Oh good lord... Not TVP...

Oh the trouble with aggregates... As if your wealth bracket dictates your income mobility...

Don't get me wrong, having more wealth makes it easier to obtain more wealth, but you can't rely on aggregates to argue that one.

People will always read into it what they want to read into it...

Also, it's not an "all sales are final" agreement that they just had customers signed. In fact, they signed that at the first moment that they ordered them under the presale agreement. Why is it, then, that they have honored all refund requests, including giving an opportunity for a full refund to everyone? That's what the latest agreement was, after all. A chance to get a refund given the changes in the product specs (i.e. power, size, etc.)

Don't get me wrong, I absolutely understand the skepticism, but this company really is doing what they said they would, they were just really far off on all of their time and spec estimates. As I said in my first post in this thread, they're just an immature company; they don't have the experience or size to really make this process go smoothly.

Once I realized what you were saying, it made perfect sense! The problem is that very few people actually use the proper terminology, so I'm stuck making guesses on what people actually mean. Just be careful to make yourself as clear as possible

If you look at the aggregates, sure... But that's also ignoring the fact that the addition of the low skill population makes both the high skill workers better off, but the low skill workers will be better off than they were from where they came from (if it's truly because of economic opportunity, which it is in this case.)

Your entire post was predicated on the premise that aggregate measures of a single country accurately reflect the real income mobility of the members of the population, so it's not just the quote that I took from you here. The premise is faulty, and your argument just doesn't stand.

Don't worry, I read the whole thing.

The fact of the matter is that this wasn't an answer that could satisfy the question of "economic expansion" aside from saying that it BTC is divisible enough to be used even if its USD price goes up to $1bn. This has absolutely no relation to an increased supply of BTC, rather, it responds to an idea that Gavin inferred from the "economic expansion" statement that the price of BTC would necessarily rise.

Can you honestly expect to see a more thorough answer made within 140 characters?

"Common sense" is a misnomer. The common theme is that people don't use good sense, let alone good reasoning. Where the truth lies is in understanding how humans think, act, and react in an environment given certain conditions (i.e. scarcity.)

Your comment about "finding an anchor" is interesting... I think you may be referring to the ability for money to be the unit of account in a way that enables economic calculation. That being said, to imply that money is then objectively valued in some way is false, even as it allows for sound objective comparisons between goods and services in a relativistic manner across an economy.

As for believing books or theories, that's not what I'm advocating. Instead, I suggest that people use sound reasoning to establish a valid means of understanding events in context. To follow a theory without first reflecting on the fundamental nature of the specific case at hand is asking to be wrong.

When looking at an economy wherein two units of exchange are used and there is significant enough opportunities to execute arbitrage, comparing the two currencies against each other for price inflation/deflation is sufficient to establish price inflation/deflation of either currency, supposing that prices accounted for in one of the two currencies is stable as is the case with dollars.

I think what you're really trying to say, however, is that Bitcoin can't deflate if it isn't used as a currency in the first place.


What fiat money, and which measure of supply are you using to determine its inflation rate?

When looking at the dollar, it's really not very accurate to say that "the money supply" has been inflated by 400%.

M2 has a relatively insignificant (and already corrected for,) change in response to the 2005 housing bubble and subsequent 2008 financial collapse.
http://research.stlouisfed.org/fred2/series/M2

M1 on the other hand has just about doubled since 2008.
http://research.stlouisfed.org/fred2/series/M1

The monetary base, on the other hand (also called M0 in some circumstances,) is actually higher than M1.
http://research.stlouisfed.org/fred2/series/BASE

My point is that it isn't as simple as attempting to look at aggregates and ask for immediate results. Money is non-neutral and will take time to "feed" through the economy. There are also many other issues involved that I won't go into here because it would just take far too long and most people would probably get bored with the explanations.


Isn't it interesting that you're somehow impervious to this fault, MPOE-PR? If I had a superpower, that would be it. Lucky for you, you obviously have that superpower already. I'm jealous.

Mexico, the place with drug violence gone rampant and a state that doesn't allow proper economic action to take place?

You have to look at many factors that are involved in the issue before making a straight comparison.

He's talking about units of the currency, not total supply. What he is really saying here is that there's 2.1 quadrillion Satoshis... Since a Satoshi is 100 millionth of a bitcoin, each bitcoin (21 million) has 100 million sub units to it. There's no increase in supply, only a change in the decimal place.

I'd love to see that "empirically observed" information. The closest you're going to get to that, though, is in showing when banks deplete their reserves too much that they're "forced" to go to the Fed as a lender of last resort when they're hitting their legal limits. If the issues of moral hazard (FDIC, repeated Fed and congressional action bailing banks out, etc.) were addressed then this wouldn't occur... But to say that the banks create the money themselves is disingenuous.

My point wasn't that you're arguing for or against inflation, but in regards to the use of terms, inflation and deflation are actually quite good for both price and supply issues. This is why I personally just say "price inflation" or "deflation of the supply of X" because it tends to get over this semantic hurdle with most people while still applying the ideas of inflation and deflation to both spheres.


This is why I said that it's exactly the opposite of the inflationary mechanism. The point was that the first person to lose the currency is the worst off while the last ones to adjust (rather, to be forced to adjust) to that pricing shift are the best off. It was just inverting the issue to try to make the point about the necessity of qualitative analysis rather than looking at the aggregates of price inflation and deflation.




If you're trying to relate Bitcoin deflation to the relative inflation of the Dollar against Bitcoin, then sure...... But that doesn't really make a meaningful point above and beyond saying that Bitcoin has deflated relative to the Dollar...

I'm not really sure where you're going with all of that. In terms of spending more in an economy, if the size of the market of goods being bought using the currency increases at a faster rate than the reduction in hording, then price deflation will occur even as the supply of currency being circulated is inflated... But that's completely relative... So again, I'm not really sure where you're going with all of this.

