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  1. #1
    Senior Member Pinker85's Avatar
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    Default Bitcoin and deflation

    Thoughts?
    "My comrades and my beloved, upon your way you shall meet men with hoofs; give them your wings. And men with horns; give them wreaths of laurel. And men with claws; give them petals for fingers. And men with forked tongues; give them honey words." --Kahlil Gibran, The Garden of The Prophet

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    Haven't really read about it enough...

    Only heard about it from a few segments on NPR.

    My intuition, tho, would be that there'd be some interesting thinking here.

    I'll ponder on it, see if I can find a good article or two to run my mind against, and respond if it makes sense.

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    Quote Originally Posted by Zarathustra View Post
    Haven't really read about it enough...

    Only heard about it from a few segments on NPR.

    My intuition, tho, would be that there'd be some interesting thinking here.

    I'll ponder on it, see if I can find a good article or two to run my mind against, and respond if it makes sense.

    I don't really understand it either, but at least you weren't getting your early info from fox where people who know even less than me described it as "basically just money laundering."
    Take the weakest thing in you
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    I'm scared of technology.

    Investing in gold ETF's is shady enough as it is, as you're giving money to a company who thinks it can mimic the price of gold (and somehow does for no fucking logical reason at all). As far as I can tell bitcoin is no different, and I don't have the patience nor the knowledge to learn if bitcoin can somehow magically disappear after I've put all my money into it.

    I think we're reaching a new era in "if I say it is, then it is" logic. And if this is true, then I think its too early to tell if its worth believing in that logic yet. At this point we're still gambling. From what I understand ETF's are a fairly new concept (created around 1990 ish).

    Still too early to tell.

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    Actually, our whole currency is based on the "trust me its worth something" concept. So I'd be willing to bet my money that once the US economy disappears, bitcoin will fail just as hard.

    Sure, it might skyrocket. It might skyrocket like crazy, so long as our monopoly money still exists. In fact I bet the creator of bitcoin is laughing maniacally at all of us right now.

    "hey guys, what if I make my own fake currency and buy a trillion shares then it skyrockets and I sell them all for real money? LOLOLOL."

    What I would give to be that guy. Fucking genius.

  6. #6

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    Quote Originally Posted by Beorn View Post
    I don't really understand it either, but at least you weren't getting your early info from fox where people who know even less than me described it as "basically just money laundering."
    There's a lot of the financial crisis was a cover for high tech fraud and attempts to launder dirty cash on the global scale.

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    Quote Originally Posted by DJ Arendee View Post
    In fact I bet the creator of bitcoin is laughing maniacally at all of us right now.

    "hey guys, what if I make my own fake currency and buy a trillion shares then it skyrockets and I sell them all for real money? LOLOLOL."

    What I would give to be that guy. Fucking genius.
    He (and we don't know who 'he' is; the creator of Bitcoins did so anonymously) didn't just decide to create a currency and then start selling units of his currency for whatever he could get for them. He devised the cryptography involved in trading and 'mining' Bitcoins, and left it up to other people to actually use. He didn't make money out of doing this.



    Bitcoins face an inevitable deflationary spiral because there is a theoretical maximum supply of them. Bitcoins are 'created' (or mined in the system's parlance) by solving cryptographic puzzles. Basically, code-breaking. You break the code, you create a number of Bitcoins. But there is a finite number of puzzles to be solved so eventually, some day, there will be no way to create more Bitcoins. Once it reaches that point there will be fewer and fewer Bitcoins to go around as more people continue to enter into the Bitcoin monetary system. Fewer Bitcoins to go around means that people will have fewer of them to spend, and if they have fewer of them to spend they'll pressure people they want to buy something from into taking fewer Bitcoins for that good. Its value will deflate.

    That's bad for a currency. If bread is worth a dollar today and tomorrow it's worth 98 cents, and the day after it's worth 95 cents, and so on and so on eventually it's not worth making bread in the first place and people start starving to death because no one makes bread.

    Bitcoins are facing deflationary pressures right now because people are hoarding them. Hoarding them reduces the supply of 'usable' Bitcoins in the system.

