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Comment by yoz-y | Hacker News Reader

I always thought of bitcoin as a commodity, not a currency. It seems to solve the same problems and follow the same rules. E.g.: a commodity (such as gold) can not be created, but it is an important feature for a currency. Without inflation it will never be a good choice for currency anyways because it will always be a more interesting to hold on it rather than use it.

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If bitcoin achieved (a big if) wide adoption, it would be like keeping all your money in an index fund whenever you're not actively spending it. Its value would follow the growing economy.

Except deflation instead of inflation. Instead of sticky wages you'll be pressured to drop your hourly rates. Borrowing money would increase the cost of the loan, depending on the rate of value increase, you're looking at negative interest rates. Everything about deflation makes zero sense.

You've identified who suffers and who benefits from the reversing of value positions caused by deflation vs inflation.

But you haven't explained why its "worse"? So borrowers are disadvantaged compared to lenders (savers).

And wage earners are in a better position relative to wage payers.. ? That's what I take away from your statement.

But, one's ability to buy things seems to be improved...

Should we want an inflationary economy more college-tuition, healthcare-cost-like... or computing & software-like? Continually falling prices for all things computing related have done wonders for that industry no?

Would consumers be better or worse off having to spend less on food clothing housing energy? Would they have more or less disposable income with flat or falling prices?

Ok now assume increases in those costs... better or worse off? More or less disposable income?

> But, one's ability to buy things seems to be improved...

It's only improved if there is a lot of investment and new / more products coming out. deflationary currency promotes holding on to your money so that it goes up in value, but if everyone does that there will be less products / services and the value of the currency will ultimately go down. If currency has some inflation, then it's used as a transaction currency so that you want goods rather than currency, so the product becomes the important thing. If you have too much inflation however you get way too much money for the amount of products, so you want stable inflation.

Won't interest rates be low if everyone is saving?

Won't there be more investible cash because a lower percentage of one's wages is devoted to commodities, and essentials? As well, there is less of an incentive to stockpile or "get ahead" of future price increases.

So.. more left over to invest?

Does expectation of future flat or lower prices give you confidence to plan a vacation, invest extra money, etc.. or would you prefer to worry about food, gas, and other prices going up in the future? (along with your sticky wages making your real wage go down)

In fact, I 100% agree that savings and investment are key to future growth, technology and the whole enchilada. Which is why I don't support stealth tax of inflation, or of governments debasing the currency and stealing wealth from citizens.

Can you clarify why this is the case? This seems to just describe inflation as if it is a net gain, meaning you wouldn't actually realize gains because the aggregate of goods you buy would increase proportionally.

> it would be like keeping all your money in an index fund whenever you're not actively spending it

But without even the pretense of funding businesses and actually participating in the economy. Your money can grow on hot air and wishes alone! Why don't we give all people some bitcoin, so everyone can grow richer and richer without doing anything.

There's plenty of hot air and wishes behind regular currency as well.

I have a plan to double the US GDP in one year:

    1. I'll pay you $1 million to sing a song for me.
    2. You pay somebody else $1 million to sing a song for you.
    3. Continue doing this for n turns.
    4. The last person pays me $1 million to sing them a song.

The US GDP is around $20 trillion. That means we only need to set n to 20 million and we now have a $40 trillion economy.

Wouldn't somebody somewhere in this kind of transaction have to pay the VAT, thus rendering this impossible?

The premise itself is fiction. The P in GDP doesn't stand for exchange or transaction. It stands for "Product." It measures the net amount of new wealth, not how many times existing wealth is transferred among parties. If I sing you a song and you pay me $1 million dollars and this process continues back and forth, the net amount of value when we stop is still $1 million and the net change to GDP is zero.

People indulge a lot of strange and wrong ideas about economics and, not surprisingly, those bad ideas are typically well aligned with their preferred world views.

Services are also part of GDP. If I pay you to sing, that's part of GDP.

That's true, but it doesn't salvage your argument. Your accounting fiction isn't a 'service' for the purposes of GDP.

Yes it is. It's a pretty common criticism of GDP.

The other comment had it right though - taxes would kill this scheme.

"It's a pretty common criticism of GDP."

...with no more veracity than your hypothetical. You don't understand what GDP measures. You've allowed yourself to believe that the economists involved are naive. You are correct, however, that this sort of bad thinking is common. Very common.

If I find a shiny rock and sell it to you for $100 and you find a fossil and sell it to me for $100, that's $200 added to the GDP. If we trade rather than pay each other, then it's $0 added to GDP. The same goes for services. If I mow your lawn, paint your house, hypnotize you to quit smoking, or sing you a song - all of those things (are included in GDP.

When you pay for entertainment it's 100% included in GDP the same way as when you pay for somebody to inspect your car.

Like it or not: Gold is money. And Bitcoin even works better as money. And of course it is used at some point. It just doesn't need to be invested into the economy to increase value. So theris an alternative to betting in the pyramid of debt.

Gold is a commodity, it can (and was) used as a currency but not as a very good one. For a good useful currency it has to have a stable price (this is why some countries prefer to use other countries money rather their own). It also has to be widely accepted. Gold is not very liquid nowadays, if I come to a car seller and throw a gold bar at them, I will most probably not get a car.

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