It's an issue with macro economics, not the individual. Sure, having people buy less useless stuff is great, but they all still need to agree on a medium for exchange, else doing anything with currency becomes impossible. Individuals buying and selling goods and services don't make currency markets, money flowing through the exchanges does. Market prices are set mostly based on leading indicators from these transactions. When a currency starts deflating, these numbers start looking bad. This is when things start to snowball. Currency worth more tomorrow than today? Stop exchanging BTC for USD(or any other currency). Investments going south and BTC doing well due to scarcity? Then pull out of the markets and hoard BTCs. Market crashed? Get all your BTC out of the bank. At a certain point it all falls apart and everyone is left holding worthless digital currency. This happened before with the great depression and has been studied in great detail. Hence the movement away from the gold standard. Again, very little of this has anything to do with buying TVs and stereos(micro vs macro economics). People don't really need currency to do that anyways. Currency is needed for the exchange of derivatives(specifically debt, AKA loans).
And yeah, the author seems to miss a lot of the things in the bitcoin website. The whole thing presumes there are unforeseen consequences, that something will replace or complement it, and that it will be remarkably volatile for some time. It is first in breed and very well aware of that.
Yeah, I too found that to be conspicuously missing in the article.
With productivity steadily rising in the developed countries it's gonna be tricky employing 6 billion people. as an example: if all the farmers were as productive as US farmers, we'd need to employ about 0.3% to feed the world. a lot of the "useless" products and services (think about the back office of your local government, which is printing documents, scanning them again and the typing them into a computer form) actually employs a large part of the population - have you thought about the implications if 90% of the population is not required to work?
We need inflation, we need people who keep spending their money and hence we'll ultimately need some sort of devaluation. A possible scenario: inflation will be introduced by new cryptocurrencies, which broaden the monetary base. hence it's ultimately the consumers who will steer the rate of inflation (and the adoption of new crypto currencies) and that seems to me like the most democratic thing that ever happened to a currency.
Would it be better to have government responsible for most investment ? I don't really care about consumers hoarding their cash - they'll buy the things they really need or want. But I am concerned if investors are better served by hoarding than by demand deposits or any other kind of debt instrument. This could drive up interest rates to unprecedented levels. Higher interest rates mean higher cost of goods and thus higher costs for consumers.
So on the contrary, Bitcoins are a deflationary economy. Deposits will have a negative interest rate (ie: holding your money in a bitcoin bank will correlate to fees), and borrowing BTC means you only will have to return bits of it. (ie: if I borrow 100 BTC from you today, I only will have to repay you 75 BTC two months from now).
It is only fair, as people learn to expect BTC to keep growing in price.
I don't think its a very healthy economy to be in, but its a completely different endgame scenario than what you describe.
Interest is almost* always non-negative. I'll only lend you those 100 BTC if you pay me something more than I'll have if I didn't lend them.
That makes a BTC based economy more prone to hoarding, and less prone to investing (what is clearly a bad thing), and also more prone to hoarding and less prone to spending (what economists think is a bad thing - I have no idea why).
* The exceptions to this rule are not systemic, normaly appearing in times of disruption. You can't base an economy on them.
That said, plenty of people are "banking" with online BTC wallets. Instawallet, Coinbase, etc. etc. The economics for these services work against them, and they are hopelessly doomed to failure.
Your reply actually raised more questions than it answered. I get that high interest rates are bad for a market that is built mostly on credit and I can kinda-sorta see how that would slow down an economy. But I don't see how that completely eliminates investment.
At some point, people have to exchange goods. People have labor to provide and goods to sell and services that they need provided and goods to buy. How is credit the only thing that enables that? Or is the argument that only credit enables it at the level that we see in current day capitalism?
The central bank prints money. That is a fact. What people forget is the fact that this is useful to an economy. The central bank can abuse its power, and inflate away your cash holdings. (ie: print too much money). That is why BTC are pegged at 21 Million coins.
So the question now is, what will an economy based off of a heavily depreciating asset look like. What are the risks?
> the perfect digital currency: they’re frictionless, anonymous[...]
seem to suggest that the author has read a lot about bitcoin (by other authors), but not investigated that deeply. (As for the content: It's bogus mainly because they're at best pseudo-anonymous, or rather: Actual anonymous payment via bitcoin takes a lot of effort to conceal. And it may only be frictionless for now - looking at the way transaction fees develop in the future is one of the most exciting concepts about it, to me.)
> Inflation is bad, but deflation is worse. [...] People hoard their cash, and spend it only begrudgingly, on absolute necessities.
I see how that is very different from the way capitalism works at the moment. But, conceptually, would it really be that bad?
I think an economy that builds on people buying loads of crap they don't need is at least comparatively bad. We certainly seem to have a problem with using more than we need from the planet.
> And they certainly don’t spend it on hiring people — no matter how productive their employees might be, they’d still be better off just holding on to that money and not paying anybody anything.
Again, wouldn't the result just be that you only hire people who create more value than deflation? And wouldn't "nobody paying anybody anything" eventually cause inflation?
Finally, a lot of the arguments employed seem rather shoddy.
This is the argument against being your own bank:
> In Hollywood, if you show someone counting out huge sums of cash, that’s an easy way for the director to say that he’s a criminal.
This is the argument trying to discredit bitcoins principle of mistrust:
> Bitcoin, in that sense, is anti democratic. It’s based on mistrust rather than trust, it refuses to take any responsibility onto itself – indeed, it doesn’t even have a self to take responsibility onto.
So far so half-good...
It’s nihilistic[...].
Nope, does not follow.
> I do have hope that in the future, someone, somewhere, is going to learn from bitcoin’s mistakes, and build a better system.
The author seems to suggest that this is his conclusion, but I thought that was the main idea in bitcoin itself. That it's artificial limit is a rather clear "we will have to come up with something better by then". Not as a "we will never need more bitcoins than this many".
I may be wrong here, but didn't Satoshi set up bitcoin precisely to be a testing ground? Beta Software? The author seems to be a little too occupied putting words in his mouth to actually read the concepts. Instead, he claims that Satoshi wants bitcoin "to be the perfectly anonymous payment mechanism for a digital world". I don't think that's true.