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What is inflation?

coinbase.com

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Re: What is inflation?

#21

Post by lottin »

notahacker wrote: post #14
lottin wrote: post #9

Inflation is a change in the price of money relative to the prices of all goods & services in the economy, and prices are set by the market. This means a currency cannot be made by design to produce low or high inflation rates, contrary to what the article claims. Only a monetary authority with the power to change the money supply can theoretically achieve that goal.

The irony is the USD actually is designed to achieve predictable and low inflation, whereas cryptocurrencies, whose demand bears little relation to current demand to hold it, lurch wildly in value

I agree but the USD isn't designed to achieve low inflation. The Fed has a public mandate to achieve low inflation, which isn't quite the same thing.

Re: What is inflation?

#22

Post by lottin »

simo7 wrote: post #18
lottin wrote: post #9

Inflation is a change in the price of money relative to the prices of all goods & services in the economy, and prices are set by the market. This means a currency cannot be made by design to produce low or high inflation rates, contrary to what the article claims. Only a monetary authority with the power to change the money supply can theoretically achieve that goal.

Well bitcoin does have an intrinsic monetary policy despite not having a monetary authority. It is possible to engineer currencies to be inflationary/deflationary without an external authority. It just cannot be a guarantee as there are many other factors to take into account.

Indeed, bitcoin has an intrinsic monetary policy, but such a policy doesn't and can't have an inflation target. This is why claims that bitcoin is inflationary or deflationary are nonsense.

Re: What is inflation?

#23

Post by notahacker »

lottin wrote: post #21
notahacker wrote: post #14

Earlier quoted context omitted.

The irony is the USD actually is designed to achieve predictable and low inflation, whereas cryptocurrencies, whose demand bears little relation to current demand to hold it, lurch wildly in value

I agree but the USD isn't designed to achieve low inflation. The Fed has a public mandate to achieve low inflation, which isn't quite the same thing.

It's a moot point, but I'd consider the Fed and its mandate and operating procedures and target as part of the design of the modern USD (just as other regimes like Bretton Woods were also specific policy choices intended to achieve specific ends, not something which spontaneously appeared or naturally evolved)

Re: What is inflation?

#24

Post by RhodoGSA »

Traster wrote: post #12

Yeah this is my problem with crypto - even the big institutions around it come out with absolute bullshit. Sorry but no, stable coins aren’t a reasonable place to store your savings and it’s insane to be telling people that.

Stablecoins have 4-6%apr yields. much better than my other savings.

Re: What is inflation?

#25

Post by lottin »

RhodoGSA wrote: post #24
Traster wrote: post #12

Yeah this is my problem with crypto - even the big institutions around it come out with absolute bullshit. Sorry but no, stable coins aren’t a reasonable place to store your savings and it’s insane to be telling people that.

Stablecoins have 4-6%apr yields. much better than my other savings.

This statement makes no sense. For a start, stablecoins provide no yield. What you can do is lend your stablecoins and obtain a yield, in the same way that you can lend any currency. The yield is provided by the borrower. Second, the expected return on an investment doesn't tell us whether such an investment is better than another. In order to compare investments, we have to look at the risk-adjusted return.

Re: What is inflation?

#26

Post by imtringued »

zaphodq42 wrote: post #20

Crypto influencers and companies use "inflation" incorrectly. "Inflation" has 2 means; the physical meaning and the economic meaning. The physical meaning is the increase in size of an object. The economic meaning is the decrease in purchasing power of a currency. Bitcoin will become deflationary (physical term) one day, which means with time total accessible supply of bitcoin will decrease. But this is will be true…

A lot of the Bitcoin are owned by early adopters that no longer have access to them. Bitcoin loss is happening at a pretty high rate because of that. It won't take 24 years.

Re: What is inflation?

#27

Post by imtringued »

dannyw wrote: post #8
seanalltogether wrote: post #2

Interesting that they don't mention that the controlled inflation for bitcoin has (and will) lead to higher transaction costs. The piper must be paid somehow.

Not really. Transaction fees are determined by supply and demand. Supply is currently limited to 1MB/10min more or less, and demand is however many people wanting to make bitcoin ttandactions. The bitcoin production schedule has nothing to do with TX fees.

Right now the security guards are being paid with the block reward. Once that is over each transaction has to pay for the security guards.

Re: What is inflation?

#28

Post by varajelle »

imtringued wrote: post #27
dannyw wrote: post #8

Earlier quoted context omitted.

Not really. Transaction fees are determined by supply and demand. Supply is currently limited to 1MB/10min more or less, and demand is however many people wanting to make bitcoin ttandactions. The bitcoin production schedule has nothing to do with TX fees.

Right now the security guards are being paid with the block reward. Once that is over each transaction has to pay for the security guards.

Right now security guard are being paid way too much and use their money to waste too much energy. When the block reward will decrease, so will the energy use. But the transaction cost is not impacted by the reward.

Re: What is inflation?

#29

Post by Traster »

RhodoGSA wrote: post #24
Traster wrote: post #12

Yeah this is my problem with crypto - even the big institutions around it come out with absolute bullshit. Sorry but no, stable coins aren’t a reasonable place to store your savings and it’s insane to be telling people that.

Stablecoins have 4-6%apr yields. much better than my other savings.

If that's true, making them more similar in terms of both risk and yield to investing in the stock market than putting your money in savings. Plenty provide no yeild - hence why they're stable coins.

Re: What is inflation?

#30

Post by nomoreplease »

simo7 wrote: post #16

> even Bitcoin experiences inflation as more of it is mined (as does gold). Surprisingly they don't understand what inflation means despite having just quoted its definition a few paragraphs above. Inflation doesn't mean that we "have more of something", it means we "need more of that something" to buy the same good over time. Do we today need more bitcoins to buy a pizza compared to 2013?

Redefining words and ideas is common in 2021. I’m not surprised
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