Quote from: patvarilly on July 15, 2011, 07:43:22 PM

Quote from: realnowhereman on July 15, 2011, 07:26:59 PM

Do you dispute the fact that bitcoins are being created? Do you not think that is money supply inflation? Given that that is true, how does any argument that says people are hoarding coins now because they are deflationary make any sense?

The number of bitcoin users has recently increased far more quickly than the money supply:

http://forum.bitcoin.org/index.php?topic=29043.0

The argument can make sense if people think that the demand for bitcoins will grow more quickly than their supply, making it a good idea to hoard coins that cost you little to produce eight months ago until the suckers next month beg you to buy them off of you at a much higher price. This is either because they think they'll be greater fools, or because they think that the bitcoin economy will expand faster than the money supply. I don't see the latter happening, so I'm going to go with the former.

That's a reasonable argument; but it's not deflation. It's the other way around, instead of people buying because the currency is deflationary, it's the currency becoming more valuable because people are buying. When the euro devalues against the dollar, we don't talk of the euro deflating -- the size of the euro economy could be the same, and the number of euros could be the same. We don't speak of oil being "deflationary" when it becomes more expensive do we?

I'm actually not sure that the bitcoin economy is large enough, consistent enough, or varied enough to make terms like "inflation" and "deflation" have any meaning -- they certainly aren't measurable; how are we going to create a "standard basket" for creating a price index in a bitcoin economy?

It's these reasons that make me think that those who say bitcoin is, at present, a commodity rather than a currency are correct.

I'm not arguing the facts of the situation, I'm arguing that this chucking around of the words "deflationary" and "inflationary" to mean increasing and decreasing in value is incorrect.