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Comment by priteshp | Hacker News Reader

This perfectly explains one of the many bull cases for cryptocurrencies. 15% annual inflation robs the working class of wealth but they previously had no alternative. At least now they can store some of their assets in cryptocurrencies while the government continues to debase the purchasing power.

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> 15% annual inflation robs the working class of wealth

Not, it robs those in the investor class that choose local currency as n investment vehicle for wealth. One is working class exactly to the extent one is dependent on current labor income. It's true that given fixed nominal wages, inflation implies a cut to wages, but Bitcoin doesn't provide an “alternative” that does anything for the working class against that unless it comes with the ability to compel employers to contract for wages that are nondecreasing when denominated in wages without employers reducing the starting level to compensate for the expected volatility and appreciation of BTC over the life of contract.

>Not, it robs those in the investor class that choose local currency as n investment vehicle for wealth. One is working class exactly to the extent one is dependent on current labor income.

Not really. The working poor are the exactly the kind of people who will put their savings in a savings account rather than a s&p500 index fund.

Ahah.

No, the working poor are the kind of people that scrap everything, fidelity cards and discount coupons and sign in a new bank for that 100€ offer.

My high score at my GED (equivalent) granted me 200€, that i immediately used. Yes, most of my middle-class friend kept that in their account, but 5 year later i was earning 50k/yr so i guess my investment in a refurbished computer was a good one.

5 to 10% inflation seems a good target tbh.

It robs the working class of wealth because of timing. The prices rise, then, later, the working class gets cost-of-living increases. That's anywhere from painful to devastating, depending on how low you are in the working class.

Because cryptocurrencies are famously stable?

From a supply perspective, yes.

The supply of Tether, on the other hand, makes a nonsense of the BTC/USD/USDT exchange rate.

Nobody[1] gives a rip about the stability of the supply. They care about the stability of the value.

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[1] OK, almost nobody. For crypto to be widely used, it needs a much more stable value.

Many people, my self included, care indirectly about the supply being limited, because they perceive that this will bode well for its value denominated in currencies which have supplies which aren't being tightly managed.

I agree that in a vacuum nobody cares about the supply.

I'm regards to the stability thing, bitcoin volatility has been steadily decreasing over time. It's still very young and has a lot of price discovery left to go. I personally believe its volatility profile will align with the normal range for commodities and currencies over the next let's say 20 years.

Many people, my self I clouded, care indirectly about the supply being limited, because they perceive that this will bode well for its value denominated in currencies which are being devalued.

I agree that in a vacuum nobody cares about the supply.

A global currency on the blockchain (democratically elected governments who implemented/join the union), where shenanigans can't be done or hidden from others - like printing of money - I agree with, in essence getting everyone on the same or at least a more even playing field, and with population oversight possible into spending of their own government.

Turkey is huge on physical gold as well. People basically spend their money on gold immediately to avoid the inflation (from what I saw in some videos). The Grand Bazaar has dozens of gold shops.

Most Turks just keep their money in a foreign currency, or gold. If I am not mistaken, about 65% of the deposits in Turkey are denominated in a foreign currency (mostly USD)

A deflationary currency like bitcoin would be awful, like all deflation.

I have never understood why deflation is bad. The money I earn becomes worth more over time? GREAT! I would settle for money that just keeps its value over time. The only side deflation is bad for is the government that uses inflation as a tax.

Because unless your investment expectation in greater than the deflation value, you won't invest. Loans become too expensive and the default rate will be higher since there is less investment. And no more thing such as buying on credit. And if banks don't loan money and credit become a thing of the past, the money supply disappear.

Also, unless deflationary money is decoupled from production , production will crumble and you will enter hyperinflation quickly.

Those all would be temporary effects as everybody adjusts. People still need to have a place to live, food to eat, cloths to wear, and ways to be entertained. Its not like everybody just stops spending money. They just get rewarded for whatever they have in savings. With savings people have more ability to take risks on investments.

Deflation builds value in an economy.

If the value of your currency kept going up people would be incentivized to keep it in their bank accounts rather than spend it and invest in their economy.

Of course this is certainly less of an issue than hyperinflation, but neither is great.

That argument always seemed weak to me. Keeping money out of the economy is a temporary effect as prices adjust. Once people have savings they would start looking for ways to employ that money. People are always going to do what will benefit them most. When people have savings they have more ability to risk loss by starting a business or investing. Having more people with the ability to risk loss is a very good thing for real growth.

Now if deflation is higher than any possible investment return, then people will only horde money. The goal of most people is to accumulate value, not a specific currency. Inflation destroys value, deflation creates value.

It's bad if you owe money. And many people do. They don't want to owe more value because the currency becomes more valuable. (They would owe the same number of dollars or bitcoin or whatever, but they'd owe more value, because each dollar or bitcoin would be more valuable.)

And then comes the second-order effects. Each debtor owing more value means more of them can't pay, so more default. This leads to things like houses reverting to the lenders, who then sell them for what they can get. This reduces the price of those assets, which causes additional deflation.

When this cycle really gets going, it crushes lots of people - even responsible people, whose only mistake was getting a mortgage when times were good, and maybe a car loan and a bit on their credit cards.

Deflation is bad for debtors only if nominal interest rates don't drop to compensate for the increased value of the currency. But given that any instability of the value of a currency is bad, inflation has historically done much more damage than deflation.

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