Quote from: Impaler on April 19, 2013, 03:29:26 AM

Do you seriously believe that BTC mining has contributed 1 BILLION dollars of goods and services to the rest of the economy? Maybe their are some miners who eat Ramen so they can afford their huge electric bills but that's not decreased consumption, that's exchanging one consumption for another. No one can point to any deferred consumption involved in making or hoarding BTCs. The entire LIFETIME CONSUMPTION of the few thousands of elite miners doesn't come to a Billion dollars.

Your assumption that the entire 'surplus' of deferred consumption goes into productive investments is baseless. The economy dose not make or not make investments by looking at if their exists a surplus of goods that could be invested, that's how a centrally planned economy might work. In a free-market economy a surplus is a sign to produce less, not more.

You have not addressed in the slightest the price signals that run counter to I've identified and are just repeating a self justifying manta that's been discredited for ages. What business is going to be investing when the price they get for their goods is declining AND volume sold is going down? Maybe capital goods are down in price as well, but that's both unlikely (because the deferred consumption was in consumer goods not capital goods) but it's irrelevant too. It just means producers of capital goods will ALSO be contracting their production. Both of these are the effects we would see from hoarding, deferred consumption and deflation. And no costs of raw materials will not go down to balance it all, the biggest cost is labor and wages are STICKY.

This is BASIC Adam Smith macroeconomics I'm talking here, supply and demand and price signals. The 'paradox of thrift' and negative effects of deflation are not even Keynesian conclusions, they are the firm conclusion of EVERY the very earliest thinking in economics worthy of the term that date back to Dickensian England.

You can call it anything you like...

But it doesn't affect the correctness of what I've said. Nobody producing a product when faced with 'the price they get for their goods is declining AND volume sold is going down' the company either diversifies what they produce (either through innovation of opening another line of business) or they do what you're suggesting... which is scaling back production which eventually results in their going out of business.

The reaction you're assuming is the expected response to a general economic slump (aka decrease of demand due to lack of funds) not the response you'd expect during deflation. During deflation you have currency that's owned growing in value and this actually encourages people to spend some portion of it that they wouldn't have before. It creates it's own added economic stimulus in this way. Persons are able to at the same time save more value and also spend more value because what they already have is increasing in value.

All that said - the idea that deflation is going to somehow make the 'price they get for their goods decline' is silly - that price isn't going to change just because the currency is worth more. Now someone may lower the price to stay competative, but if the currency is worth more... that's a neutral move on the part of the company not a loss.

What you really should consider is this bad idea that deflation is going to encourage hoarding. It doesn't and it won't. If someone suddenly made everything cost half the current price... how would a typical consumer act? They'd buy more/nicer stuff with some portion of their income and probably end up saving (or paying down debt) with the other portion. Both of those are good for any economy.