Take his "100 Widget @ 1BTC each to produce, sell them later at a different value of BTC." scenario, which he characterises as an 80% loss. Now consider where the widget maker would have got his initial 100BTC from, and what he'll do with the BTC he sold the widgets for. Using his numbers, lets say you sold 50lb of butter to get your initial 100BTC. Several months later, when you've sold all your widgets (for the deflated 0.2BTC price) and you've got 20BTC in your wallet, you convert that back into your original resources, and get 100lbs of butter at the new 0.2/lb rate. All of a sudden the exact same scenario now looks like a 100% profit (50lb of butter becomes 100lb) instead of an 80% loss (100BTC becomes 20BTC). Admittedly, hanging on to the original 100BTC would have allowed the widget maker to sit on his hands for a few months and then buy 500lbs of butter, but looking at just the BTC deflation without the outside context makes things look very much worse than they really are. And ultimately, it's butter (or opamps or widgets) that you need to eat/live and that have "real value" in some sense - those 100BTC could just as easily have turned out to be worthless at the end of the widget production run - and the widgets could still have been sold for USD or traded for butter. The guy with a private key to a magic number proclaiming "100 BTC" might have had _nothing_ Not a problem if you can afford the gamble - not such a great idea if you _need_ that butter to feed yoru family.
Re: Bitcoin Deflation and Economic Activity
#61Seems to me the problem pointed out only exists if you view the transactions without taking their larger context into account.