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Bitcoin exchange rate reached $100 USD per BTC

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Re: Bitcoin exchange rate reached $100 USD per BTC

#381

Post by cookiecaper »

fragsworth wrote: post #358
deelowe wrote: post #218

Earlier quoted context omitted.

There are a few replies here that seem to be reacting negatively to the OP due to the tone of the submission instead of the content. To be clear, deflation is categorically bad for a currency. It's terrible, like great depression terrible. The reason it's bad is that deflation makes it more profitable to do nothing than to invest. When this happens, people react by not spending money. The market dies. While inflation…

> To be clear, deflation is categorically bad for a currency. It's terrible, like great depression terrible. I hear this argument a lot, but no nation that we know of has ever collapsed because of deflation, right? We've never (recently) been in a period of significant deflation, so how can we be so certain of its effects? > deflation makes it more profitable to do nothing than to invest. Investment won't ever stop,…

>Investment won't ever stop, it just behaves more like a there is a minimum interest rate. No matter what the deflation is, I can still loan out $100 and expect $110 back within a year and make a bigger profit than holding on to it.

But is that $10 profit going to be worth the risk of default when an investor could get a satisfactory return by just sitting on the money in the first place? What incentive does an investor have to take bets and possibly lose thousands or millions of dollars when his money appreciates considerably without doing anything?

To use a case from the bitcoin economy, we all know the story of the pizza that someone bought when the x-rate was something like 3 cents per coin. Today, the 10k btc spent on that pizza would have been worth $100k! This story is often told to try to incent people to get into btc, with the implication that "if you forgo the cost of one pizza, in a little while that will be worth thousands of dollars", without realizing that this exactly is the problem with a btc-based economy; if everyone is forgoing their metaphorical pizza in the hope of exponential growth in currency value, the market will be unusable.

Re: Bitcoin exchange rate reached $100 USD per BTC

#383

Post by leot »

jamoes wrote: post #318
leot wrote: post #307

Earlier quoted context omitted.

No, it's not a lie. Why in heaven's name would the investor class want higher inflation? They don't. The really don't. Our understanding of the benefits of a small amount of inflation comes in spite of the interests of those who already possess of a lot of wealth. The investor class doesn't want bail-outs, though I'm sure they appreciate bail-outs when they happen. The wealthiest lost the most (in money, though not i…

The investor class doesn't benefit from inflation, it's the banker class that benefits. Here's how it works: The banks have a balance sheet of debts owed to them. Some of the debts come from companies like General Motors and United Airlines. If one of those companies threatens to go bankrupt, then the bankers simply lobby the congress to "bail out" the troubled company. This allows the banks to keep the troubled asse…

That's awfully convoluted. You're asserting that this Glenn-Beck's-whiteboard-esque arrangement holds more sway on banker's behavior than the effects of inflation on bankers' own personal wealth holdings.

Do banks want to be bailed out? Sure. Who doesn't. Do rich bankers benefit more than the working class from higher inflation? Certainly not.

Re: Bitcoin exchange rate reached $100 USD per BTC

#384

Post by baddox »

scott_karana wrote: post #371
baddox wrote: post #364

Earlier quoted context omitted.

Why buy a smartphone when next year's smartphone will be better in every way?

Deflation would refer to the value of the same good. Obviously new smartphones are pitched as "new, improved" goods, and marketing sways consumers to get the latest and greatest. Not so for staples.

Well, you buy staples now because you need them now to survive.

Re: Bitcoin exchange rate reached $100 USD per BTC

#385

Post by cookiecaper »

jasonkolb wrote: post #281
deelowe wrote: post #218

Earlier quoted context omitted.

There are a few replies here that seem to be reacting negatively to the OP due to the tone of the submission instead of the content. To be clear, deflation is categorically bad for a currency. It's terrible, like great depression terrible. The reason it's bad is that deflation makes it more profitable to do nothing than to invest. When this happens, people react by not spending money. The market dies. While inflation…

Deflation is just one form of asset appreciation. If this line of reasoning were true then we would never see anyone selling anything that appreciates in value. But this is a very one-sided way to consider this scenario--it only takes into account the supply side. When the asset is appreciating, the demand side takes this into account as well and is willing to discount their asking price to take this into account. Yo…

One problem here is that you're considering the currency as an asset that should appreciate. The argument of most economists today is that currency should not appreciate because it encourages hoarding what is essentially a useless non-good, it's just a token for convenience of value transfer. If real goods appreciate, it's because the value offered by that good to the marketplace has increased, so the market pays a commensurately larger price. If currency appreciates on its own, people will want to hoard it, and will only spend it on things they deem highly valuable. Perhaps you can argue that this is better in the long run and would stop rampant consumerism, but it's pretty obvious that without rampant consumerism, many people would be making less money.

People aren't really spending bitcoins in a meaningful way. They're using it as a passthrough for the dollar, basically. I have a Bioshock Infinite key that I want to sell. Will let it go for 1.5 btc. Why won't this offer be taken up now, when just a couple of weeks ago it would've been considered a fair deal, and just a couple of months ago it would have been considered a GREAT deal?

