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"If a 30 year old puts a days wages into an account and can expect a days wages out when he's 80 years old then he can drastically simplify his retirement."

Your idea here seems to be that bitcoin could help you not only hedge against "inflation", but also against rising economic productivity. I.e., what a saver really wants is some kind of guarantee that at age 80 they will be able to consume the same fraction of economic output that they were able to at age 30. Could you spell out how bitcoin helps solve this problem?

(I take it for granted that hedging purely against inflation is actually a solved problem, because you can just invest in short term bonds, which provide excellent hedges against inflation. But of course they don't help at all with rising productivity).

Edit: Another - massive! - issue with retirement savings is longevity risk. How can you ensure that you won't run out of savings before you die? Bitcoin won't help you here.

Bitcoin solves that problem by being finite. Since scientific advances are cumulative and directly impact worker productivity, it is reasonable to assume that a stable currency that does not inflate will at least preserve purchasing power.

Investing in short term bonds is not only not riskless (lots of governments and corporations have either defaulted or written down their debt), but often times do not even match inflation.

Saving as a logevity risk: Yes. You don't know how long you will live, we could very well develop medicine that would keep me as a functioning senior until I'm 100 years old. But against all other alternative forms of saving, if bitcoin was a world-currency it would be the safest way to assure purchasing power.

How big a problem is it that bitcoins are finite ? The minimum unit of a bitcoin today is a satoshi, there can ever be max about 2200000000000000 satoshi. Is 2200000000000000 units of currency going to be enough to run a global economy ?

Finite being no-inflation. There is actually no technical limitation from stopping the subdivision of bitcoins.

One way money becomes less valuable is because demand for goods and services increases. So there can be Bitcoin inflation without an increase in the BTC supply.

Obviously if a comet is hitting the earth a month from now the relative demand shifts from dollars to Viagra, but we're speaking in term relative to dollars. Since the supply of Bitcoins is not increasing after it hits 21 million, there is no reason to suspect inflation.

Bitcoins isn't going to preserve your purchasing power contrary to your claims even if it preserves it more than USD.

how the f is it reasonable to assume that it will preserve purchasing power, based on the assumption that it will be stable?

I can set up a chain of assumptions about the dollar based on actual historical precedence & Bitcoiners will whine & whine but because Bitcoin is "so pure" or something you think it's safe to chain a set of dependent assumptions together & say "This is how its goin down"?

Basic supply and demand theory. When supply goes up, price falls. Since Bitcoin's supply does not go up after a certain point, all other things being equal it will preserve purchasing power vs the USD.

but why would demand remain constant? In Bitcoin, a buyer & seller are needed in order to exchange. The idea of demand remaining constant only really holds true in a scenario where Bitcoin is the 1 world currency, and even then there are fluctuations in population and productivity.

I get that you're saying all other things being equal but that doesn't really float in a real-world simulator.

I've wonder about #2 though. We see the downsides of saving in an inflationary system, but a finite currency system... do we really expect that to be stable for 50 years, and if so, based on what precedent?

I was surprised to see BOA list "It's finite" as an advantage. It seems like this mentality is all anti-inflation (which seems justifiable) yet the alternative is taking a wildly experimental approach to savings. BTC hasn't proven stability within a month really yet, why trust it for 50 years? And then if you put in that 1 day's wage of Bitcoins, what happens when the market cap for BTC fluctuates? It won't always be in a steady demand, it will depend a bit on how many people are using it, no?

I am a doomsdayer also I think that it can only succeed if it always remains the same price or keeps going up, but the belief that this is possible is obviously intellectually malformed.

>but a finite currency system... do we really expect that to be stable for 50 years

No, it's deflationary. And while deflation isn't "evil" in and of itself, it causes the same problems as inflation (in reverse, obviously).

For example, if Bitcoin are restricted to 21MM units, as the population of the planet increases, an individual's wages must decrease in Bitcoin terms to maintain their real value.

That means that prices for goods will have to drop as well, which leads to terrible menu costs, and hoarding (why buy my car now when it will be cheaper in bitcoin terms next year?) In a predictably deflationary environment, it's always better to spend your money "later".

yea i hear ya... i've always been wondering what fraction of current market volatility is due to speculation & how much is just the flaw of the deflationary nature exposing itself too soon

If in say 100 years human population growth stopped, would it still be deflationary? Surely the population cannot grow infinitely?

> In a predictably deflationary environment, it's always better to spend your money "later".

So if I'm saving up in a deflationary currency, it's better for me to wait upgrading my computer until the day before I die, instead of doing it now?

