344 sats \ 1 reply \ @Undisciplined 9h \ on: Bitcoin Economics And Finance Survey bitcoin
This passage really demonstrates how confused modern macro is. Full disclosure: I didn't even peak at a single one of these articles.
In a monetary sense, "deflation" means decreasing supply, so it's directly contradictory to say a fixed money supply is deflationary. Of course, these are the kind of people who start talking about deflation whenever price inflation falls below 2%.
Now, it is true that bitcoin is actually deflationary (or at least it will be), because of lost/stranded bitcoin. The history of prices on the gold standard would seem to directly refute the claim about "welfare destroying volatility", as prices were so stable over the course of centuries that people thought of them as almost innate properties of goods. Compare that to today, when we're constantly shocked at how much prices have changed for everything.
Then, the comment about adjustable growth rates seems to come from someone who doesn't understand one of the core Misesian insights about money: any amount of money is enough to facilitate economic transactions, since money is divisible.
The author of the main article seems to have confused himself talking about hyperinflation and central bankers as though it's a counterpoint to the deflation concerns. It wouldn't be bitcoin that's hyperinflating, or if that's what those authors did say then they're morons. Bitcoin deflating and fiat inflating are completely disconnected phenomena.
The final point about fixed supply ultimately hurting miners' profits might be right. I've read people making it before. It depends on the purchasing power of bitcoin, which would stabilize at full adoption, while competition between miners drives fees down. Until then, mining profits could increase, decrease, or go sideways. Where that author is slightly wrong is in not recognizing that bitcoin really doesn't have a fixed supply.
prices were so stable over the course of centuries that people thought of them as almost innate properties of goods.
So do my kids, whose only exposure to economic transactions is video games :D
But to your broader point, yes, this paragraph was not very enlightening. The Iwamura paper looks interesting though, since it discusses the long run profitability of mining, one of the key debate topics within Bitcoin.
reply