Please, tell us Bitcoin's economic flaws. I do hope you're not going to parrot the same worn-out, fallacious complaints about deflationaryism, volatility, etc. that we've all heard and dismissed.
I don't think your tone is appropriate here.
Concerns about deflation and volatility have not been unanimously "dismissed", at least not "here" (hn). They've been actively debated, without resolution. I'm curious about why you think those arguments are fallacious, but another thread might be a better place for that.
Though I agree that the GP was unnecessarily snarky as well.
Deflation and volatility do not make bitcoin nothing more than "a lesson in basic economics for crypto-anarcho-libertarian-nerds".
Contemporary dogma surrounding deflation is broken in multiple ways. The idea that deflation is bad is only considered credible (imho) is because it is touted so loudly. There are very few examples of deflation in history to draw from (as opposed to inflation, which there are many more), and further, many of the existing examples of deflation, while "on paper" are bad are not particularly harmful to the median-income'd person.
One rhetoric for deflation-is-evil is predicated on this idea that if consumers know their capital is going to be able to aquire more tomorrow than today, they will wait till tomorrow "too much" for the economy to function. (The analysis tends to get very hand-wavy after this part..). Interestingly, for the past 50~ years we have experienced rapid deflation in computer prices. Consumers have not shied away from purchasing an iphone 5 the second it comes out because it will be cheaper next year and their iphone 4 is basically the same thing. The idea that inflation is 'necessary' to keep an economy going is essentially conjecture; and I disagree; I think a deflationary currency (especially when there are other local currencies competing) will be very good for the economy and encourage more businesses that create things as sexy as the iphone5 (or services equally as appealing to consumers) as it will be the only way to get that currency out of people's hands. When people are hungry or trying to imprss someone, or really desiring of something.. they will spend today even if next year they might be able to get a couple percent more.
Anyway, perhaps deflation is the nail-in-the-coffin, but I don't really see evidence of it, just a lot of people really insisting that it's true.
As for volatility; I think volatility both a) has a potential to lessen over time, and b) is not an insurmountable barrier depending on how much people want to use bitcoin specifically (if you need to send money somewhere privately) ; they can be exposed to exchange rate for only a few minutes, or, use an escrow service that is also willing to hedge (the silk road does this).
bitpay exposes merchants to zero% exchange risk; they get lower rates than cc's and zero charge backs.. no merchant account necessary.
However, beyond even all of that, these arguments are dismissed because by every measurement available: bitcoin is acting as a currency, despite deflation* and volatility. People have so deeply ingrained that 'deflation==dead' that when they see a functioning currency that doesn't have the characteristics it is "supposed to" they define it as a " a lesson in basic economics for crypto-anarcho-libertarian-nerds" as if they can predict the future. Quite pompous.
Bitcoin has had several major crashes which easily could have dropped bitcoin to zero if it were indeed worthless. Yet it continues on, acting as a medium of exchange between --hundreds-- -thousands- -hundreds of thousands- millions of people; some as a toy, some are betting their lives on it.
Your point about deflation in electronics sounds to me like a great one. That still doesn't account for what I've heard as the bigger complaint of investor fear (because no, they really don't have to invest in a vehicle that underperforms deflation because it's so shiny, like in iPhone). But there may be other mechanisms/responses out there that I just don't know about.
Outside of a fringe group of Austrians, economists essentially agree that having a flexible money supply is a good thing.
One of the first pieces of evidence is typically that those countries that left the gold standard earlier also recovered from the Great Depression earlier.
Good for whom? One can certainly see how it is good for the powers that be. You'd have a rather harder time financing non-stop invasions of faraway countries if you had to pay for it through overt taxation.
>>>One of the first pieces of evidence is typically that those countries that left the gold standard earlier also recovered from the Great Depression earlier.
By ramping up production for WWII.
Now I'm going to go orthogonal and mention something I've never seen addressed. Germany was economically a shambles. How did Hitler manage its economic comeback? Have any books been written on that subject?
Disclaimer: Germany in the period of '33 to '45 was not a capitalist society and aggregate measures of markets can be grossly misleading.
In the Great Depression the German chancellor Bruenning did try to keep a balanced budget, kept essentially a gold standard [1] and cut unemployment insurance. This resulted in 30% unemployment and a very high multiplier. Additionally Weimar Germany was on brink of civil war in the end.
Hitler then did introduce the Reichsarbeitsdienst, essentially forced but payed labor for the unemployed. And he did ramp up spending, first mostly for infrastructure later shifting to the military. [2] And he was rather reckless in consolidating his power, which probably lead to increased 'investor confidence.' With these policies he managed to get more than 5% real GDP growth each year, [3] together with steeply falling unemployment. [4] ( Wikipedia has an article with more details. [5])
And this is probably the reason why this is rarely addressed, economic policy was an area where Hitler did have some success, at least by modern metrics which are not easily applicable. ( And therefore it is actually quite hard to discuss without getting awkwardly close to not damning Hitler. In fact I am wondering at the moment, if this posting needs a stronger disclaimer.)
[1] The Rentenmark introduced after the hyperinflation of '23 was backed by land.
[2] The details are actually quite interesting, the regime was trying to hide a substantial part of the dept as 'Mefo bills.'
1. Only the goldbugs dismiss the problems with deflation.
2. What is the ultimate driver of demand for Bitcoin? Fiat currencies have laws to create demand for them -- taxes, debt laws, etc. What legal business has any particular reason to accept Bitcoin payments, when they must then turn around and convert those payments to their nation's currency (at cost)?
>What legal business has any particular reason to accept Bitcoin payments, when they must then turn around and convert those payments to their nation's currency (at cost)?
You should ask the hundreds of businesses that do so.
The most obvious reason is the fact that it actually costs less. There are substantial fees associated with using credit/debit cards or paypal. The fees for converting BTC to fiat are much smaller.
