Post
Topic
Board Economics
Re: Bitcoin. In no way deflationary.
by
Impaler
on 05/05/2013, 01:49:41 UTC
I'm responding to you to mention that there is in fact reason to look at the supply of money, and more importantly, changes in that supply. This is because money is a non-neutral good, and prices take time to change through an economy.

If you are to expand the supply of money exactly with the population, it isn't as simple as just saying that prices will adjust accordingly. You must know the qualitative issues that surround the means by which the supply of money was increased. If that money goes first to X individual, then that individual benefits most from the newly created money regardless of the aggregate data surrounding the change involved. Likewise, person Y who receives the new money (as in, who is last to adjust to the change in supply,) is actually made worse off because of the lower purchasing power of their money in the time until prices adjusted.

This is why the issue of "price stability" is really impossible to answer for the "best" outcome. There is no such thing as price stability when the market of millions of goods have independently changing prices. You may be able to make aggregates of the prices (CPI, PPI, etc,) but those aggregates hide the meaningful information that prices give to an economy.

No one denies that the supply of money is a FACTOR that can contribute to inflation/deflation, and yes how new money is added (or old money removed) has massive effects and has to go through a messy process of rippling through the economy to rediscover new equilibrium points (and some people get screwed in this process).  None of that is even remotely in dispute, you seem to be assuming I support inflation simply because I don't spit on Keynes grave every time I mention him as is the normal etiquette here on the forums.

I am simply arguing that deflation/inflation as terms describing the change in the purchasing power of money are useful and meaningful and the orthodox meaning of these words amongst ALL economists.  The deeper ramifications, goodness badness, supply vs demand side mumbo-jumbo is irreverent here because I'm just trying to point out that semantically their is no disagreement.

And I have no idea what your lost wallet statement is supposed to mean as that's not inflationary by anyone's book, losing a crytpo coin wallet decreases money supply and all things being equal will cause deflation if it is not being offset by an equivalent decline in demand for money.  Mises and Keynes agree on this simple point.