Bitcoin and other cryptocurrencies

[Mark Carolus]

I myself own some Bitcoins and quite a lot of Dogecoins, so it's not that i don't like them or anything.

 

However i do want to hear some opinions on the following.

 

 

At the moment, Bitcoin (and other cryptocurrencies) are subject to huge price-swings.

It is believed that the value of these coin will become less volatile sooner or later and i think this might very well be true.

 

But there is an issue (I think).

 

Deflation vs inflation.

 

In a world where money is subject to inflation, i can buy a house today at 100.000 Dollars (for example) and pay it back over 30 years.

In those 30 years, every Dollar in itself will have less value, therefore the house I bought will go up in price (but not necessarily value), this means that, over time, i pay less relative Dollars for my house.

 

 

In a world where money is subject to deflation, i can buy a house today at 100.000 Dollars and pay it back over 30 years.

In those 30 years, every Dollar becomes more valuable, therefore, the house I bought will go down in price.

This means that, over time, i pay more relative Dollars for my house than the amount i bought it for in the first place.

 

In short:

Value of Dollar goes up = I pay to much for my mortgage.

Value of Dollar goes down = I pay less for my mortgage, in relation to the average value of the house in the long term.

 

 

Now here Bitcoin comes in.

Bitcoin is worth x amount of Dollars right now, however as soon as Bitcoin becomes a mainstream currency, while their cap remains at 21 million Bitcoins, it will more than likely be subject to deflation.

 

It is for this reason, that i think Dogecoin does a better job, at least in terms of being/becoming a useful real-life mainstream currency.

Its cap is increased by 5 billion each year (perhaps that is to much, perhaps not, only time will tell), meaning that as usage increases, so does the supply, making it far less scarce a resource and therefore less likely to deflate.

 

Your opinions please.

[Wesley]

I myself own some Bitcoins and quite a lot of Dogecoins, so it's not that i don't like them or anything.

 

However i do want to hear some opinions on the following.

 

 

At the moment, Bitcoin (and other cryptocurrencies) are subject to huge price-swings.

It is believed that the value of these coin will become less volatile sooner or later and i think this might very well be true.

 

But there is an issue (I think).

 

Deflation vs inflation.

 

In a world where money is subject to inflation, i can buy a house today at 100.000 Dollars (for example) and pay it back over 30 years.

In those 30 years, every Dollar in itself will have less value, therefore the house I bought will go up in price (but not necessarily value), this means that, over time, i pay less relative Dollars for my house.

 

 

In a world where money is subject to deflation, i can buy a house today at 100.000 Dollars and pay it back over 30 years.

In those 30 years, every Dollar becomes more valuable, therefore, the house I bought will go down in price.

This means that, over time, i pay more relative Dollars for my house than the amount i bought it for in the first place.

 

In short:

Value of Dollar goes up = I pay to much for my mortgage.

Value of Dollar goes down = I pay less for my mortgage, in relation to the average value of the house in the long term.

 

 

Now here Bitcoin comes in.

Bitcoin is worth x amount of Dollars right now, however as soon as Bitcoin becomes a mainstream currency, while their cap remains at 21 million Bitcoins, it will more than likely be subject to deflation.

 

It is for this reason, that i think Dogecoin does a better job, at least in terms of being/becoming a useful real-life mainstream currency.

Its cap is increased by 5 billion each year (perhaps that is to much, perhaps not, only time will tell), meaning that as usage increases, so does the supply, making it far less scarce a resource and therefore less likely to deflate.

 

Your opinions please.

For a mortgage currently, there is a positive interest rate that always means you end up paying more for the mortgage than the inflation rate.

 

In a deflationary system, the interest rate could be very close to zero in order to compensate for the difference.

 

Not to mention that saving money will be massively easier, so the need to get a mortgage for the average person is greatly diminished as if you can eve save a little bit over many years, house prices will drop and you will be able to buy a house outright.

