Sometimes a debate is a healthy way to bring to light opposing views. In this way one can further question and challenge the arguments for and against the thing. It's important to regard all the considerations present in formulating a constructive perspective on the thing in question.
Interesting debate took place recently with a couple of public profile crypto players being on the pro Bitcoin and Crypto side and a couple of less known academics arguing against Bitcoin.
An interesting argument against Bitcoin is the idea it's bad if the value of thing continues to go up over time. It's suggested that this is bad because people will not spend so easily and will be more thrifty with their spending habits and this is argued as a bad thing because if people aren't spending enough that's bad for business.
I disagree with the above argument.
Since my argument wasn't made by any of the bitcoin pro's - I'll make it here:
The value of Bitcoin increasing...the deflation over time is actually a good thing. One - there's a strong incentive to collect payment using an asset that has deflationary value. This means Bitcoin is more valuable as time goes by. Anyone who collected it and held onto it would be better off. In fact with this kind of regard - anyone today working a low paying job who is collecting it all in bitcoin would be doing very well to do over time with the deflationary model here. Which would improve individuals economic stability even within low paying minimum wage jobs. Heck - forget just low paying labor - anyone who receives payment in a deflationary asset is going to be better off financially over time.
Next point has to do with quality of business services and products. When the consumer is more thrifty - companies cannot be careless or sloppy with their roll outs of products and services. This means inferior products will become increasingly less in demand - and waste created through profitable business models of planned obsolescence will be less effective because as the consumer is more thrifty in saving their deflationary currency, they are also a more sophisticated shopper - meaning there's going to be more regard into the purchases as investments and quality of product. This won't happen all of once - it would be a gradual curve that would develop over time and you'd have better and better products and services. Sustainability starts to enter the picture here because we simply don't need to just spend money to stimulate the world - we can actually slow down and appreciate the best of things. Consumers who are cautious with their spending represents a powerful force in the determination of world politics as consumerism is in a way a form of democracy. In having people save and become more influential voters/shoppers by creating more scarcity for needless and frivolous shopping and products....the planet gets a little better and we start slowing down the amount of waste that is created on just pumping out products.
Retirement living is easy for everyone when you use a deflationary currency. You've banked some serious compounded time accumulation with an asset that appreciated over time. Common sense that everyone would need such assets to insure a life of dignity and prosperity.
The idea is that the world should be a world of dignity, a dignified life for everyone.
Bitcoin and Crypto seem to be a step in the right direction.
BITCOIN MORE THAN A BUBBLE: DEBATE
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WHAT DO YOU THINK ABOUT BITCOIN AND CRYPTO, IS IT HERE TO STAY?
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FREE - UNIVERSAL BASIC INCOME - WEEKLY CRYPTOCURRENCY PAYOUT
- What I like about this social experiment, is the fact that it's success is directly dependent on ordinary people everywhere - where there's a willingness to say,
"Yes - I accept a weekly payment for being a human being to cover my basic costs of Existing Here."
I see all these forecast for Bitcoin, which may seem crazy, but the thing about this space is, it's so new, it's evolving everyday and we haven't even scratch the surface of it's potential...so it's hard to discount it's future valuation at the moment...$250k for bitcoin might be a very fair price in the years to come.
Right, there's really no reason to ever be surprised by any number. Like when it was $1, it would seem mind-bending to think of it as over $10,000; it would have been wrong to imagine like $5 as the point it could get to.
Maybe the marketcap of all global fiats, and whatever that would translate to per bitcoin, would be a decent baseline for the eventual price.
But even that could be low in the sense that fiat can't be trusted long-term and maybe more people would hold currency (rather than i.e. flood the stock market) when you can trust it.
Maybe super long-term, currency stops being as important, when there's more self and community sustainability. (If you have everything you need and can swap tomatoes for cucumbers with people directly, there's less need for currency.)
Constantly more people are being born tho and maybe eventually there are machines who become economic actors, so there's that going in the other direction.
Lots of different effects, but imo no number should be really shocking.
And really, when scarcity is gone or mostly gone, our whole relationship with money would probably change. Having a gazillion dollars would probably just feel like a "head start", like the only point of having it is to creatively deploy it. There's no need to sit on it and think about planning and security and whatnot when basic resources are always provided. You just fire, it's like coins in a video game or something, you don't think about it in the sense that you want to stockpile them just for the heck of it.
I guess it depends on what someone wants Bitcoin to be. If it's supposed to be an investment to retire on, then deflation is good. If you look at it as a mere transaction tool supposed to further economic activity, deflation is bad.
Given Bitcoins fundamentals I'd say the latter should look for a different coin. There are enough out there for that.
Can you elaborate on this point for me? I'm not sure I understand your reasoning here.
