Quote from: firefop on April 30, 2013, 01:14:34 AM

Quote from: Wuji on April 17, 2013, 11:26:12 PM

If you claim to have credentials in understanding virtual currency than what would you have studied? Second life or World of Warcraft? Bitcoin is a whole new world and let's face it, as a speculation vehicle the price is dependent on faith and news right now. People still aren't able to predict weather and they have more to work with than Bitcoin speculators do.

Come to think of it mudflation might actually be the best thing to have studied when it comes to bitcoin.

The problems that the most educated 'economists' seem to have when it comes to bitcoin are many, I'll just point out a couple that frustrate me to no end.

1. DEFLATION IS BAD. This is based on not understanding that all the economic 'laws' and principles they've learned have been only been proven in an inflationary (debt based) currency. They will not always apply inversely with an deflationary currency. It doesn't completely invalidate these effects and in most cases something that somewhat resembles the inverse may probably applies, but there will be important differences.

2. OMG HOARDING. This comes from not really understanding the lack of a causal relationship between deflation of a deflationary currency and economic contraction. Causally this link simply isn't there. It's is however causally linked when we're talking about fiat (or any debt based currency).

3-8. The next 5 points I won't really go into, but they all involve not understanding that a deflationary currency will require much more agility on the part of financial institutions and businesses in general. This is by design. Bitcoin is much much faster than the existing banking system and we see evidence of this in how business is conducted with bitcoin (stocks dividends being paid on a weekly basis). The common mistake is a free market won't be able to compensate for this and business in general will breakdown.

To this silliness I say "pfft", I don't care if a business or even a sector of business goes out of business... the void will swiftly be filled by newer and more agile entities who will want to provide those missing goods and services. Sure it may ruin some people, but on average and over time things will get better for everyone.

9. BITCOIN WILL FAIL BECAUSE... I can't even really explain this one, but latching onto one issue and claiming it will kill bitcoin is just stupid in the extreme... in anything we should evaluate the good and the bad and weigh them against each other. My response is, "hey your agenda is showing'. I chalk this one up to fear mostly... and a clinging to old ideas rather than evaluating bitcoin for what it is... rather than 'what it could do' (which is kill financial institutions as we know them - end monetary oppression on a global scale - etc).

There was a good deal of understanding of deflation in historical economics. Just not in recent times. See, for example, Adam Smith's Wealth of Nations for a great discussion of the effects of technological progress on an economy. (hint: deflation and long term the only people who gain are landowners... capitalists see a short term jump in profits, laborers see the demand for labor, and thus their wages, drop).