A way to better think about the issue of qualitative analysis in the change of the money supply is to see how someone feels when they lose their Bitcoin wallet. This is the exact opposite of the inflationary mechanism described above.

That's a quote taken well out of context. Mises would acknowledge the semantics of price inflation/deflation, but he would stick to the supply issue of it.

But as you said, that's all semantics.

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.

You're at least very closely related to the person who did write it, if any of the connections that your account has with the supposed author are accurate.


The issue isn't about deflation preventing spending. You're putting the cart before the horse here. The discussion was on how hoarding affects deflation.

The fact that you've missed this repeatedly is telling me that you're really not worth any more of my time. I've already explained not only that this is a different issue, but that the article you linked includes points that I agree with. I'm rather certain that I've made it clear I understand what those article(s) are attempting to say.

Also, for future reference, it's wise to link to more than a single source time after time. If you wrote it, then fine, but you suggested otherwise already, and even if you wrote it there should be links to outside sources within the articles rather than further linking within the blog.

I'm in it for the long haul; that being said, I do not have enough resources or skill in this field to be an innovator or invest in an innovator beyond just a small amount.

I have a feeling this is where most people who aren't doing day trading with BTC lie, then there's the last few who actually have the available capital to make it all happen.

One small point beyond this though...

This isn't at all accurate... There's no way to increase the supply of BTC (though you can surely increase the effective circulation of it through fractional reserve banking.)

Call me picky, but I am interested in more people actually understanding how the economics of Bitcoin (and even economics in general) work.

I'm getting the feeling you didn't read the article, even though I surmise that you wrote it?

By all means, there are some good ideas that are presented in the article, but perhaps you were thinking of another one if you're trying to respond to the arguments at hand, because this one just doesn't address the issues being discussed. Essentially, this article is about consumerism and ecology rather than issues surrounding deflation in relation to the money supply.

By the way, I agree with the point about inflation encouraging consumerism, and I agree that we would be in a better world if there wasn't this built in disincentive to save/invest in the future.

And one more thing, the relation of the supply of dollars to turkeys is flawed in that any actual currency will always have more supply than all of what could possibly be bought in the connected (or nearly connected) market than what the current price multiplied by the supply of any good will be... This is because the currency is chasing after more than just that good... Essentially, that portion of the argument does not prove the point that there's an ecological problem, else you would make the claim about any monetary unit.

Did I answer your question? I'm rather certain I actually read the article (as well as that which was linked in the original post.) You should really stop making it a habit of being condescending to people you don't know.

That's pretty much all politics and no economics.

The division of labor, coupled with the massive increase in productivity (both demanded and supplied) will create all the jobs needed.

If you want to see the fallacy a little more clearly, replace "immigrants" with "babies born" and take a look at history to see how economies always adapt to changes in population. On top of that, take a look at where the jobs are needed and how it actually helps to free up workers to be put into more productive, more specialized fields.

Uhh, I don't think you really got what was being talked about there... That blog post really doesn't hit the issue at hand.

I was referring back up to BTConomist's claim that there isn't deflation without spending -- that hoarding doesn't cause deflation. The article referred some to turkeys and oil (a reference to products/real wealth available to purchase,) but it doesn't talk about how hoarding of a currency changes the money supply or how that changes the way money is valued against products or services.

I definitely can't defend all of what johnyj has said here, but he is correct about the issue of money creation by banks.

The documentary is correct, up until the point where it talks about the banks themselves issuing credit that isn't backed by deposits. At least, this is if the banks aren't issuing their own currency units which they eventually hold on fractional reserves themselves, but that would essentially be saying that the bank is the Fed or ECB, and these days that's not how people generally think of banks.

Here's how fractional reserve banking really expands the money supply in today's economies.

The central bank (ECB, the Fed, etc.) creates the base money supply. In the case of gold backed specie, this is where the amount of available gold applied towards exchange rather than jewelry or other uses comes in.

This base money supply is "borrowed" from the Fed by anyone from commercial banks to the US Treasury. This is why the "debt as money" phrase came about, since all money is traced back to debt to the Fed. Once these institutions have the money on their books, it is essentially works like any other deposit or form of income since it is a radically rare case that the Fed asks for that money back, except in cases of acting as the lender of last resort (though that serves a different function entirely.)

From this point, the new money is lent out from commercial banks, or it is spent by the US Treasury. The money is now in circulation, and can be spent for any purpose by whoever else holds the funds.

These funds in circulation can either remain physically held, or they can be deposited into another (or the same) bank.

The banks in today's system lends a portion of these deposits out while still holding the original deposits on account. This is now a fractional reserve system, and it has resulted in the expansion of some measures of the money supply. The depositors still have complete access to their money in the bank, while the borrowers have access to all of the funds that they borrowed. This works because depositors in a trusted banking system do not withdraw their funds at a high enough rate to deplete the bank's reserves -- however, under certain crisis circumstances, depositors will withdraw their funds en mass in what's called a bank run, in which case the bank's deposits will eventually be depleted and the bank will become insolvent.

This is the extent of the fractional reserve system. You could go on to include how the borrowed money, once spent, may eventually be deposited into the bank again, but it's really just a recursive function of however many times the exact same process has occurred. There is no expansion of the base money supply, even as the credit markets are expanded 10's, even 100's of times, depending on the reserve rates and the market propensity to deposit into the bank.

This is not fraud. This is not theft. This is not money creation.

This is the bank loaning money from its depositors, and lending it out to its borrowers. If you're in debt then you're running on fractional reserves as well. The bank functions in exactly the same manner, and the way the money supply is altered is also exactly the same.

I hope this helps to clarify the issue.