So what you’re basically saying is that we must increase the supply of fools by offering cheap money so they can buy stuff which isn’t valuable(junk) so as to inflate the economy. I disagree if that is what you suggest.
The reason for my disagreement is because I disagree when you say people wont be willing to spend. People are willing to spend on entertainment provided they have an income. People will spend on entertainment because there is no guarantee any of us will be alive in 10 years when Bitcoins could be worth 1 million a coin or whatever high value number people are throwing around. There is also no guarantee Bitcoin will be there 10 years from now. So basically the deflationary anti spending argument is actually an argument in favor of saving.
If you think people shouldn’t save anything then you basically have another USD where everyone is living on credit, living on debt, and no one can afford to save. That is no better than what we already have honestly except perhaps it’s an Internet dollar but it maintains all the flaws of the fiat monatary system.
Investing is something I would entertain right now because its one of the few ways to spend money to make money. There is risk involved but depending on how many Bitcoins you have the incentive for taking those risks might or might not be worth it. It also depends on how many Bitcoins you invest, but to have some Bitcoins invested in Silver, in Stocks, in alternative cryptocurrencies, or in promising technologies, that is what I see going on quite a bit. I see people investing in cryptostocks, I see people buying Gold and Silver physical Bitcoins, I see people buying mining equipment like Avalon ASICS using Bitcoins. This behavior will increase in the future when the ROI becomes high enough to make more people invest.
The entertainment market will not suffer during deflation. People want comfort and happiness and will spend any amount of money to achieve it. Gaming sites, movies/music, gambling sites, cam/porn sites, etc., will all do well under Bitcoin. These all count as spending, and over time more money will be spent on these activities.
What people will spend Bitcoins on does not have to be what people spend USD on. People will spend Bitcoins on virtual or digital content, this could be e-books or access to academic journals. The only thing Bitcoin is missing is infrastructure and exclusive content which can only be bought with Bitcoin. You have both those in place and people will have to spend Bitcoin to get content and anyone can make content.
Of course I do not advocate people buying (or selling) junk. The whole point is to allow suppliers to more accurately gauge the level of interest in things on the part of consumers, by measuring their willingness to spend money without confusing interference from a changing currency supply.
I would argue that both deflation and inflation are forms of noise that inhibit market signals from traveling because they introduce more complex variables to the equation which don’t actually do anything. Volatility is probably worse than either of these things. Any of the three is probably tolerable in small amounts, but they will tend to act as a burden on the system.
If people are saving rather than spending, it’s a signal that products aren’t good enough to spend on, which should trigger investment in better products. If people hold cash savings instead of loaning it out to businesses, this makes it harder for businesses to find adequate capital to produce a better product.
I could agree with you if people were rational but they aren’t. People need incentives to do what is rational and deflation provides those incentives by rewarding the rational and punishing the irrational. You can spend in a deflationary currency but if you spend on stuff which isn’t worth it then you get to experience buyers remorse or guilt over all the money you could have saved if you had not bought that Pizza. I think that is a really good thing because it makes people give considerably more thought into their investments.
And you’re right if people are saving rather than spending it means products aren’t good enough. And most products truly aren’t good enough which is why people are sending that signal. Businesses who need capital in the Bitcoin world can get it from USD which is inflationary. There is plenty of credit and cheap USD money that angel investors can supply to Bitcoin businesses. This is why USD and Bitcoin will have to co-exist.
You can spend in a deflationary currency but if you spend on stuff which isn’t worth it then you get to experience buyers remorse or guilt over all the money you could have saved if you had not bought that Pizza.
This is an example of why I don’t like deflation, at least not for the economy as a whole. It makes you get buyer’s remorse about things like pizza, which actually are a pretty good deal in some situations. You can get fed without having to make food, you can arrange a party without hiring a catering service. The time spent by humans on making the pizzas is drastically reduced on a per-pizza basis because the pizza maker has specialized tools and skilled personnel.
So to me the fact that it discourages people from buying pizza is a sign of economic inefficiency. If they were not buying pizza in a market where the choice to hold onto your cash does nothing aside from retaining the ability to make other purchases, it would be a clearer signal that pizzas are not needed, that other things are more important.
Not really. There will be people who like to eat. There will be morbidly obese people who will eat until a heart attack. But there is nothing fundamental about pizza that it’s essential to the planet, the survival of the species, the sustainability of the environment, or staying happy and healthy. If it were important then people would buy more pizza, such as if pizza were shown to extend human lifespan then yes people will buy a lot of pizza. But if pizza doesn’t do that but vitamins do then people will spend Bitcoin on expensive vitamins instead of pizza but the Bitcoin will always be spent.
Pizza almost certainly would not go away even in a deflationary economy. If anything, more people would spend time creating pizzas in their own kitchens. This would take away from their hours previously available for leisure, education, and jobs. This is just one example of how deflation could make people act in less efficient ways, by relying less on mass production and economies of scale.
