Hacker News new | comments | show | ask | jobs | submit login

This is an important question to raise. One of the only reasons that credit cards were able to take off was because the credit card companies promised to limit your liability if your credit cards were stolen.

Similarly, there are countless examples of people's bank and investment accounts getting hacked, with the banks and brokerages reimbursing their customers to prevent bad PR.

Given this, I imagine that it would be a long time before the average person would be comfortable maintaining any store of money as Bitcoins (versus quick conversion and payment for things, but then what's the point?).

Agreed this is a main reason BTC is struggling.

But also, Bitcoins can increase greatly in value especially since at a certain point it's guaranteed there's no inflation. I just don't see people willing to spend something that can increase so much in value. It's like paying for Reddit with fractions of Facebook stock.

Regarding your second sentence:

Are you suggesting that bitcoins are struggling because people will not want to spend something that increases in value?

So bitcoins aren't purchased because they will increase in value too much?

That is the same circular logic that is used to explain "deflationary spiral", and it doesn't make sense.

Consider high tech equipment like a computer. You know that the price of a computer (or TV, or hard drive, or graphics card) will fall rapidly but you buy it anyway because you want to purchase it. It doesn't actually matter much that the price of the item is deflating. And these are for luxury items. Price deflation of goods matters even less when it is for something essential, like basic food items.

In other words, what you are saying is that the price of items priced in bitcoins will fall (because your bitcoins will become worth more and more), and therefore people will not spend their coins. However, we already see real world examples of deflating prices, where people still buy these items.

"since at a certain point it's guaranteed there's no inflation."

I'm sorry, but this is a statement you cannot make.

To make this claim, it would need to be true that the cost, in Bitcoins, of goods and services in the real world, would never rise.

There is no basis to believe this is true.

"The most important thing to remember is that inflation is not an act of God, that inflation is not a catastrophe of the elements or a disease that comes like the plague. Inflation is a policy." -L. Von Mises

It is worth noting that in (the crazy cult of) Austrian economics, inflation is defined as increasing the money supply. This sometimes makes discussions with them difficult, since for rest of the world (all serious economists) inflation means increasing prices


The Austrians are 'crazy' when they inexorably link inflation to the supply of money growing faster than the demand for money, but when someone quotes Friedman on inflation, to wit: "Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output," heads nod, and no one calls anyone crazy.

The difference between the two views is little more than semantics.

You don't understand how Austrians define inflation. If they had said it's "the supply of money growing faster than the demand for money" we wouldn't have an argument (oh, we would, but not over the definition of inflation) They claim it is the increase in money supply that is inflation. They don't care about prices. Also - Friedman (with his famous VM = PY ) obviously acknowledged the importance of demand for money affecting prices)

Both the Austrians and Friedman overestimated the role monetary policy can play. We've had a huge increase in the monetary base, but no price inflation since 2008. Austrians and to some extent Chicago-economists have predicted runaway inflation, and ended up with egg on their faces. But self criticism is of course nowhere to be seen as usual.

In that statement, L. Von Mises is presuming some things that are not true of BitCoin. In particular, the BitCoin creator has essentially made it impossible for anybody to change the number of BitCoins in circulation. Thus while it may be true that no governmental entity or currency controller will choose to inflate the currency through some activity, it is not true that the currency will therefore not vary in value over time when compared to some other things, and it isn't unfair to say that if I need more BitCoins to buy something now than I did last year, the currency has inflated, and vice versa. It may not be precisely the same as fiat currency inflation in every detail, but it's broadly the same, but it won't be the result of changing policy. (Arguably one could call it the result of an unchanging policy set at the beginning.)

In the sense that the quantity is not controlled by a government, BitCoin can be compared to gold. And the value of gold is highly unstable.

He meant the inflation of the _money supply_, not the inflation of the price of goods.

He is actually suggesting the opposite about the price of goods -- that they will deflate.

You absolutely can make the statement that the money supply of Bitcoin will not inflate in the long run, by the nature of their design.

Well, if you have enough bitcoins, you are probably pretty happy to spend small amount of them. It is usually pretty rational to spend some of your collected wealth before you die.

No need to conflate spending with savings/investment. Just keep some USD in an exchange and convert it to spend it.

Guidelines | FAQ | Support | API | Security | Lists | Bookmarklet | DMCA | Apply to YC | Contact