The thing with saying something is "always better later" is that it logically means that it never gets done, because there's always a "later" (until there isn't (ie. you die)).

>"So if I'm saving up in a deflationary currency, it's better for me to wait upgrading my computer until the day before I die, instead of doing it now?"

If you're maximizing your economy, yes.

In that case your original statement was inaccurate. It should have read:

> In a predictably deflationary environment, you maximize your economy by spending your money "later".

Which, in fact, is better said as:

> In a predictably deflationary environment, you maximize your economy by not spending money.

And that leads us to the obvious fact that saving up money in order to not spend them is absolutely pointless.

Okay but stop thinking in extremes for a second.

Imagine I need a car and I hear there is a 30% off sale in January. Yes, I'll wait. Im considering the lost marginal value to me (keeping my shitty car in December) vs marginal gain (saving 30%). That's what deflation feels like.

But as far as I can see, you wouldn't have bought the car without deflation (or a sale, as it were), because you couldn't afford it. So in this case it causes you to spend money that you wouldn't have spent otherwise.

Then the best possible job is to sell food. You're basically forcing people to give up currency that will insanely increase in value if they don't want to die..

hah yeah this is what i was thinking about too. if you follow deflationary logic through to the end it makes you think of a Mad Max kinda world. But they expect it to stabilize when it hits the cap, no? I don't know.... experiments that take hundreds of years to run. Why not just dollar-back it? lol, i know i knowwww, they hate that. But the Canadian gov has a cryptocoin, right?

Deflation doesn't eliminate the demand curve, it just shifts it a bit to the left. It reduces consumption. It reduces investment. It increases savings. It does not cause a 100% reallocation from consumption and investment to savings.

So people get wealthier, because they save more and consume less?

No. You failed to recognize two key points:

1) Savings erodes investment. Savings is the non-productive hoarding of cash. Investment is when one takes cash and deploys it in a way that creates value. In a slightly inflationary economy, a wealthy person can only remain wealthy if they deploy their capital in a way that creates more value for the entire economy. In a deflationary economy, they can get wealthier by doing literally nothing.

The net effect of this is a reduced pace of innovation for the whole economy.

2) My consumption is your income. Thus, if I spend less money, you make less money.

The net effect of this is a huge pile of pernicious effects (reduced economic mobility, reduced productivity gains, reduced innovation, reduced opportunity, reduced incomes for all, etc...).

"why buy my car now when it will be cheaper in bitcoin terms next year?"

Because you want to go on vacation this year?

>"Due to inflation uninformed people are bullied into investing in mutual funds, stocks, housing, etc. with their savings."

It's not bullying, it's the foundation of capitalism; that is putting capital to work, not putting it under your mattress.

I'm satisfied that Bitcoin (or whatever succeeds it) exists, merely as a check against corrupt government. It's good that the money printers know there's an alternative. But I'm not ready to ditch the current economic paradigm, which has created more wealth for more people in the past 200 years than any point in human history.

People are disillusioned if they believe there were significantly more economically stable periods in history. Believe it or not, smart people are actually concerned about, working on, and resolving current issues. It doesn't happen overnight.

I think the introduction of bitcoin into the current paradigm would only serve to deepen and strengthen it. A universal currency with no barrier of entry and a slew of other features and benefits can and should be leveraged.

No, the foundation of capitalism is private property. Coercing individuals to accept a currency for debt payments and then inflating that currency thereby manipulating individuals to invest in markets that they don't understand is not capitalism.

Your #2 would be monumentally awful for the economy. The individual might like it if they can let their money just sit there and hold value, but if everybody can save like this, then there is very little incentive for anybody to ever lend out their money. If nobody wants to lend, then nobody can borrow either.

(Technically, the price of lending/borrowing, i.e. interest rates, would skyrocket until lenders were willing to lend, but then almost nobody would be able to afford to borrow anything unless they had something with the potential for monumental returns)

If nobody can borrow, then how does anybody start or expand a company? If starting and expanding companies gets massively more difficult, then who will employ that 30 year old in the first place? How would any new product or technology ever get created and distributed?

The Austrian theory is that this problem solves itself: 30 yr olds try to hide their money in "inflation-proof" non-fiat currencies for 50 years, and then when they cash out they get a crash course in Supply and Demand -- all these BTC flooding the market and no one producing anything for sale drives the (nominal, BTC) price of everything up, so those BTC don't actually buy much anymore, and people have to go back work to make things for each other.

Why Bitcoin and not any other crypto currency?