[Mark Carolus]

For a mortgage currently, there is a positive interest rate that always means you end up paying more for the mortgage than the inflation rate.

 

In a deflationary system, the interest rate could be very close to zero in order to compensate for the difference.

 

Not to mention that saving money will be massively easier, so the need to get a mortgage for the average person is greatly diminished as if you can eve save a little bit over many years, house prices will drop and you will be able to buy a house outright.

 

Hmmmm, yes, i guess that could be true in the long run, in fact, it is true for the long run.

But how about the short run? i think one of the reasons things are going down the drain, is exactly because people don't like to think long term, if it doesn't do good in the short term, people don't do it.

[Wesley]

Hmmmm, yes, i guess that could be true in the long run, in fact, it is true for the long run.

But how about the short run? i think one of the reasons things are going down the drain, is exactly because people don't like to think long term, if it doesn't do good in the short term, people don't do it.

In an inflationary system, you are incentivezed heavily to spend now for saving money leads to it losing  value. 

 

In a deflationary money system people will be much more incentivized to save money, rather than spend it quickly. This will lead to a change in people's thinking and planning processes.

 

Of course there will be growing pains, but sometimes the medicine to moving to a better system tastes bad. That doesn't mean the disease is better than the medicine.

 

Finally, I would also like to point out that Doge will (in the very long term) probably become deflationary as well. When the inflation is not a percentage of the total, but a fixed number and the coin usage and loss increases exponentially with time (or at least at a much faster rate), it is very likely that eventually Doge will also be deflationary. It may take a few years longer than it would with bitcoin, but it does not solve the problem unless the currency programs in a specific percentage inflation per year.

[Mark Carolus]

In an inflationary system, you are incentivezed heavily to spend now for saving money leads to it losing  value. 

 

In a deflationary money system people will be much more incentivized to save money, rather than spend it quickly. This will lead to a change in people's thinking and planning processes.

 

Of course there will be growing pains, but sometimes the medicine to moving to a better system tastes bad. That doesn't mean the disease is better than the medicine.

 

Finally, I would also like to point out that Doge will (in the very long term) probably become deflationary as well. When the inflation is not a percentage of the total, but a fixed number and the coin usage and loss increases exponentially with time (or at least at a much faster rate), it is very likely that eventually Doge will also be deflationary. It may take a few years longer than it would with bitcoin, but it does not solve the problem unless the currency programs in a specific percentage inflation per year.

 

Great point, you make a lot of sense.

 

This leads us to the heart of the problem though.

Seeing as people have the tendency to always want things in the short term, it becomes obvious that we (I say we for ease of use) have to educate/teach a critical mass of people about these things.

As long as the majority stays oblivious of these points and keeps going for the things that work in the short term, we can not (or at least hardly) make the change we need to make, in order to get there.

 

This is one of the main reasons, I personally don't see this ever happening.

If we merely look at popularity alone, just popularity nothing else (for the sake of the argument), we can clearly see that Zeitgeist thinking and/or socialist/communist thinking is in the vast majority.

Whether it is a good thing or not being beside the point, that which is most popular, has the biggest chance of succeeding (succeeding as in being implemented or at least being tried).

[Wesley]

Great point, you make a lot of sense.

 

This leads us to the heart of the problem though.

Seeing as people have the tendency to always want things in the short term, it becomes obvious that we (I say we for ease of use) have to educate/teach a critical mass of people about these things.

As long as the majority stays oblivious of these points and keeps going for the things that work in the short term, we can not (or at least hardly) make the change we need to make, in order to get there.

 

This is one of the main reasons, I personally don't see this ever happening.

If we merely look at popularity alone, just popularity nothing else (for the sake of the argument), we can clearly see that Zeitgeist thinking and/or socialist/communist thinking is in the vast majority.

Whether it is a good thing or not being beside the point, that which is most popular, has the biggest chance of succeeding (succeeding as in being implemented or at least being tried).

