[solarman5000]

>Because they handled it for hundreds of years, and it works all day everyday.

Yeah that great depression that started in 1929 and sank the world, the stagflation of the 1980's, the crisis in 2008, the 7% inflation this year, all evidence the govt does a great job handling it

[throwaway946513]

If we're going to discuss crushing inflation and prices, shouldn't we also consider BTC and other coin's wild volatility? 60k one day, 40k the next. That's not a very stable system either.

[ben_w]

I think you’re conflating the economy and the monetary system. The latter is part of the former, but only part.

Money itself is mostly done fine. Mostly: There are exceptions, but (outside of wars) I know if only a handful of examples where governments had something less stable than Bitcoin.

[kevinak]

How is it fine? Even a currency like the USD has lost most of it's value over time: https://howmuch.net/articles/rise-and-fall-dollar

I guess you could call it stable. A stable decline!

[ben_w]

Indeed it has.

First: That, within certain bounds, is deliberate — a small level of inflation helps the rest of the economy by encouraging spending. The last thing you want is people HODLing their paycheques.

Second: your link shows an average halving time of the US dollar purchasing power of 22.5 years. Bitcoin has about the same price today as it was 6 and 12 months ago, but was about double that 3 and 9 months ago. Even the Brexit referendum’s effect on the GBP would be hidden in the noise of BTC’s volatility.

[kevinak]

First: Ok, so. Let's imagine that there was a perfect sound money. One that couldn't be tinkered with, one that couldn't be debased. Would you still need to "encourage spending"? I definitely do not think that's a given. I'd even argue that the need to intervene in the economy by playing with the cost of money is a symptom of the current system.

Second: Yes. No one is denying that Bitcoin is volatile. If you pick any arbitrary period of time you can come up with whatever statistic you want. This is not sound argument IMO.

[ben_w]

1. Crudely speaking, money that stays in a savings account acts like money destroyed, i.e. deflation. Deflation encourages more people to do the same, because the effective savings interest rate is ≈ $nominal_interest + $inflation, leading to a spiral.

Except: money stuck in savings accounts also means the money isn’t spent on goods & services, so fewer jobs are supported, so productivity goes down, which is effectively +ve inflation even with the money supply perfectly fixed, but fewer jobs also encourages more savings and also triggers a spiral.

Which effect dominates (+ve or -ve inflation) depends on other factors, but both ways are a spiral of economic pain.

2. What? This is specifically about which is worse, how can you not make this type of comparison?

[ben_w]

And now it’s too late to edit, I see an error:

> $nominal_interest + $inflation

Should either be:

> $nominal_interest - $inflation

Or:

> $nominal_interest + $deflation