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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

#501

Post by vrotaru »

aleyan wrote: post #445
vrotaru wrote: post #393

Earlier quoted context omitted.

You totally wrong, and the reason you are wrong, is because you do not understand growth. Like... totally. Yes, I'm arrogant and I'll deal with an idealized model where the same set of resources is transformed into final goods, but bear with me. In order to get a real growth of 4% be it per year or per century in such a scenario, you need to find a better use of resources so that with the same resources you may produ…

Let me paraphrase that the way I understood you. In a case where monetary supply is fixed (ie gold), if you hold on to it for a period of time, you will get more goods for it than now. That 'more' will correspond to economic growth over the period. You will have the same fraction of the purchasing power pie as before, but now the pie is larger. Does not look like a win to me, but this is the judgement call for the re…

Yes, that is it. Contrary to the popular belief, just holding money under fixed supply monetary regime doesn't make you rich.

A Rip van Winkle with a year savings (say clerks' job) falling asleep for a 100 years will not wake up a Rockefeller.

Re: Bitcoin exchange rate reached $100 USD per BTC

#502

Post by solistice »

tatsuke95 wrote: post #484
brc wrote: post #473

Earlier quoted context omitted.

Good luck. You're swimming against a tide of people minted from education with the mindset of deflation bad, inflation good. Of course, everyone likes deflation when it means they can buy more for less. Of course, if prices of things get so low that people start to purchase, then deflation will eventually reverse, unless you assume that deflation will continue forever until prices reach zero and everything is free. O…

> "In fact we see deflation in specific markets like housing which helps to clear out the bad decisions and mistakes and set the base for future expansion." Periods of asset deflation after over-investment/economic distortions may act as a balance, but it isn't "good". Having your net worth halved is crippling. > "The simple fact is that no economy and social order has ever imploded due to deflation" No economy implo…

I'm actually genuinely curious what research and theory you are referring to, and I wouldn't know where to start looking. Could you give me some pointers?

Re: Bitcoin exchange rate reached $100 USD per BTC

#503

Post by moultano »

jasonlingx wrote: post #496
rmc wrote: post #389

Earlier quoted context omitted.

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 g…

> bitcoin has a guaranteed rate of deflation. This is not true. There is no guaranteed rate of deflation. The rate at which you can 'mine' bitcoin is limited and there is a hard limit to the total amount of bitcoin that can be mined.

Assuming the economy grows, a fixed amount of currency causes deflation.

Re: Bitcoin exchange rate reached $100 USD per BTC

#504

Post by dreamdu5t »

zanny wrote: post #461
reedlaw wrote: post #447

Earlier quoted context omitted.

So Keynesian economics forces everyone to invest in order to avoid the inflation tax while Austrian economics encourages saving allowing savers to reap the benefits of deflation. Both serve as proxies for the economy, so tell me again the downside of saving and prices going down over time?

Money you are saving that isn't being used for monetary exchange is effectively dead weight in an economy. Due to modern inflation rates, nobody really "saves" in any modern economy by just hoarding fiat currency - and because of this, the vast majority of the monetary supply is being used for exchange and commerce, and you get peak utility of the currency that way. If you sit on money you get from the economy, you a…

That money sits... forever? Prices don't respond to money being removed?

Savings would still be invested with a fixed money supply, because investment provides a return whether nominal prices are falling or rising.

Sound investments will account for either inflationary or deflationary trends, just as they do now.

Re: Bitcoin exchange rate reached $100 USD per BTC

#505

Post by richcollins »

millstone wrote: post #455
anonymoushn wrote: post #444

Earlier quoted context omitted.

Do you suppose that there is some sort of seed-factory producing the seeds at no cost and selling them into the market, or do the other seeds in the market come from plants which produce only 4% y/o/y growth in the number of seeds? In the latter case, has the entire seed-planting industry taken a loss over the last year? And if so, would less people plant the seeds this year, so that planting the seeds would again be…

I like using seeds as an example, because they make a nice toy model. They last a long time, and more of them can be produced through capital goods (that is, other seeds) and labor alone. In this model, seeds have no inherent depreciation, and our hero would have bought them from a seller, e.g. a storefront. In a deflationary environment, the nominal value of capital goods decreases, so anyone holding seeds, whether…

If the market wants more seeds won't the price increase as a result of the increased demand? If it doesn't want additional seeds, should we create them just to "reduce unemployment"?

It seems like the market will price seeds in a way that incentivizes optimal production.

Re: Bitcoin exchange rate reached $100 USD per BTC

#506

Post by vrotaru »

millstone wrote: post #411
vrotaru wrote: post #393

Earlier quoted context omitted.

You totally wrong, and the reason you are wrong, is because you do not understand growth. Like... totally. Yes, I'm arrogant and I'll deal with an idealized model where the same set of resources is transformed into final goods, but bear with me. In order to get a real growth of 4% be it per year or per century in such a scenario, you need to find a better use of resources so that with the same resources you may produ…

> In order to get a real growth of 4% be it per year or per century in such a scenario, you need to find a better use of resources so that with the same resources you may produce an output which is 4% greater than before Let's work through an example. I buy 100 seeds for $1 each. I plant them, let them grow, and harvest the result. I now have 104 seeds. My real growth is 4%! Now I want to sell the seeds back to recou…

You are joking right?