    This is why we use money that is essentially made up out of thin air (fiat currency), and this is why the US Federal Reserve is doing "quantitative easing": people aren't spending their money and the economy is slowing down as a result, so "the Fed" is reducing the value of money that is being hoarded by printing more money and injecting it into the system.

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    Senior Member Pinker85's Avatar
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    Quote Originally Posted by 93JC View Post
    He (and we don't know who 'he' is; the creator of Bitcoins did so anonymously) didn't just decide to create a currency and then start selling units of his currency for whatever he could get for them. He devised the cryptography involved in trading and 'mining' Bitcoins, and left it up to other people to actually use. He didn't make money out of doing this.



    Bitcoins face an inevitable deflationary spiral because there is a theoretical maximum supply of them. Bitcoins are 'created' (or mined in the system's parlance) by solving cryptographic puzzles. Basically, code-breaking. You break the code, you create a number of Bitcoins. But there is a finite number of puzzles to be solved so eventually, some day, there will be no way to create more Bitcoins. Once it reaches that point there will be fewer and fewer Bitcoins to go around as more people continue to enter into the Bitcoin monetary system. Fewer Bitcoins to go around means that people will have fewer of them to spend, and if they have fewer of them to spend they'll pressure people they want to buy something from into taking fewer Bitcoins for that good. Its value will deflate.

    That's bad for a currency. If bread is worth a dollar today and tomorrow it's worth 98 cents, and the day after it's worth 95 cents, and so on and so on eventually it's not worth making bread in the first place and people start starving to death because no one makes bread.

    Bitcoins are facing deflationary pressures right now because people are hoarding them. Hoarding them reduces the supply of 'usable' Bitcoins in the system.

    This is why we use money that is essentially made up out of thin air (fiat currency), and this is why the US Federal Reserve is doing "quantitative easing": people aren't spending their money and the economy is slowing down as a result, so "the Fed" is reducing the value of money that is being hoarded by printing more money and injecting it into the system.
    Errm, I think the reason people think about deflationary spirals is because they've heard of the theory, which was developed by economists who never thought about bitcoin. It seems that deflationary spirals are only possible with a currency like the dollar that is printed or retracted by the federal reserve. People have lived with a gold standard for a lot longer than inflating currencies, and things worked out. I just don't think of deflationary spirals as a bitcoin thing: https://en.bitcoin.it/wiki/Deflationary_spiral

    The crux of the deflation argument is that in order for deflation to be a problem, you have to assume that bitcoin has already become an enormous success. It's a logical contradiction to think that deflation would prevent bitcoin from succeeding.

    For instance, you agree that deflation encourages people to hold bitcoins. Then bitcoin becomes a success. Everyone has them. Everyone will accept them as currency. If they encourage too much hoarding, then people would lose faith in bitcoins, and then hoard less, right? That would bring bitcoin back down to a level it succeeds at, and it's a success again.

    But I don't actually think such oscillation is actually an issue with bitcoin, as stated above.
    "My comrades and my beloved, upon your way you shall meet men with hoofs; give them your wings. And men with horns; give them wreaths of laurel. And men with claws; give them petals for fingers. And men with forked tongues; give them honey words." --Kahlil Gibran, The Garden of The Prophet

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    Gosh, ecomomics and money handling is a subject I have no dang control or knowledge of. It's all dynamic, like there's so many people and probabilities, which weighing out to make working predictions just is beyond me.

    That reminds me of what a great sage once told me about how I have a very rich collection of knowledge, but that much of it is as of now useless and can't add to the growing potentials of life.

    If you have a lot of money or knowledge, but don't spend or use it, then what good is it!? That's my very simple opinion to add within the great mixer.

  10. #10
    Senior Member Pinker85's Avatar
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    "My comrades and my beloved, upon your way you shall meet men with hoofs; give them your wings. And men with horns; give them wreaths of laurel. And men with claws; give them petals for fingers. And men with forked tongues; give them honey words." --Kahlil Gibran, The Garden of The Prophet

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