Quote from: drhobomanxxiii on May 04, 2013, 10:25:38 PM

Quote from: BTConomist on May 04, 2013, 07:42:02 PM

And how exactly do you see this happening when hoarding seems to be everyone's favorite pastime? As you can see, lost coins don't drive BTC's deflation... No spending = no deflation.

No spending doesn't mean no deflation. Besides, if the only thing that's being traded is USD for BTC, that's still spending.

To tell you the truth, your statement caught me off-guard for quite some time. Wink

Nevertheless, after a few sips of some fine cuban rum and a wisdom spark, I think I may have found just the right words to clarify my initial position. So, here it goes. Ready? Let us first agree on the following play of words... If trading USD for BTC can be considered buying BTC, then trading BTC for USD will be considered buying USD. Does this sounds about right? So, if by buying BTC you would be engaged in demand creation for BTC, then by buying USD you would be engaged in demand creation for USD... But where is the value creation in that?

By trading one currency (say BTC) for another (say USD) you are merely engaging in the transfer of some assumed value between those currencies, and nothing more. Now, if the underlying value (not to be confused with the exchange rates) of each such currency has not changed between the two back and forth transfers, then both transfers would simply cancel each other out. But if one currency's underlying value (BTC's) was suddenly projected to increase relative to another currency (USD's), then the exchange rate between the two currencies would eventually self-adjust (due to some market forces) to reflect that projection. And we all know what would happen then: you would receive back less BTC for every USD than what you had initially used to buy those USDs (when you initially transferred some assumed value from BTC to USD).

Hopefully these badly-structured sentences were somewhat helpful in shining some light on why the increase in the underlying value of a currency is derived from the assumptions/projections about the increase in economic activity, rather than the increase in trading activity (i.e. back and forth buying/selling BTCs for USDs). Unfortunately, the only way to increase economic activity in a market-driven economy is to increase consumption of products/services produced in that economy this is what I call the increase in spending. And when it comes to BTC-based economics, deflation is just a pretentious way of saying inflation.