But if you are serious, error is here: But I discover that prices have dropped by 4%

You do not simply drop prices, like that. Why did prices drop? (Price) deflation is just a descriptive name not a moving cause. (Price) deflation is not a knob which someone simple turns up and down.

Now depending on why exactly the prices did drop, and by how much you may be either in or out of luck.

Re: Bitcoin exchange rate reached $100 USD per BTC

#507

Post by codehalo »

niggler wrote: post #19
oleganza wrote: post #13

Earlier quoted context omitted.

So who and when is going to get out? And out where? To fiat currency that is controlled, inspected, can be frozen, taxed and stolen? Bitcoin grows like crazy because it is a money proved to work. It survived exchange hacks, stolen wallets, viruses, user mistakes, network-affecting software bugs and government seizures of bank deposits. It allows you to hold something in your pocket that nobody knows about and you can…

"Bitcoin grows like crazy because it is a money proved to work." Bitcoin grows like crazy thanks to various entities of increasing credibility building an ecosystem around BTC. Like Coinbase, which I'm sure is why a lot of people here got into bitcoin. Listen for about 30 seconds of https://www.youtube.com/watch?v=0UKC7iaBKvs#t=830s

Coinbase is a fucking disaster.

Re: Bitcoin exchange rate reached $100 USD per BTC

#509

Post by begurken »

solistice wrote: post #502
tatsuke95 wrote: post #484

Earlier quoted context omitted.

> "In fact we see deflation in specific markets like housing which helps to clear out the bad decisions and mistakes and set the base for future expansion." Periods of asset deflation after over-investment/economic distortions may act as a balance, but it isn't "good". Having your net worth halved is crippling. > "The simple fact is that no economy and social order has ever imploded due to deflation" No economy implo…

I'm actually genuinely curious what research and theory you are referring to, and I wouldn't know where to start looking. Could you give me some pointers?

From Wikipedia:

http://en.wikipedia.org/wiki/Causes_of_the_Great_Depression

"In their 1963 book A Monetary History of the United States, 1867-1960, Milton Friedman and Anna Schwartz laid out their case for a different explanation of the Great Depression. Essentially, the Great Depression, in their view, was caused by the fall of the money supply. Friedman and Schwartz write: "From the cyclical peak in August 1929 to a cyclical trough in March 1933, the stock of money fell by over a third." The result was what Friedman calls the "Great Contraction" — a period of falling income, prices, and employment caused by the choking effects of a restricted money supply. Friedman and Schwartz argue that people wanted to hold more money than the Federal Reserve was supplying. As a result people hoarded money by consuming less. This caused a contraction in employment and production since prices were not flexible enough to immediately fall."

Here's a video of Milton Friedman (he won a Nobel Prize for this work) explaining how monetary contraction caused the great depression:

https://www.youtube.com/watch?v=O7pnjzCuSv8

"By 1933, the quantity of money in the United States had gone down by a third." ... "For every 3 dollars of currency and deposits that people had had in 1929, only 2 dollars were left."

One thing people often forget about deflation is that a general decline in the level of prices also includes labour prices and interest rates. It is characterised by zero interest rates, falling prices, falling wages, and because wages are 'sticky-down', high unemployment. You really do not want to live in a deflationary economy unless you have a large pile of cash. It's miserable.

A second, and in my view, more valid definition of deflation is a contraction of the money supply. Ben Bernanke (current Fed Chairman) is an expert on causes of the great depression, and has been doing everything he can to ensure that the US money supply does not shrink.

Re: Bitcoin exchange rate reached $100 USD per BTC

#510

Post by brc »

tatsuke95 wrote: post #484
brc wrote: post #473

Earlier quoted context omitted.

Good luck. You're swimming against a tide of people minted from education with the mindset of deflation bad, inflation good. Of course, everyone likes deflation when it means they can buy more for less. Of course, if prices of things get so low that people start to purchase, then deflation will eventually reverse, unless you assume that deflation will continue forever until prices reach zero and everything is free. O…

> "In fact we see deflation in specific markets like housing which helps to clear out the bad decisions and mistakes and set the base for future expansion." Periods of asset deflation after over-investment/economic distortions may act as a balance, but it isn't "good". Having your net worth halved is crippling. > "The simple fact is that no economy and social order has ever imploded due to deflation" No economy implo…

Careful with reading bias into what I have written.

I have not said deflation is good, or said that it is not bad.

I have merely stated it creates winners and losers, and that inflation isn't automatically better. The same as a 'high' or 'low' currency - the goodness or badness depends on the reference frame.

The assumption that inflation is automatically better is 'common knowledge' based on theories of economics developed that classify savings as bad, and spending as good, based on the assumption that deflation will cause consumption to be postponed, but which hand-waves away the problem of inflation bringing forward consumption with the trite statement of 'in the long run we are all dead'.

My point is that deflation isn't the bogeyman many have been trained to believe it is. Spending-based assumptions of economics have led the world down a garden path of unsustainable debt in the name of endless 'stimulus' and inflationary policies. Periods of mild deflation and creative destruction would have served the world better than endless shots of new cheap money.

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