Thoughts on Inflation

2개월 전

So I've been thinking a lot about inflation recently. This is just some of my meandering.

Fiat money has involuntary inflation created by autocrats and then pyramided up with fractional reserve banking practices.

Crypto has voluntary inflation created originally as an incentive to keep the network going.

Whether it's voluntary or involuntary, inflation reduces purchasing power from those that hold money created previously. In the fiat case, it's especially immoral as that stolen purchasing power is used to fund wars, distort the economy, and generally make the world a worse place. Nobody would willingly pay for all this evil through taxes, so the go-to move is to steal the value through inflation.

And then I was reading the LEO burn report: which got me thinking. LEO has done fairly well and one of the big reasons for that is that the available money supply has actually decreased over time. There has been more burned than created. Less to go around, more purchasing power... sort of.

That's only part of the story because when you look at it by account, what is really happening is that the dead money held in the official sell wall accounts is being destroyed and the amounts held by users is going up. So in terms of usable float, the supply is still increasing. Fortunately, under the competent leadership of @khaleelkazi, utility is increasing faster than the usable float so people are staking in anticipation of the token being worth even more in the future. It's a better situation than most cryptos find themselves in.

Still though, we know that there is no optimal quantity of money. Prices will adjust to any given quantity in time. Crypto inflation is created in the hope that the marginal incentive to do whatever actions are required (maintain a node, produce blocks, upvote content, etc) is more supporting of total network value than the damage done by inflation. In a few cases that has worked out. In most other cases, it has not. And that's OK. Many experiments need to be performed before we can find what works.

What would a static supply crypto look like?

Ideally, the quantity of money would remain constant and people would increase or decrease their holdings through the sale and consumption of goods and services. But how do we get to such a state?

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This is probability one of the most interesting topics one can discuss (at least in my opinion). One could argue that in the bigger scheme of things we have a static supply in BTC (this is compared to inflation of fiat).

The most interesting quote I've read on the topic is that there is no clear definition because they want people confused. It is easier to bullshit people if they don't know what is going on (or something in those lines). It was an argument on one of my good friends post @vieira (can't remember where exactly he writes to many posts, or at least he did back then)

The best post I've seen him write on inflation is this one - What REALLY is inflation?

I've also made some sort of attempt a while back (learnt a lot more in-between so my opinion might have changes a little) - If you save in fiat currency, and that includes stocks and pension funds I am afraid the news is not good.

Quote from another friend:


Never have I seen a bigger group of educated people (*1) more fiercely debating the meaning of a word. With the rise in crypto you could see the correct definition stand out like a swore thumb in white paper after white paper but you will not see the truth in textbooks. They lie. They don't want you to know what it means for then you would know why you lose all your wealth as you age!

Keep listening because they will tell you when the next housing crisis will hit your country (not!).

They will tell you when the money you have in the bank will be halved and you would only be able to withdraw mere sents per day of what's left (not!).

They will let you know in advance when they will outlaw the gold you have been saving through sweating blood in the sun (not!)

Keep listening because they'll make sure you're fine. They will brush your little head with a soothing hand and make sure no ill enters your home. For they are powerful.

1 - I say educated but this word has a different meaning for me than for others. "You need a education" is normally the first phrase that's slung at you when you're in conversation with someone on this net. They assume you skipped the whole schooling thing and have no sense for logic as they willy nilly throw this around. It shows your complete lack of thinking for yourself. I need 5 years of lectures to have an understanding on a subject!? I say good fella you are nutcrackers mind fucked to think for all to be below your understanding. The only person to talk with such conviction is one who was told how it should be by someone else because it is with confirmation of others we are reassured. You have it completely wrong. Like I said... to say those words proves you a fool and perhaps calling you a fool is being to kind. Maybe something stronger will wake you from your dreamworld.