I'm referring to the classic argument for inflation after which the economy contracts if there is too much money sucked out of circulation. One reason why this can happen is the expectation of money increasing in value. The inversion of that would be to slightly inflate the money to keep the circulation stable. At least that's the theory as you get it taught :-)
that's what they teach 😉
The root of these parables I think goes back to the idea that anyone in or close to the banking system has a lot to gain by people believing this. (If you controlled a currency, and could decide who gets to have new units, you'd want people to think there's a purpose to creating new units too.)
They have it inside out. People sit on money as a consequence of bad economic conditions. (In a bad economy, it's more common that a person needs to save and less common for them to have an excess of capital to spend or invest.)
So they try to pretend the correlation is a causation, as a little trick to make it seem like there's evidence.
The idea that money could increase aimlessly to the point of bringing the economy to a halt...
I mean, for one I hope that's not true, because if decent economic conditions depend on a room full of guys fidgeting around with the currency, then we just always have a top-heavy hierarchical world.
And it doesn't check-out intuitively imo. As it goes up, you have more incentive to spend and invest (and this is the process by which a recession ends, now people are spending again). The higher it goes, the more incentive. So it's self-balancing, there's no possibility of the "vicious spiral" that the Keynesians try to scare people about.
(The vicious spiral is probably a projection for what happens to fiat currencies when there's too much inflation and people start to lose confidence.)
Indeed, emphasis on that:-)
I guess the fundamental problem is that you can't just take the textbook and then it tells you how to act/react in every situation. It needs management, hence "a room full of guys" to change course. In terms of correlation/causality you are probably right, but the issue is I guess that Keynes explained it pretty well and intuitively with his model. And not just that, but it gives people with a drive for power the chance of being more important than before. That's why the central bank concept will exist until they break too much or until something makes them irrelevant. Blockchain might be just that.
Not too long ago I started reading Martin Armstrongs blog. His explanation is that most of the economic cycle is based on confidence or generally expectation on what will happen next. The big problem here is that when the relevant players expect the situation to stay bad or even worsen, then they will stay reluctant to invest no matter the superficial incentives the market (or even politics) might offer. You only get out of this trap by changing the expectation and restore confidence. That's why I do understand the argument to a certain degree that you have to break the cycle with force/money printing.
But then again, Armstrong argues that the Great Depression was only the Great Depression because there was the expectation for the government to jump in. In essence, political central banks increase the problem. Question is: Can central banks ever be non-political?
Hmmmm. Well a lot of what they say will make sense, kind of like if you look at a model of the universe where the sun moves around the earth, both models have consistency and a coherent train of thought where it makes sense how you get from point A to point B.
So it's logical in how it builds off itself, and you'd probably find the Austrian model is too, but then eventually you'd find some assumption or building block in one of the models that isn't correct.
Right, even if it were true that "if a central bank does this, XYZ thing is the result", in practice you don't know what the bank will decide to do and you have no way to hold them to the textbook theories. (like if you give matches and gasoline to a 5-year-old, you don't get to be like "well the idea was he was going to do blah blah" 😉, it maybe was a bad idea to setup this whole possibility.) And even if we think the bankers are skilled and trustworthy today, it doesn't guarantee that corrupt people or even just people who would make poor decisions won't at some point be in charge of it.
So there's just no way to have really good long-term trust in it. And it doesn't seem like this should be a feature we want our economies to depend on, at least not now that we can have digitized currency without the centralized control aspect.
I'm absolutely with you on this. The only modus for a central bank that I could imagine is when the government budgets exclusively stems from the money printing and in return taxes got abolished. I believe one of the Austrians suggested that, but I'm not sure if that could even fund one aircraft carrier before the critical level for inflation is reached.
thanks for clarifying :)
I think inflation systems work best in tandem with deflation...just like breathing.....in and out.
I agree. At the end, when trying to direct the in/deflation process, you only end up causing frictions. The best thing is therefore to either do nothing and wait until it's over, or to improve the fabric of the economy in a way that such processes run off more smoothly or faster. Blockchain with its different approaches might indeed be a big step forward to that. It's really exciting to see how that will play out, although I am anything but an expert.
You talk about bitcoin and crypto and the deflationary aspect and I agree with most of your points however many cryptos (including Steem) are not deflationary and the supply will continue to rise!
haha! very good point - I got so on about bitcoin and deflationary and I didn't even address the inflationary and how it can be good when it's structured good. Thanks for shouting it out for me here - will have to do a post going back and forth between the 2 and how they can work good and how they can be bad. Niiice @grizgal
Whether or not this is a bubble is irrelevant. The important thing to remember is bitcoin is still under valued.
agreed
So undervalued
I think it’s pretty commonly accepted that Bitcoin will be used as a strore of value rather than as a currency. At least that’s my view. And bubbles aren’t inherently bad either, they usually occur around transformative technologies.
well the more they mock it the higher and wider it grows :)
we are heading in the right direction and the time will make this journey more better
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