21–30 of 110 posts
Yes, If I split my 10 into 10 ones and if 9 can pay today for something that cost 10 yesterday, I feel richer.
This causes folks to save and horde like in Japan. Because its deflationary.
It's more difficult to control the masses via monetary policy if things are deflationary... That's why governments try to maintain slight inflation. Comfortable folks don't produce for the government.
Can someone pro-bitcoin provide a counterpoint to the deflationary spiral criticism? I don't have enough of an understanding in economics to think of one.
The mistake in the article is that bitcoins can subdivide AND increase in value. Bitcoins are not going to have liquidity crisis, as much as some people seem to want it to.
The problem is that they increase in value, to a degree that the individually rational choice is not to spend them "now". The babysitting coop coupons were effectively subdividable as well: participants could have taken the initiative to say "I'll provide two hours of babysitting for an hour coupon" or "I'll provide 15 minutes of babysitting for 1/2 an hour coupon". [Edit, for elaboration] That would be rational when…
Central banks and fiat currency remove the danger of speculative bubbles...or at least, they centralize the danger to a single, publicly controlled entity.
The mistake in the article is that bitcoins can subdivide AND increase in value. Bitcoins are not going to have liquidity crisis, as much as some people seem to want it to.
Subdiving does not increase the overall supply of Bitcoin though. There would be no way in the future to obtain Bitcoin, except by taking it from someone else. Or someone else's hoard, as the case may be. (This is at least briefly touched on in the article) This is also covered in the book "Debt: The First 5000 Years", when gold-standard and silver-standard monarchies had real problems keeping money in circulation du…
To me it seems the problem with the Babysitting coop was price fixing. The price of of an hour of babysitting was always 1. If the price of an hour of babysitting was allowed to float you would not have the shortages.
See the original Krugman article. It goes further into explaining efforts to try and rectify their economy, as well as a general discussion on the principles involved.
But I don't see how that's significantly different from allowing the price of babysitting to float -- I know doubling the number of coupons isn't exactly the same as making them half as valuable, but it's similar.
But since bitcoins simply adjust in value according to market demand, I, as well, don't understand how Krugman's story applies to bitcoin. If everyone thinks bitcoin's value will always go up, because it's deflationary, and everybody hoards -- well not everybody will, right? There must be other factors at hand, surely?
The mistake in the article is that bitcoins can subdivide AND increase in value. Bitcoins are not going to have liquidity crisis, as much as some people seem to want it to.
There won't be a liquidity crisis only if all people dealing with bitcoins will accept to lower their prices in response to the deflation of the currency - this would include workers paid with bitcoin. Not very likely. Would you accept to be paid less and less every year (month, week...)?
Because they'd be able to buy more and more with that money, obviously.
To me it seems the problem with the Babysitting coop was price fixing. The price of of an hour of babysitting was always 1. If the price of an hour of babysitting was allowed to float you would not have the shortages.
I suppose you could argue some hours of babysitting are more valuable than others, and people could negotiate, say, 4 hours for 5 coupons or vice versa. It's not clear this either (a) wasn't already done on some ad hoc basis (I'd imagine if it was agreeable to both parties, it'd probably happen) or (b) would have provided a solution to the liquidity problem, though.
Can someone pro-bitcoin provide a counterpoint to the deflationary spiral criticism? I don't have enough of an understanding in economics to think of one.
Is that the retarded idea that no one will buy anything if prices keep falling? Look no further than computers, cell phones and all manner of electronic gadgets. Their prices keep going down, but everyone keeps buying them.
If you need/want something now, you'll buy it now.
Here's a summary of the article: "The State-Controlled Mainstream Media paints a gloomy picture of a currency that can't be controlled by the State."
EDIT: Perhaps a downvoter might want to point out a flaw in what I said?
I don't quite buy the analogy. Seems to me that part of the problem was having tokens that could only be exchanged for one thing, and even then at a fixed exchange rate.