. This is the same as saying that the saver refrains from consumption or investment, the others can consume or invest what the saver does not consume or invest. There should be no direct consequence for the total investment.
In another thread (
https://bitcointalksearch.org/topic/the-proper-way-to-calculate-the-future-value-of-a-bitcoin-322619), I suggest that the price of a bitcoin must obey this inequality:
(price of 1 BTC) >= [(World GDP in dollars)*(fraction of economic transactions using bitcoin)]/[(supply of bitcoins)*(fraction of bitcoins used in transactions)*(bitcoin velocity)]
Do you agree?
I agree with you that if people attempt to save half of the total bitcoins, the unsaved bitcoins will go up in value. Are you sure they will go up 2x though? People will know that the people who are saving bitcoins could decide to re-introduce them into the market at any time, so I'd expect the remaining bitcoins to have less than 2x the value as if no one saved any bitcoins. If the remaining bitcoins did go up 2x in value, then any investments that those people make with the remaining bitcoins will have 2x the impact, and the command of resources being controlled by people needing investment would be the same as if everyone invested directly (although maybe there are some bad effects of investment decisions being concentrated into too few people).
Unfortunately, it's in any individual's interest to hold bitcoins
Correct, but it is not unfortunate. Saving is the precursor to any investment. It is not possible to invest before saving. Saving and investment does not have to be done by the same person.
Here is the puzzle though: Bob decides to save all his bitcoins in his basement. So the value of all other bitcoins adjusts upward. Bob's bitcoins grow in value if everyone else does something productive with the other bitcoins. After a few years, Bob sells all his bitcoins and makes a profit because the economy grew as a whole. The question is: what real value did Bob provide to society, which allowed him to capture this extra value which he did not have before? Bob is apparently being paid for not doing anything. Call what I just described Scenario A. We can imagine a situation of 0 inflation where Bob doesn't profit from holding onto money and doing nothing. After years of hoarding, Bob sells his bitcoins and made no profit. Call this Scenario B. Exactly the same amount of goods and services were produced in the non-Bob part of economy in both scenario A and B. In scenario A, Bob gets more command over resources, and everyone else (people who actually created wealth) gets slightly less. The rest of the world is basically paying Bob for not having spent his bitcoins. It seems like Bob is free riding on the productivity of others.
If Bob does nothing but sit and home and check the price of his bitcoins on Mt.Gox during all this time, then neither situation is better/worse for total wealth. But suppose in Scenario B, bob knows that his bitcoins are not gaining in value, so he goes out to produce something of value in his spare time so that he can support himself. In Scenario A, he knows his livings expenses will be paid by the appreciation in value of his bitcoins, so he doesn't create anything. Won't having a money supply like in scenario B result in more wealth in the world?
Btw, you've made me start thinking of the problem in a new way, thank you.
Bitcoins can only gain in real value (assuming no changes to adoption) at the rate of global economic growth. Unless literally no bitcoins are being spent, they will gain real value at a rate less than the rate of return on investment.
Can you explain this? What would make bitcoins grow at a rate less than the ROI on investment? Are you claiming above that the ROI on investment (on average I assume) is larger than the rate of GWP increase?
Deflationary currency vs. a (predictable) inflationary one is simply immaterial with respect to real macro factors.
I have a strong intuition saying that this should be the case. I just haven't been able to find an error in my argument yet. I think Erdogan might have pointed me to the flaw though... gotta think about it more.
I think it's clear that from the POV of an individual, inflation/deflation makes no difference. Arguments that people won't spend money when there is deflation seem bad, because there will always be some price where the consumer will buy. That argument assumes that the seller values bitcoins less than the buyer.
I agree with you about the investment vs. consumption equilibrium. My concern is about the choice to "passively invest" via holding onto bitcoins, vs. actively invest by buying equity in companies or lending. I thought the passive investment strategy was free riding on the productivity of others and would lead to less productive behavior across the economy if lots of people did that, but after Erdogan's comments I have to think about it more.
I am not used to it!