Re: Bitcoin exchange rate reached $100 USD per BTC

#386

Post by adrianwaj »

I am going out on a limb and calling this price peanuts. The rise is due to Cyprus, and if bankers keep stealing people's money (and printing it) ... which they sure will because they compete amongst themselves about who has the most multi-millions (regardless of how they got it)... a portion will move their wealth into bitcoin. Also, as fiat currencies lose value, bitcoin will rise. Bitcoin is a hedge against fiat.

add: in fact the ideology of bitcoin is steeped in disempowering central banks. So you are buying into an ideology, and so long as the tech can keep up with the ideology, and there's nothing with better tech, and central banks keep ripping people off, then bitcoin will rise. It's far from perfect, but I think the web itself was about unlocking information to empower people (as created by hippies), something like the advent of literacy to empower people to read the bible when it was limited to priestly classes. Bitcoin is like grade 1 spelling and grammar, or the first web browsers: sure is better than not having either.

Re: Bitcoin exchange rate reached $100 USD per BTC

#387

Post by jonknee »

bitcartel wrote: post #366
dragontamer wrote: post #268

Earlier quoted context omitted.

Gold is a piss poor investment. Owning Real Estate (and making money off of it) entails taking care of it. People taking care of their land (so that it can appreciate in value) is a good thing. The typical Real Estate "investor" adds a ton of value to their home, not just through maintenance, but also additions (ie: a new deck). This maintenance is true value added to the economy. True value that wouldn't have been a…

> Gold is a piss poor investment. Do you know something that the Chinese, Germans and Russians don't ? "Central Banks Bought Most Gold in Nearly 50 Years" http://www.cnbc.com/id/100458951 "The Russian central bank will continue to buy gold as it seeks to diversify its foreign reserves away from paper assets it views as risky" http://www.reuters.com/article/2013/01/24/russia-cbank-idUSL... "The startling news that Ger…

Central banks and average people have vastly different goals. Also, large investment banks don't seem to keep their immense wealth in gold.

Re: Bitcoin exchange rate reached $100 USD per BTC

#388

Post by rmc »

baddox wrote: post #364
pg_bot wrote: post #279

Earlier quoted context omitted.

Deflation increases the value of holding cash. By definition deflation occurs when the price of a basket of goods decreases. Why invest your money in a basket of goods today when it is going to be cheaper to buy that same basket tomorrow?

Why buy a smartphone when next year's smartphone will be better in every way?

Because today (and every day between now and next year) you can use that smartphone to do things that you can't do without a smartphone. So yes, the smartphone has lost money value, but you as a person and in your life, have gained.

Not so with bitcoin.

Re: Bitcoin exchange rate reached $100 USD per BTC

#389

Post by rmc »

randallsquared wrote: post #232
deelowe wrote: post #218

Earlier quoted context omitted.

There are a few replies here that seem to be reacting negatively to the OP due to the tone of the submission instead of the content. To be clear, deflation is categorically bad for a currency. It's terrible, like great depression terrible. The reason it's bad is that deflation makes it more profitable to do nothing than to invest. When this happens, people react by not spending money. The market dies. While inflation…

> The reason it's bad is that deflation makes it more profitable to do nothing than to invest. This makes no sense to me. If keeping 100 units makes one richer because they are worth more in a year, then any investment which has a positive return (that is, you end up with more than 100 units in a year) must be that much better... What am I missing?

Let's pretend the deflation is at 3% (i.e. there's a inflation rate of -3%). Then your 100 units will be worth 103 units (in today's money) in 1 years time. This is a guaranteed rate of deflation (bitcoin has a guaranteed rate of deflation, I don't know if it's 3%)

So someone comes along and wants a loan, but they can't pay back 3% interest rate, only 2%. Why would you give that person your 100 units if you'll only get 102 units (in today's money) back in a year? Much better to hold on to it.

So someone comes along and can pay you 5% interest rate. Sounds better, right? However it's for a business. So you don't know if their business will survive, it might go backrupt. Let's pretend it's an early start up, so there's a 50/50 chance they go bust and your 100 units are a write off and gone. So that's only a 2.5% interest rate. Again, why loan it out if you can get a guaranteed 3% by doing nothing?

etc.

Re: Bitcoin exchange rate reached $100 USD per BTC

#390

Post by kiba »

cookiecaper wrote: post #381
fragsworth wrote: post #358

Earlier quoted context omitted.

> To be clear, deflation is categorically bad for a currency. It's terrible, like great depression terrible. I hear this argument a lot, but no nation that we know of has ever collapsed because of deflation, right? We've never (recently) been in a period of significant deflation, so how can we be so certain of its effects? > deflation makes it more profitable to do nothing than to invest. Investment won't ever stop,…

>Investment won't ever stop, it just behaves more like a there is a minimum interest rate. No matter what the deflation is, I can still loan out $100 and expect $110 back within a year and make a bigger profit than holding on to it. But is that $10 profit going to be worth the risk of default when an investor could get a satisfactory return by just sitting on the money in the first place? What incentive does an inves…

But is that $10 profit going to be worth the risk of default when an investor could get a satisfactory return by just sitting on the money in the first place? What incentive does an investor have to take bets and possibly lose thousands or millions of dollars when his money appreciates considerably without doing anything?

People loans each other bitcoin in the bitcoin economy all the time, abiet with high interest rate.

if everyone is forgoing their metaphorical pizza in the hope of exponential growth in currency value, the market will be unusable.

The demand for pizza will be low, but not zero, because the desire for pizza competes with desire for monetary profit. At some point in the future, people decides that the waiting is enough, and they will buy pizza as reward for all their patience.

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