The vast majority of people do not need to be educated on it. The only reason the current system is the way it is is because the state uses inflation to erode savings, 401K plans in order to herd money into the stock market, and a variety of other taxes and subsidies to herd money into the pockets of them and their friends.

 

Once the incentives change, people will automatically find new methods of operating very, very quickly.

 

Finally, I do not care what framework is the most popular. If we use that standard, then the current statist paradigm is by far the most popular. My goal is to figure out what is correct and then work towards that.

[Mark Carolus]

The vast majority of people do not need to be educated on it. The only reason the current system is the way it is is because the state uses inflation to erode savings, 401K plans in order to herd money into the stock market, and a variety of other taxes and subsidies to herd money into the pockets of them and their friends.

 

Once the incentives change, people will automatically find new methods of operating very, very quickly.

 

Finally, I do not care what framework is the most popular. If we use that standard, then the current statist paradigm is by far the most popular. My goal is to figure out what is correct and then work towards that.

 

While I fully agree with you, how would this ever come to be?, this is what i mean.

How would we change those incentives, if the people keep voting for the people who will never implement it?

You put great points on the table, but I cannot seem to find the answer to the root of the question.

[Wesley]

While I fully agree with you, how would this ever come to be?, this is what i mean.

How would we change those incentives, if the people keep voting for the people who will never implement it?

You put great points on the table, but I cannot seem to find the answer to the root of the question.

This is the part that this community is unique from other libertarian and ancap sites. The argument is that irrationality, statism, violent crime, mental disorders, drug abuse, suicide, poverty, and more can all be linked to adverse childhood experiences.

 

When we make the moral case that children are people to be treated with the highest moral standards that you would ever hold your behavior to, then the language of violence, force, and threats of the state will seem absurd and other solutions will be found through negotiation. Also, all of the excuses for state power of the variety of social and criminal ills will vastly decrease making the excuses for government also negligible.

 

This is the argument for how a peaceful society can be achieved, and it already is becoming less and less acceptable for parents to use any form of abuse against children. Once we have a society of whom the vast majority speak the language of peace, negotiation, and voluntary interactions then reasoning and educating people will be easy.

 

For more on this, there is a video series at www.fdrurl.com/bib you may wish to check out. I think it has very valuable information in it.

[cynicist]

Deflation vs inflation.

 

In a world where money is subject to inflation, i can buy a house today at 100.000 Dollars (for example) and pay it back over 30 years.

In those 30 years, every Dollar in itself will have less value, therefore the house I bought will go up in price (but not necessarily value), this means that, over time, i pay less relative Dollars for my house.

 

 

In a world where money is subject to deflation, i can buy a house today at 100.000 Dollars and pay it back over 30 years.

In those 30 years, every Dollar becomes more valuable, therefore, the house I bought will go down in price.

This means that, over time, i pay more relative Dollars for my house than the amount i bought it for in the first place.

 

In short:

Value of Dollar goes up = I pay to much for my mortgage.

Value of Dollar goes down = I pay less for my mortgage, in relation to the average value of the house in the long term.

 

You're forgetting that the reason you end up paying less is because your money is losing value. This means that everything else you pay for is getting more expensive over time. You are taking an extremely narrow view of currency. Deflation is a good thing. The more valuable your currency is the cheaper things become for you. It also makes more sense to save your money or invest it, which has a strong snowball effect on companies which borrow money in order to expand or start. This leads to more innovation and cheaper products in the long run since you have more competition.

 

Inflation is only beneficial to people who control currency because they can spend the money before the effects of the inflation hit the rest of the market, and obviously for politicians because they can promise more goodies for "free" while the cost of inflation is relatively invisible for the majority of people. They just see the effects in higher prices and blame corporations for being greedy without realizing that they are just trying to compensate for how worthless the currency is becoming.

 

Educating people in economics is a failure, most are just not that interested in how it works. It's much easier to use the moral argument since everyone is interested in being good.