Quote from: dinofelis on May 14, 2017, 09:27:59 AM

Quote from: classicsucks on May 14, 2017, 07:37:35 AM

Your claims about money supply are interesting. Is it possible that your views about current inflationary economics cause you to regard such systems as normal and stable?

One should distinguish between inflation/deflation (= the change in real world value of a token) on one hand, and debasement (= creating monetary tokens) on the other hand.

In general, a good currency has only very mild inflation or deflation, and what's more important, this mild inflation or deflation is *predictable*. This makes that the currency is a good representation of value as a function of time, and hence a good "unit of account". Whether the deflation or inflation is 2% or 3% ... doesn't really matter. If you KNOW that on average, a currency has an inflation rate of 2%, say, you KNOW that 10 years from now, a given sum represents 20% less value than that same sum today, so you can take this into account in every long term agreement. If you know that the currency is mildly deflationary, you know that a given sum will represent about 20% more than today, so that too, you can take it into account.
As such, mild inflation or deflation, for a currency, doesn't matter much, as long as it is predictable.

But in order for a currency to keep its inflation or deflation rate close to the "programmed" one, the currency OFFER needs to adapt as a function of its value. If the currency is too expensive (that is, if the deflation is too severe), more currency needs to be put on the market. If the currency becomes too cheap, (that is, inflation is too severe), currency needs to be taken out of the market.

Sounds like a fair summary of current mainstream neo-Keynesian monetary policy. I just wanted to point out to you that this system is by no means normal, stable, or rational, and it has no successful historical precedent. It's just been "the system" for the past 40+ years in G8 countries.

Quote from: dinofelis on May 14, 2017, 09:27:59 AM

A currency with a given production rate, worse, a currency with a decreasing production rate, and an increasing adoption, will be explosively deflationary. That's exactly what we saw with bitcoin. Everyone is cheering that bitcoin went up from $0.1 to $1700 or so in about 6 years, but that is a catastrophic deflation.

Imagine that 6 years ago, you signed a contract with me that I would clean your room for 100 BTC (say, $10) per day, with an indemnity of breach of contract of 5000 BTC (say, $500) if you decide to stop the contract without me failing to clean your room. Then I'm rich now, and you will be working the rest of your life to pay off the contract !
You cannot do business in such a "currency".

If that currency would become in general usage, then the economy would fall in a deflationary spiral: as hoarding currency instead of spending it would lead to higher wealth, and as the increase in value of the hoarded currency would outpace any reasonable true economic return on investment (look at bitcoin: what real world economic investments allow a factor of 10000 ROI in 7 years !), nobody would spend, nobody would invest, and everyone would hoard more and more currency, having less and less currency running around, increasing even more the value of the few coins that are available and not hoarded yet, inspiring people to hoard even more.

Aren't you forgetting that inflation also arises from increased monetary velocity, not just increased supply? So the increased nominal exchange value is not necessarily "catastrophic deflation" at all. As you point out, in a classic deflationary event, the velocity of money spirals downward as the currency becomes more valuable - it's smarter to hold money than buy goods and services. This doesn't effect bitcoin for several reaons: 1. bitcoin not a primary unit of account, and 2. it isn't required to purchase vital goods and services. Furthermore, there is an increasing number of goods and services that can ONLY be purchased using bitcoin. People who aren't taking fiat profits on exchanges are likely buying more of these "exclusive" goods and services as we speak - if they're smart, they know that the price/fiat exchange rate will correct soon anyway. Remember that people buying into the bitcoin currency to acquire goods and services don't care what the fiat exchange rate is - they simply buy the coin and get the product at roughly the same exchange rate (or better if they bought in January). Additionally, remember that bitcoin is a financial asset class of its own, which continues to find new market share and investment. Finally, I doubt that a complete stagnantion of BTC trade and exchange voume would happen on the bitcoin network - most people know that this would kill bitcoin and a devaluation would be close at hand.

I don't think people are really writing up labor contracts for BTC. Just about every store I've seen uses national currencies for pricing and the BTC price is determined by daily exchange rates. There's no real problem with that other than wild fluctuations before exchange. Somebody from Coinbase said in an interview that their large merchants exchange their BTC for fiat once per day day or more. That insulates the merchant from large losses (but also large gains).