Quote from: unk on June 26, 2011, 04:14:21 AM

westkybitcoins: for much of the period you're describing, the group of 'middle class' americans to which you're referring held extremely little cash, and they held essentially none outside interest-bearing accounts with which they matched or even beat inflation. furthermore, many such families 'saved' in non-cash assets, such as a family house.

to be clear, however, i'm not disputing that inflation takes from some people and gives from others.

OK. Fair enough that you don't dispute it. Let's just focus on that then.

Quote

that's true of anything, however; it's true, of deflation too, for example. who benefits and who suffers is a detailed empirical question that requires nuanced analysis to answer, just like questions about the true incidence of a new tax. for instance, if we all used bitcoins, the eventual presumed deflation would affect salaried laborers versus investors in very complicated ways that are hard to predict based merely on the notion of 'deflation', for they would depend on many other macroeconomic and psychological factors. (for example, how sticky are wages? how are pensions computed?) to answer these questions with ideological generalities will almost always lead to wrong answers and bad decisions.

Three points.

First, let's look at "who benefits and who suffers." In a centralized, inflationary monetary system, this is pretty clear. The primary beneficiary is the one who gets to create more money (or I suppose more accurately, those immediately able to use the new money in exchange for goods and services at full value. This could be the central bank itself. This could be the entities bailed out via newly minted cash.) The primary suffering are those forced to hold the money, those holding it out of ignorance, and those holding it out of necessity--the system as it is requires us all to use dollars for our everyday needs. There will always be some of these people. In fact, for the monetary system to actually function, the money MUST be in someone's hands. And those someones get screwed.

What about with bitcoins? Well, remember that the bitcoin network doesn't go and periodically destroy bitcoins. There's simply a cap on the number of them that will ever exist. So the primary beneficiaries of any deflation are ALL the voluntary holders of bitcoins. So far, no problem there, is there? And the primary suffering in this case? Those who lose their bitcoins.

Please take a second and think about how ingenious that is.

Some people will irretrievably lose their money in ALL monetary systems. Under inflation, these people lose 100% of their lost money, and will also lose some % of their remaining money due to their central bank. Under a non-inflationary money, these people still lose 100% of their lost money, but they gain some % of that value back in their remaining money. Even if they have no remaining money, then they've just broken even with the inflationary system... they certainly didn't fare any worse for it.

This reduces the group of sufferers to the ideal, most fair group... those who would have lost purchasing power anyway. They are demonstrably never worse off than they would be under an inflationary system, and periodically are better off. This arrangement seems far, far superior to one where the politically connected profit at the expense of the poor, the uneducated and the coerced.

Second, there's a big difference in how any transfer of wealth occurs under an inflationary and a non-inflationary system. In a non-inflationary system, any wealth transfer can only be initiated by the person who would lose their purchasing power... for example, those who lose their bitcoins. Call such a situation what you will, but at best, their loss of purchasing power is an accident, at worst, it's just their own fault.

Under an inflationary system, the wealth transfer can be initiated pretty much at will by those who would gain the purchasing power. Which is so ripe for abuse it stinks. Moreover, that purchasing power comes AT THE EXPENSE of the suffering. And remember: for the monetary system to even work, SOMEONE has to be holding the money, so there is NECESSARILY a patsy. Before we started redefining terms in western society, we used to call that sort of a wealth transfer theft. And considering it's a system forced onto some segment of the society or another, I prefer to just call it getting screwed.

Third, there's something far more fundamental we're overlooking. Our opinions on the issue don't matter. The fact is: people choose non-inflationary systems. You can call that stupidity, ignorance, cowardice, whatever. People do. They do it over and over, every time. They choose non-inflation over inflation. This is proved by the fact that governments have to resort to legal tender laws and having tax payments required to be in their own currency. Gresham's law ceases to exist in the absence of coercion. Thought experiment: go to a nation, any nation. Give them a choice: they can transact in a non-inflationary fiat money, or some other inflationary fiat money, or even both, with all contracts and debts honored equally. They can pay taxes in either form of money they wish. Of course, they still can have access to all the other means of asset protection; just ensure there will be no penalties or punishments given to them for choosing one fiat money over the other in regular use. Oh, and don't bar anyone from informing others about the true natures and consequences of each.

Which of the fiat monies do you think people will choose? Seriously, is there even any question?

So say what we will, people have spoken. They don't want inflationary monies. THE MASSES DISAGREE WITH YOUR ASSESSMENT OF THE ILLS OF A NON-INFLATING CURRENCY. They only deal with it because it's forced down their throat by people who feel the need to save them from themselves.

But considering that (a) they're the ones who have to use it, and (b) the whole issue is supposedly about what's in their best interests... I'd say the people themselves are best suited to determining what is best for them.