You don't understand money – and it's a good thing for Bitcoin

Re:You don't understand money – and it's a good thing for Bi... by JohnJamesRambo on Friday November 15, 2019 @01:22AM (#21542709)

Or German Marks when they were worthless after WWI and bundled in huge stacks. I feel like people in “developed” countries think “this couldn’t happen to me” when time has shown us time and time again it certainly can and you will be powerless to the whims of your government. Our original poster feels the same false safety in his or her Euros. They have developed amnesia to the lessons of the recent past. Bitcoin can be a safety valve out in case of those same cyclical disasters. It is freedom from your government’s manipulations of your money. Is it perfect or ultra stable? Absolutely not, but every person, especially the ultra rich, needs it in their portfolio.

“The root problem with conventional currency is all the trust that's required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust.” -Satoshi Nakamoto

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Re:You don't understand money – and it's a good thing for Bi... by weego on Friday November 15, 2019 @01:42AM (#21542796)

So we've been ravaged by ww3 and our money is useless. How exactly do I still have Internet access and who is running all this infrastructure to allow me to trade crypto with someone?

And why are cryptocurrencies, which are also a limited resource that can't be diluted, immune to inflation?

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Re:You don't understand money – and it's a good thing for Bi... by sedeki on Friday November 15, 2019 @01:52AM (#21542846)

I am pretty sure deflation is the big concern with limited supply, not inflation. For exactly the reason that the supply is limited...

There are issues of Bitcoin one could argue about - but inflation is not one of them.

Give us a concrete scenario.

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Re:You don't understand money – and it's a good thing for Bi... by ivalm on Friday November 15, 2019 @01:57AM (#21542866)

While deflation is a concern for the economy as a whole people who hold money generally like deflation. A lot of why people bought cryptos is in hopes of massive deflation (egbitcoin price going up). Also, the promise of cryptos is essentially deflationary since productivity (and total world wealth) goes up while e.g. bitcoin total supply is constant.

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Re:You don't understand money – and it's a good thing for Bi... by sedeki on Friday November 15, 2019 @02:11AM (#21542919)

Deflation means that aggregate prices go down over time. I am not sure what it means that, as you said, people bought cryptos in the hopes that the dollar prices of bitcoins would ”””deflate”””. But sure, prices go up when demand go up - is this unusual?

(Sorry if I came across as arrogant.)

On whether deflation is bad for the economy. The standard example of this is the Great Depression, where massive amounts of credit was created and later people opted out of USD and wanted gold. There were bank-runs, as I’m sure you know. Thus FDR ”banned” gold (he even forced people to return gold or risk confiscation and jail time).

Of course dollar prices go down then, i.e. deflation.

I don’t see this as an argument that deflation is bad.

Or do you have another example or perhaps can correct me?

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Re:You don't understand money – and it's a good thing for Bi... by ivalm on Friday November 15, 2019 @02:41AM (#21543041)

You seemed to suggest in GP that one problem with fiat is that it may become deflationary (ie prices for goods in fiat will go down). I pointed out that Bitcoin is by construction deflationary, prices (in bitcoin) for goods go down as long as bitcoin occupies at least a fixed fraction of total exchange tokens.

Simple example, if bitcoin is the only exchange token in circulation then bitcoin will become more valuable as a function of time simply because the amount of "stuff" increases. This is as opposed to fiat, which increases in supply to compensate the increase of material wealth in the world.

The reason deflation is bad is because it discourages investment. If I can buy more stuff later with the same amount of tokens then I have an incentive to not spend my exchange tokens, thus reducing the total circulation of tokens/investment/etc. It also makes loans more painful (unless interest rates are negative), but if interest rates are sufficiently negative then this encourages people to not deposit money into loan originators (traditionally banks, but in crypto world could be something else).

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Re:You don't understand money – and it's a good thing for Bi... by sedeki on Friday November 15, 2019 @04:24AM (#21543500)

> then bitcoin will become more valuable as a function of time simply because the amount of "stuff" increases.

> The reason deflation is bad is because it discourages investment.

I agree that economies are naturally deflationary because people don't stop working. So what? I think printing money is bad (as opposed to the concept of "inflation" which is an effect) is bad, because it distorts market mechanisms that occurr naturally - I'm talking about (more) efficient capital allocation here.

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Re:You don't understand money – and it's a good thing for Bi... by ivalm on Friday November 15, 2019 @11:19AM (#21546072)

If you are discouraged from investing (deflationary exchange token) then this leads to suboptimal capital allocation (since money will be used neither for investment nor loans)

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Re:You don't understand money – and it's a good thing for Bi... by knocte on Friday November 15, 2019 @02:51AM (#21543079)

> A lot of why people bought cryptos is in hopes of massive deflation

No. Bitcoin is not a get-rich-quick scheme, it's a not-get-poor-slowly scheme. It's mainly protection against inflation, not hope for massive deflation.

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Re:You don't understand money – and it's a good thing for Bi... by ivalm on Friday November 15, 2019 @03:13AM (#21543167)

You say this, but that's not what drives volume. Most crypto volume is on exchanges, not on the chain, and that's due to speculation.

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Re:You don't understand money – and it's a good thing for Bi... by knocte on Friday November 15, 2019 @03:24AM (#21543210)

Finance in general is plagued of this too: most money movements are non-productive asset transfers (investing, buying/selling of businesses, ...; as opposed to salaries and individual end-user purchases). But you will always be able to pinpoint the baseline of bitcoin to its most useful feature: people avoiding the criminal monetary policies of their corrupted governments.

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Re:You don't understand money – and it's a good thing for Bi... by JohnJamesRambo on Saturday November 16, 2019 @09:52AM (#21552891)

I assume the postal service still worked in post WWI Germany? We don't have to be living in a new stone age for our money to be worthless. I assume the internet would still work in some capacity.

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Re:You don't understand money – and it's a good thing for Bi... by keymone on Friday November 15, 2019 @03:20AM (#21543196)

Yeah, because of course it is known that newspapers, radio and tv all disappeared after ww1 and then also after ww2.

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Re:You don't understand money – and it's a good thing for Bi... by umanwizard on Friday November 15, 2019 @01:34AM (#21542762)

This is a good reason to buy physical gold and bury it somewhere. I'm not convinced it's a good reason to buy Bitcoin.

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Re:You don't understand money – and it's a good thing for Bi... by sedeki on Friday November 15, 2019 @01:56AM (#21542863)

Because gold is less risky due to its traditional status as money? Just curious.

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Re:You don't understand money – and it's a good thing for Bi... by umanwizard on Friday November 15, 2019 @02:30AM (#21542990)

Yes. If gold ever completely loses value we are probably living in such a total collapse of civilization that all bets are off. Whereas I can easily imagine a scenario where the Bitcoin fad fizzles out and everyone's coins deflate massively in value.

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Re:You don't understand money – and it's a good thing for Bi... by Guthur on Friday November 15, 2019 @01:27AM (#21542727)

I doubt the ultra rich are keeping significant portions of their wealth in money markets.

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