The most common form of inflation is due to an increasing money supply, but it (as demonstrated with Bitcoin) can have other causes.
Not really. The money supply only affects inflation in that it increases demand for some things quicker than supply can meet demand. In that regard, untargeted stimulus money did that. Let's not forget though that there is also significant supply disruptions with covid, the war in Ukraine... There's also strong supply-side factors to the inflation we're experiencing.
My Econ 101 understanding is that if there is more money available to buyers but the amount of goods available stays the same, and if the goods have elastic prices, the prices will go up.
Money doesn’t even get introduced until later.
A better way to have phrased my post is that economics fundamentally understands price levels as being driven by supply and demand, and everything else influences prices though effects on supply and demand.
(eg : bad weather impacting crops production resulting in increased food prices for a year, or a war imposing blockades on oil and gaz)
No, that's just an increase in the price of bread. If all the inputs in making the bread were in BTC, then it would be inflation.
If all of the inputs that went into making that bread were paid for in USD, and the relative price in BTC went up, that's called "currency risk". That's a completely different thing from inflation.
'In economics, inflation is a general increase in the prices of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reduction in the purchasing power of money.'
I can afford less for the same unit of currency (Bitcoin) therefore I have inflation or deflation if I get more.
And people claim that Bitcoin is inflation save due to a limit amount of bitcoins being produced (I read that multiple times) while this is just not true.
It is correct that bitcoin is designed with limited supply in mind, but that does not necesaarily stop inflation and definitely doesn't in practice because currency risk dominates the perceived value of bitcoin.
As far as i remember, people often claimed that bitcoin protects against inflation, that statement has so many requirements attached so it doesn't matter in practice.
Which means earlier you invest more your Bitcoin is worth.
Until someone realizes that who ever was rich before is now loosing valur by investing in BTC too late and making early adopters rich.
The question is only when this ruse gets so outbalanced that no one wants to invest anymore which will either lead to inflation or the big crypto burn.
> Definition of inflation: a general increase in prices and fall in the purchasing value of money.
It feels like you are jumping through hoops to avoid the definition of inflation.
The parent comment's mention of bread is literal and figurative. When talking about inflation, "bread" a whole sector of goods. The specific mention of bread is to reference necessity - basic needs like food/shelter/clothing.
Clearly the lines of inflation are fuzzy but if 'large enough' people's basic buying power decreases then you have inflation.
With BTC, the parent comment is simply talking about being able to buy less with BTC because they can't go to someone who will give it to them for a lower price. Do that with enough goods and you've got inflation?
But I think parent commenter is correct. The bread price increases because of inflation of the USD denominated inputs. What you can buy with BTC changes because of changes in currency swap prices. In Zimbabwe during hyperinflation a dollar would buy you the same amount of e.g. bread because the goods inputs were priced in USD, but it would cost vastly more in Zimbabwe dollars on a day to day basis.
It's a measure of the increase of prices compared to currency value. Currency supply change can be one of the forces which affect it, but it's far from the whole picture.
Sure, it may or may not fit the classical definition of inflation, but if it happens across the board, then functionally it is the same.
Also, any currency devaluing (which BTC is doing) is inflationary for an economy based in that currency.
And the purpose of a currency is to facilitate financial transactions.
Which crypto is horrible at, because it cannot maintain a decent value at any point.
Crypto is as good at being currency as iron is at being bread.
They have a stable government, a stable currency, a free Democratic system, they see no reason to use crypto because they have never lived in a sanctioned or very corrupt country with no freedom and Dependant on a financial system and a mother countries decisions without any influence over them.
These people are only about 15% of the world, you are lucky if you are born or living there.
I think this video explains it very well, from a north Korean citizens point of view, even though I don't agree that BTC is good for this, its similar to digital gold now, its vrry inefficient almost no one uses it IRL.
I don't want to be a dick but if you live in Venezuela or North Korea you are irrelevant to the world economy. There is a Dutch saying "wie betaalt bepaalt".
Only if you've fallen down the Austrian rabbit-hole. It's not what mainstream news sources, economists, politicians or really anyone else means by that term.
Inflation is to do with the amount of goods purchasable with a unit of currency, a relative decrease in the value of that currency compared to (usually) a cross-section of prices of goods which are commonly bought by users of the currency.
> Literally nobody claimed they were going to control the actions of governments and force them to not regulate crypto. Where did this idea come from? The claim is that they would be effective despite attempted control by governments (see Monero)
Are you interpreting the statement differently from how I do? It's absolutely they case that cryptocurrency enthusiasts often use "take control away from government" and "code is law" (implying law is not law, or at least not law that overrules code).
Your reply here seems to be imply that you read it as a claim that cryptocurrencies would blackmail and bully governments to do their bidding.
If so then I don't see how you get there from that quote.
But then you seem to be saying that indeed regulation is ineffective. Which is the point of what you quoted to begin with.
> Inflation is about total supply of something, not cross asset trade price (i.e BTC/USD, or EUR/USD).
Bahahaha.
The main question for me trusting Bitcoin is that I believe that supply inflation leads to price inflation over time, but I accept that some people don't believe it.
The relation between supply and prices is also influenced by velocity, which has been swinging wildly at least for the dollar.
Velocity suddenly went low in Q2 2020. That means people are holding on to their USD more, and therefore the value of USD goes up.
So, in spite of supply inflation going up, velocity crashed, which means price inflation was close to nothing during 2020.
IF velocity picks back up, we will see price increase, but if not, then no. This depends on how much people want to spend versus save, and not as much on central banks.
And people tend to suffer from the bandwagon effect, and that is how we get business cycles.
All this stuff is literally what all the crypto people were and still are saying.
They really think inflation == price? Inflation is about total supply of something, not cross asset trade price (i.e BTC/USD, or EUR/USD).
>This idea that a central entity can’t regulate cryptocurrencies is pushed around by crypto enthusiasts. However, governments are trying to bring regulations into cryptocurrencies and stable coins.
Literally nobody claimed they were going to control the actions of governments and force them to not regulate crypto. Where did this idea come from? The claim is that they would be effective despite attempted control by governments (see Monero)
There are so many valid criticisms of cryptocurrencies that you could make. But then you'd have to actually learn something about them and that's hard to do if you've already made up your mind on something.