My favorite song on the topic - Coins and Crowns

The beast explained - Ken O'Keef

An opposing view on inflation - The Money Masters

Getting back the inflation on crypto. My opinion is that all fiat is being hyper inflated. We just don't see it because all the countries are doing it and different fiat currencies stays in line with each other but you can see it in the price of BTC which can not be inflated (or at least till now. Some say they do it through paper BTC).

Will will however not see any other crypto stand up the way Bitcoin has stood up because it was the first if someone tried to bring out a coin that is static supply it will fail but we have that in Bitcoin (or near damn close to it). My reason for this - One Of A Kind: Why Bitcoin is 'The Next Bitcoin'

The reason I say BTC is more or less static supply is that it is almost nothing compared to the billions they print in QE and fractional reserve lending.

Best author I've come across explaining this is probably G. Edward Griffin - Usury



Yes, there are all kinds of historical reasons for the twisting of words. And I agree that relative to its current supply and relative to fiat, BTC has very little inflation. That's great as far as it goes. I'm just imagining an inflationless future.

I have no idea how to get from here to there. I wrote a post a couple years ago on why crypto is not actually money yet because it doesn't fulfill all the properties of money. Somehow you'd need to simultaneously airdrop an inlationless money to everyone that also serves the functions of money. I suppose BTC will be as good as any after a few more halvenings.

On usury, yes, that was the ancient definition. And it retarded economic growth for millenia. Interest is the cost of accessing capital, and there is nothing wrong with that. Both the borrower and the lender have to consider what the uses of that loan will be and whether it will produce more than it costs. The problems come in when you have an overall inflationary system that nobody knows how to price things accurately.


@dpl Please make this like three posts so I can upvote the shit out of it and try to wrap me head around some of these good points (and links!)

What I’ve been thinking about inflation lately is quite simple. It’s a chicken and egg problem.
In reality, it is money supply inflation that happens first that leads to price inflation. It’s not that prices in and of themselves inflate.

If you understand my meaning there, then the next question is: So why do central banks look at inflation as one of the statistics that leads them to make monetary policy decisions?

In short, if monetary policy => inflation, how the heck does it work when central bankers say inflation => monetary policy?

I think I’m making sense here. But someone please tell me I’m not!

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@shanghaipreneur, that sounds spot on. If you are the ruler you do as you please. You even amend the terminology and explanation of the process to bend the truth to your will.

I don't like George Orwell's 1984 that much because it is scare tactics/enslavement propaganda but if you look past this you can learn a lot from the book.
1984 Audiobook by George Orwell

In short this is what we all have to face in this reality - 2+2=5
The book and film may seem meaningless but I see more truth in it every passing day

I can't read enough about inflation. The idea itself is hard to wrap my head around sometimes because the term is rarely defined at the beginning of articles. I actually learned something here and was able to visualize your examples. So thanks. FYI, I found your account because you were highlighted in one of @steem.leo 's posts.


Glad you got some use out of it

Tokenomics works well for LEO so far, that's right

What would a static supply crypto look like?

Even if a crypto (LEO for instance) had a static supply, it would be competing with a zillion other cryptos and paired with at least one of them, in its case STEEMP.

For many periods in history, the total supply of gold has been relatively static which yielded relatively static prices, but for it there have been times of sudden increases in supply, such as when gold was discovered in southern Africa and, within a few years, world supplies increased significantly and prices for other things rose.


Let's assume for a moment that we can wave a magic wand and LEO is a popular money/medium of exchange already with a wide distribution. Wouldn't making LEO a static supply increase its desirability compared to inflationary STEEMP/SE tokens/BTC/whatever?

The relative stability of the supply of gold is why it has worked for so long as money. With those notable exceptions like South Africa and Spain bringing Aztec and Inca gold back to Europe. IIRC current mine production of gold is 1-2% of the total supply, which isn't too bad.


The Deep State BurgerKing will never allow this. Heads of lettuce will kaiser roll!

Thank you for posting from the interface 🦁