Quote from: Meatpile on August 10, 2012, 05:44:26 PM

Quote from: tynt on August 09, 2012, 05:23:05 PM

Quote from: Muis on August 08, 2012, 10:16:33 AM

There is one weakness of it, which I hope someone can invalidate. Suppose I'm a car-dealer and I buy 1 car for 100 BTC from my supplier. By the time I can sell it to a customer, I can only ask 95 BTC for it, because of deflation. Now everyone argues that isn't a problem, because the prices at my supplier also have dropped with the same amount, so I can buy a new one there for 95 BTC, and again have 1 car in stock, and don't suffer any losses. But if I did absolutely nothing I would still have 100 BTC, so why should I work hard as a car-dealer instead of hoarding?

I can't see why this would be good for Bitcoin. People said that it's good because it forces merchants to keep their stocks low, or produce goods only on-demand. But then you're asking merchants to change the way they have been doing business for decades, which seems unlikely to happen.

So how can Bitcoin solve this problem for merchants?

This is true if you have hyperdeflation and your business's profit margin is 0%.
Lets take a scenario where annual deflation is 5% and you take 5% cut of each car sold. You have BTC100. First month you buy BTC100 car and sell a month later. Car costs now BTC99.5 due to the deflation. To take your cut you sell it for BTC104.5.
(BTC100- 5% / 12months)* 1.05 = BTC104.5
Pocket the BTC4.5 and buy another BTC100 car. Do that for 1 year and you end up with BTC154. If you count in the deflation you are now 58% richer.
If you didn't do anything then you are only 2% richer.

That is a terrible example: Your whole premise means that anyone doing business needs to KNOW THE FUTURE. You assume it will be 5% per year... with the volatility of bitcoin can be upwards of 50% or more.

How can you possibly set realistic profit margins when value can swing in such huge unpredictable fashions?

Ask Wall Street.