[vishnugupta]

This[1] is an insightful article from an economist who has experienced the real world economics from very close quarters.

I don't have any opinion about Bitcoin one way or another, though through these fascinating arguments I gain new insight about the money and its relationship with geopolitics, human civilisation and other aspects.

[1] https://www.yanisvaroufakis.eu/2013/04/22/bitcoin-and-the-da...

[cyphertruck]

That article is from 2013 and so we must grade it on a curve. He makes several wrong assumptions about how bitcoin works because he’s thinking it is based on trust, and he is an inflationist.

I have yet to have an economist explain to me why deflation us bad- computers getting cheaper is good, fixed income people being able to afford things us good. Inflation mainly allows government to hand out money yo wall street in exchange for bribes at the expense of everyone else. That’s not good.

[betterunix2]

"I have yet to have an economist explain to me why deflation us bad"

There are a few different issues. First, volatility is universally bad for a currency, because it makes all transactions in the currency more risky. Money should always be a medium of exchange first and foremost; there should be little to no room for speculating on the value of money and people should not have to factor in unexpected changes in the value of money when determining prices. In general people will switch from more volatile to less volatile currencies because less volatile currencies make trade more efficient.

Unexpected deflation is particularly bad, because in addition to the general problems with volatility, it also triggers defaults on loans (because money becomes more difficult to obtain). Too many defaults in too short a period of time will create a "contagion" effect by reducing the collateral held by lenders (who use loans as collateral for their own debts), which triggers even more defaults. Worse, as lenders see their collateral vanish, they will try to make up the difference with money, taking money out of circulation and causing even more deflation and thus more defaults. This is the "deflationary spiral" scenario.

Inflation is not some trick to hand money over to "Wall St." Rather, a low, predictable rate of inflation is targeted so that there will be some "breathing room" during an economic crisis. It does not hurt people on a fixed income because it can be planned for and the fixed income can be adjusted for inflation (e.g. someone could hold a portfolio of TIPS). It also has nothing to do with the price of computers, which have become cheaper because of economic growth (and in fact have become cheaper over decades of inflation). Inflation also encourages investment activity by discouraging the hoarding of money, which is a good thing for the economy.

[cyphertruck]

It’s a shame you spent so much time patiently trying to explain all that to me, not realizing it’s probably the ten thousandth time I’ve heard this. I appreciate the efforts, bit that view is rationalization and I tried to save you the effort by pointing out that the technology industry has not stopped like you would expect if your view were reality.

And I assure you, as someone who holds bitcoin that has greatly appreciated, I can’t wait to spend it on things that depreciate.

In fact my spending has increased now that my spending power has increased dramatically.

[betterunix2]

OK, well, congratulations on your gains, you made a good bet, it paid off, and I hope you can put it to good use. It does not make anything I said false. You asked why deflation is bad, and I gave you a summary of the various reasons why.

As for what we should expect...why should the current situation be so surprising? The vast majority of merchants who "accept Bitcoin" use a third party payment processor that immediately converts Bitcoin into a fiat currency. The number of people who use Bitcoin as money, rather than as a system to communicate payments made in some other currency, is vanishingly small. The "technology industry" has mostly focused on non-monetary applications of blockchains and a lot of attention has been paid to "permissioned" blockchains because they are overwhelmingly more efficient.

[jdmoreira]

> "I have yet to have an economist explain to me why deflation us bad"

1 bitcoin will always buy more and more and more and more. So you have zero incentive to spend your money today and you have all the incentive to wait as far as you possibly can before spending anything. The economy would grind to halt. Isn't this obvious?

Besides, rich people can sit on their money instead of re-investing. They will never have to work and neither will their descendants. You basically established some kind of stupid cyberpunk feudalism.

[cyphertruck]

You are arguing that the kings if the past with lots if gold starved, simply because their gold could buy more food over time. People don’t forgo food for decades to put more money into index funds despite the broad market increasing in value consistently over time.

Computers get cheaper every year such that even inflated dollars can be held to get a better computer next year.

And yet the technology industry has not ground to a halt. Food is low tech, cell phones are high tech.

It is obvious- this argument in favor of government being able to debase the currency to fund wars and somehow that’s good for poor people is never going to hold water.

But here is another thought- no matter how much you call it stupid, or fuedalistic, leftists gave been making this argument fir over a decade now and Bitcoin has only gotten stronger.

You may even be able to make it “illegal” if you ignore the constitution and laws, but you cannot stop it.

Bitcoin will be the tool that liberates the people out from under your technocratic thumb.

Thats what I find most exciting.

[jdmoreira]

Wow, I can't even make sense of what I read. It's like all the crazy conspiracy theories thrown into a blender and the outcome is: "Bitcoin liberates!".

I think you really have poor mental models of the world. I'm sorry but there's not even anything else I can say.