So what you’re basically saying is that we must increase the supply of fools by offering cheap money so they can buy stuff which isn’t valuable(junk) so as to inflate the economy. I disagree if that is what you suggest.
The reason for my disagreement is because I disagree when you say people wont be willing to spend. People are willing to spend on entertainment provided they have an income. People will spend on entertainment because there is no guarantee any of us will be alive in 10 years when Bitcoins could be worth 1 million a coin or whatever high value number people are throwing around. There is also no guarantee Bitcoin will be there 10 years from now. So basically the deflationary anti spending argument is actually an argument in favor of saving.
If you think people shouldn’t save anything then you basically have another USD where everyone is living on credit, living on debt, and no one can afford to save. That is no better than what we already have honestly except perhaps it’s an Internet dollar but it maintains all the flaws of the fiat monatary system.
Investing is something I would entertain right now because its one of the few ways to spend money to make money. There is risk involved but depending on how many Bitcoins you have the incentive for taking those risks might or might not be worth it. It also depends on how many Bitcoins you invest, but to have some Bitcoins invested in Silver, in Stocks, in alternative cryptocurrencies, or in promising technologies, that is what I see going on quite a bit. I see people investing in cryptostocks, I see people buying Gold and Silver physical Bitcoins, I see people buying mining equipment like Avalon ASICS using Bitcoins. This behavior will increase in the future when the ROI becomes high enough to make more people invest.
The entertainment market will not suffer during deflation. People want comfort and happiness and will spend any amount of money to achieve it. Gaming sites, movies/music, gambling sites, cam/porn sites, etc., will all do well under Bitcoin. These all count as spending, and over time more money will be spent on these activities.
What people will spend Bitcoins on does not have to be what people spend USD on. People will spend Bitcoins on virtual or digital content, this could be e-books or access to academic journals. The only thing Bitcoin is missing is infrastructure and exclusive content which can only be bought with Bitcoin. You have both those in place and people will have to spend Bitcoin to get content and anyone can make content.
Of course I do not advocate people buying (or selling) junk. The whole point is to allow suppliers to more accurately gauge the level of interest in things on the part of consumers, by measuring their willingness to spend money without confusing interference from a changing currency supply.
I would argue that both deflation and inflation are forms of noise that inhibit market signals from traveling because they introduce more complex variables to the equation which don’t actually do anything. Volatility is probably worse than either of these things. Any of the three is probably tolerable in small amounts, but they will tend to act as a burden on the system.
If people are saving rather than spending, it’s a signal that products aren’t good enough to spend on, which should trigger investment in better products. If people hold cash savings instead of loaning it out to businesses, this makes it harder for businesses to find adequate capital to produce a better product.
I could agree with you if people were rational but they aren’t. People need incentives to do what is rational and deflation provides those incentives by rewarding the rational and punishing the irrational. You can spend in a deflationary currency but if you spend on stuff which isn’t worth it then you get to experience buyers remorse or guilt over all the money you could have saved if you had not bought that Pizza. I think that is a really good thing because it makes people give considerably more thought into their investments.
And you’re right if people are saving rather than spending it means products aren’t good enough. And most products truly aren’t good enough which is why people are sending that signal. Businesses who need capital in the Bitcoin world can get it from USD which is inflationary. There is plenty of credit and cheap USD money that angel investors can supply to Bitcoin businesses. This is why USD and Bitcoin will have to co-exist.
This is an example of why I don’t like deflation, at least not for the economy as a whole. It makes you get buyer’s remorse about things like pizza, which actually are a pretty good deal in some situations. You can get fed without having to make food, you can arrange a party without hiring a catering service. The time spent by humans on making the pizzas is drastically reduced on a per-pizza basis because the pizza maker has specialized tools and skilled personnel.
So to me the fact that it discourages people from buying pizza is a sign of economic inefficiency. If they were not buying pizza in a market where the choice to hold onto your cash does nothing aside from retaining the ability to make other purchases, it would be a clearer signal that pizzas are not needed, that other things are more important.
Not really. There will be people who like to eat. There will be morbidly obese people who will eat until a heart attack. But there is nothing fundamental about pizza that it’s essential to the planet, the survival of the species, the sustainability of the environment, or staying happy and healthy. If it were important then people would buy more pizza, such as if pizza were shown to extend human lifespan then yes people will buy a lot of pizza. But if pizza doesn’t do that but vitamins do then people will spend Bitcoin on expensive vitamins instead of pizza but the Bitcoin will always be spent.
Pizza almost certainly would not go away even in a deflationary economy. If anything, more people would spend time creating pizzas in their own kitchens. This would take away from their hours previously available for leisure, education, and jobs. This is just one example of how deflation could make people act in less efficient ways, by relying less on mass production and economies of scale.