I was writing a lengthy comment to this freshly pressed post, when I realized the answer should be better a post on it’s own. I’m an advocate for the idea behind Bitcoin. So I totally disagree with the author and might be strongly opinionated. I keep the form of a comment, because I’m to lazy to rewrite everything. You should head over to the original post to pick up the context:
I disagree. You take unlimited growth for granted, and the only way everything can possibly work, you even mention god, to foster your point. And that’s the only point you make to back up your view. That shouldn’t convince anybody. When someone takes beliefs into account for making a point, that really alerts me.
Fiat currencies are not backed by anything either. It all boils down to trust. Do you trust your government, really? You mention the armed forces to back up the money. THAT really scares me. Do you foretell that the USA will declare war upon, say China, if they don’t take your precious Dollar anymore? I doubt that.
Our population (I’m German) isn’t growing, it’s shrinking. So why inflation? Yours is growing with less then one percent. That’s not much either. Growth is limited! And now their is not much more then Africa with high population growth rates. That will end soon, before 2050, I guess.
Well, regarding the reason to buy something with Bitcoins: besides some illegal stuff, that’s out of question, anyway – their is no real reason to do it. At least for now. But at some point, it might. It will start with the first shops taking Bitcoins as the leading currency. Somethings costs 0.2 coins, regardless of the current exchange rate to Dollars. Then Bitcoins are measured by how many you have to spend to buy something, not some exchange rate to some arbitrary currency.
If I’m in need of something and have the money, I buy it. If I get a better whatever, when I wait some time, I won’t necessarily wait. But that depends on the rate and the thing in question, of course. But it’s the same with inflation, I buy things when I need them and have the money and not earlier, just to spare some dime. In electronics this is reversed since ever, regardless of the inflation rate.
I asked in some other comment or blog post, I don’t remember anymore, where exactly: why “neo liberals” (not sure if this term exists in English) – I mean the free market advocates – are not embracing the Bitcoin. You gave me the answer. They are scared that their unlimited-growth-world-view is not supported, and even might be wrong.
A hypothetical calculation of the real inflation/deflation rate of Bitcoins would be great. Maybe drawing different adoption scenarios. Anyone with the necessary skills out there?
I really haven’t expected it, but the discussion continued. For the sake of keeping my thoughts together, I will include my comments here. I’m not sure about the rights, so I only link the answers. I’m sorry, but you have to switch back and force to follow along.
Here is the reply to this post.
I don’t get your first sentence. You say this in your post:
Isn’t the finite supply setting BitCoins up for eternal deflation? As the population grows and productivity improves the sum of the global utility will also increase. A growing population will need and produce more utility in the shape of food, housing, etc. to survive. But there is still just 21m BitCoins.
(sorry, for the lack of formatting possibilities)
And keep writing that the population will grow. How do I support your argument by saying it will not grow without bounds?
The second part: raising productivity, well I’m no expert, but how do you measure this, anyway? In relation to a currency? Which inflates? What does that say? This is just some other fairy tale.
Nevertheless, I hope you are aware that a Bitcoin is dividable to eight decimal places. And I read somewhere (I can’t remember where) that there is plenty room for more in the implementation. So everyone will be able to have her share of coins.
So logically their actually is no limit. It is more like, that the value of the coins raises, inherent deflation, if you will.
You should check the Bitcoin Wiki for further thoughts about that matter: https://en.bitcoin.it/wiki/Controlled_Currency_Supply
I did get this reply.
I will try to take the comment apart and anwer to the various aspects in isolation.
I understand what productivity is. But how is it measured? Generally in terms of money: products produced and services delivered in terms of U.S. Dollars in some time span, right? As this is the case, the aspects you are referencing are coupled to the system in question. Look at it in isolations. Is there still a need for continued growth of productivity?
There is another stronger force than profit prospects regarding currency systems. That really keeps everything going: Demand. If someone needs something, he will find someone to deliver it, for some price tag.
Yes every new utility will be worth fewer Bitcoins. But what’s the matter? If you get less money next year, because of deflation, the mortgage would be reduced likewise, because no one would be able to pay it. The landlord himself would pay less for everything and could effort it … If it is adopted in breadth there is no problem at all.
Thinking about it, it will not make any difference I guess. No real man/woman out there thinks about inflation/deflation. They are simply wandering about and decide to buy things, when they need them and have the money.
Money lending, no problem either. The interest rates level the inflation/deflation rate out.
But what might be the rate? The current volatility is a problem. Well it is still early and things have to sort out. I wouldn’t recommend anyone to invest huge amounts of money. But I like the idea: take a self-controlled system and cut off the middle-men.
A last thing to consider, besides monetary rewards exist many different – and often more rewarding ways to be rewarded. That might sound idealistic, but you hit the tone quite well, either, as you said you look optimistic into the future (another comment).
And get this answer.
I’m tired. Really. I will only answer here in short and then try to forget that conversation.
The population can not grow unlimited! As you admitted yourself previously.
I would in such a scenario lend money only with a negative interest rate, of course! But which bank would give me the money anyways? You should check this.
I must ask myself (again), do I pick wrong words? Do I compose my points wrongly? Are their logically flaws? I don’t know, but it seems I can not get through, he can not follow or doesn’t care to follow my arguments.
This happens quite often to me.
But what should he do, anyways? He can not simply change his mind about this topic.