[lottin]

> computers getting cheaper is good

In the context of deflation goods getting 'cheaper' simply means that their nominal price falls, while real prices remain constant. If you thought that deflation makes people richer (or that inflation makes people poorer) then you were wrong.

[cyphertruck]

Inly if you redefine “rich”. Increased purchasing power makes you richer, giving you a chance to build wealth. Inflation robs this from society and is oppression. I really don't care to be gaslit about economics.

Bitcoin fixes this.

[Retric]

Inflation only impacts actual cash. Land, stocks, gold, durable goods, even loans, and other forms of wealth are not directly impacted by steady state inflation.

Remember, if you have money in an interest generating account then you don’t have actual cash you have an IOU for cash with whatever institution you deposited that money with. Now, changes to the inflation rate or hyper inflation are another story, but consistent ~1.5% inflation is the goal.

[chipotle_coyote]

> I have yet to have an economist explain to me why deflation us bad

At risk of being the "Let Me Google That For You" Guy, it's not too hard to find articles where economists give cases against deflation, e.g.:

https://www.brookings.edu/opinions/5-reasons-to-worry-about-...

https://www.economicshelp.org/blog/978/economics/definition-...

https://www.pbs.org/newshour/economy/why-is-deflation-bad

The basic argument is that in small amounts, both inflation and deflation can be fine, but either one can become a problem. The issues with too much inflation are fairly obvious; the issues with too much deflation is that downward price pressure falls on everything. If deflation is so reliable that prices are going to be meaningfully lower if I can put off a big purchase for as long as possible, I'm going to do that. If enough people follow my lead, that hurts sellers. Wages go down -- more than likely through layoffs rather than pay cuts. And anyone who's already in debt -- and this doesn't just include your Uncle Bob who routinely puts too much on his credit card, it includes companies using lines of credit -- can end up in real trouble.

> computers getting cheaper is good

Sure, but -- even though I've seen this example trotted out before as a pro-deflation argument -- the prices of manufactured goods steadily fall due to continual improvements in manufacturing processes, economies of scale, and general technological progress. This has been particularly noticeable in computers over the last three decades, but Moore's Law isn't a supporting argument for the benefits of monetary deflation.

[cyphertruck]

“This has been particularly noticeable in computers over the last three decades, but Moore's Law isn't a supporting argument for the benefits of monetary deflation.”

Asserting that an argument is not an argument is not a rebuttal.

The claim that people having more purchasing power will stop the economy is self serving for inflationists and never supported by evidence.

In fact the opposite has been the case time and time again.

As I proved in the example you simply ignored.

So, like I said, I have never seen an argument. Just these kinds of self serving assertions.

[luhn]

If you don't like the Fed throwing money at rich people, you should probably be rooting for inflation. The historically low inflation of the past decade has them handing out money like candy.

[cyphertruck]

We have not had low monetary inflation since at least the Ford presidency.

You are confusing the consumer price index for “inflation”. It’s understandable, this lie is one of the earlier examples of fake news.

When the fed prints money it goes to wall street and politically connected people. (This is quite literally the definition of fascism- a private economy run by government)

Wall Street profits from the inflation, but the rest of the people get poorer.

[jdmoreira]

No. Everyone profits (the world economy grows). Sure, some people will be left behind like blue collar americans but that’s mostly because of globalization.

Also people that put their money in the stock market for the long term will do much better than others. Even if they are poor, it doesn’t matter. Just buy SP500 with all the money you can spare.

At worst inflation is a tax on ignorance. If you keep buying crap you don’t need with your dollars instead of investing... it will suck for you.

What about those that are so poor that have zero money to spare in the first place? Well, that’s a situation that shouldn’t even exist. That’s why I live in European Social democracy where governments actually distribute wealth.

[jdmoreira]

Besides the US can print as much dollars as they want because they have the largest economy and the largest military to keep the rest of us buying those dollars and inflating our own currencies in lockstep.

The US is not Zimbabwe. It’s not even comparable.

You can literally shove those dollars down the throat of the rest of the world for as long as the status quo is maintained.

[luhn]

If CPI doesn't do it for you—which is fair, it's certainly flawed—what's your preferred measure of inflation?

[UncleMeat]

> and he is an inflationist

Is this going to be a new slur from the community?

[cyphertruck]

Wasnt a slur, but a representation of his position. It should be a slur, though, as monetary inflation is a tax that hurts the poor the most.

[jdmoreira]

No, inflation doesn’t hurt the poor the most! Have you even given this a minimal amount of thought?

Compare someone with a billion dollars and someone with 0 dollars today. Then huge inflation comes... who lost more purchasing power? Not the person with zero dollars, that’s for sure!

You really need to take a step back and start thinking because there are multiple people here spending their time and energy trying to explain something basic to you from first principles. Have some self doubt about your worldview. You are dismissing sound logic based on what? Most of the things you reply don’t even make sense.