El Salvador abandons Bitcoin as legal tender

Would that not be a bad thing when using it as legal tender? Deflation tends to be disastrous for the economy.

Exactly, too many people confuse investment (store of value) part of a currency with fungibility (medium of exchange) and debt (standard of deferred payment). Being good at one or even two of these things doesn't necessarily make it good at all three, good currencies balance all three to a greater or lesser degree.

that doesnt hold for a deflationary currency

If the value of your coin only goes up in value, why would you use 1 bitcoin now to buy a pizza slice if you can use it 5-10 years from now to buy a house?

A house in 5-10 years is nice, but it doesn't stop me from starving to death today.

I think it was just an analogy. The incentives are to defer purchases, if possible, which lower economic activity overall.

Sure, my point was that there are many reasons someone might spend money today that might be better off saved for the future, however much it may increase in value.

deflation is fine for an economy. inflation is disastrous for an economy. the people in charge of the money printers are trying to keep you confused. don’t buy it.

LOL

I have $1,000.

I believe that tomorrow, my $1,000 will be worth $2,000.

Why would I ever spend my money?

Hence, economy freezes.

This is so plainly obvious to everyone except crypto zealots I literally gasped seeing your comment.

> there are many reasons someone might spend money today

Yes, because that's the value of money. Bitcoin isn't money. It's a speculative asset precisely because people are hoping its value will only go up.

Because I need to buy food, clothes, pay rent, and replace my laptop that just died.

And I need to do this today or i’ll starve on the street.

I could delay buying a new laptop, but that’s a personal preference. I still need one at some point.

That’s why I would spend my money, because there are things I need or want.

I'm speaking from experience. I literally spent Bitcoin last week that I would rather have held, because I needed the money.

Not arguing too hard but people do have to spend some money to live regardless… it could be said people are less careful with their money when they feel like it’s losing value, so they spend more and save less. Yes it results in more spending but on what?

Yes, it would drive consumption toward the barest minimum to live and investment toward zero.

This is bad.

> Yet it results in more spending but on what?

Well near target inflation rates (which is a positive non-zero number) it results in a mix between consumption and investment.

This is good.

And yet, en masse Bitcoin is used as speculative investment, not money.

And who doesn't want to live in an economy where your purchasing decisions are made with the hunger of starvation!

Right, you'll spend the absolute bare minimum and proactively invest approximately never.

This is bad.

In fact, you'll only ever invest in highly speculative investments because they're the only things that might possibly justify the opportunity cost of your currency just accruing value.

This is bad.

> It's a speculative asset precisely because people are hoping its value will only go up.

This is the same for any currency trading.

computers have experienced rapid deflation in the previous decades. did that prevent people from buying computers? no, obviously not.

of course you are just trolling ("LOL") and you are incurious to any evidence or argument that contradicts your straight-from-cable-news talking points.

There are other ways to encourage spending though, like a wealth tax. Not that I necessarily support it, but that would be the more comprehensive solution to hoarding, since it couldn't be worked around by just exchanging fiat for other assets like gold.

By people in change of money printer, did you mean Giancarlo Devacini, who has printed hundred billion funny tokens in some non-extradition offshore with zero audit, and used those funny tokens to buy other tokens like BTC, ETH and others? Those people? Or he is fine, because you are directly benefiting from that token printer and doesn't care about others being swindled in the process?

This isn't quite the same. Money that is deflating becomes literally more functionally useful the longer you hold it. Computers stay as functionally useful as you hold them and arguably degrade relative to the software you need to run on them. In your analogy you should be concerned with whether I want to sell my computer (analogous to spending my money). If a computer truly did become more functional with passing time then no, nobody would sell them unless they had to - illustrating the problem.

That's exactly the problem: People will (rationally!) limit their spending to bare necessities if they expect the currency they have on hand to strongly appreciate over time.

Are you saying low consumption is bad and high consumption is good?

High consumption has been improving the economy, and destroying the earth. I'm not saying I have the answers, but it's not so simple.

> that doesnt hold for a deflationary currency

I think crypto proponents in general share this inability to understand the fact that one of the most basic traits of money is stability of it's value, and anything that fails to meet this basic requirement is simply useless as a currency.

No, I'm saying that consumption at subsistence levels and investment opportunities having to overcome a deflation hurdle is bad.

It is very good that the default thing to do with excess money is invest it.

I'm not trying to strawman the opposing side, but I always found it ironic that many of the cryptocurrency proponents I talk to think that starting a business is amazing and innovation is important, but also hate inflation, which encourages those two things.

They'd have to think at least one or two steps further than chart-go-up.

Yes, bur you dont want to limit your populations spending to just those essential items.

you're technically correct, yes it isn't exactly the same. good job! for an example that is exactly the same, look at the general monetary deflation in the united states during the majority of the 19th century. I know most people won't, so I used a similar example that everyone is familiar with.

Their argument isn't that it's not "exactly the same" (they were being polite), it's that it's functionally the opposite. And when you imagine a variation in which it's functionally the same, your argument clearly falls apart.

As far as deflation in the 1800s, are you referring to in 1818 after a credit collapse cratered England's economy and then spread to the US and put it into a recession; or maybe the Panic of 1837 which triggered a depression until the mid 1840s?; or do you mean the Panic of 1873 which triggered the Long Depression that lasted until 1899?

Which one of those are good examples we should look to?

it isn't the opposite, it is the same. many people are confused about money though, so understandable that you had trouble relating them.

how could panics be what I'm talking about? we are talking about price levels, or I'm trying to at least.

The glorious periods of deflation that you're glamorizing are referred to in the historical record as panics and depressions. Because they were very unenjoyable.

> Exactly, too many people confuse investment (store of value) (...)

The "store of value" trait of money has nothing to do with the investment angle. It literally means value you store. It's the assurance that it retains it's value so to allow you to use it in the future to purchase something just like you could do today.

> Not arguing too hard but people do have to spend some money to live regardless…

This isn't about a decision to buy bread and milk for your breakfast. It's about the decision on whether you invest in a grocery store vs let your money sit in a bank. If doing nothing is more profitable than doing something then society as a whole will gravitate towards generating no economic activity. This has disastrous consequences because the majority of people in a society do not have the luxury of having investments to live off their dividends.

Useless after IMF bribed you with a huge pile of money.

Bitcoiners understand it well. They realise that in order to stabilise in value and become a unit of account, it has to grow close to it's ultimate potential as a store of value first. Which in the case of bitcoin is potentially well over $100T market cap. This is why El Salvador is likely willing to back down in the currency aspect for now and focus onto accumulating and holding bitcoin reserves.

Imagine that, having the option of saving your money for things you really want instead of being forced to spend it on things you don't, or risk lending it out for essentially free to compensate for the continuous fall in value.

All investments are speculative.

Who cares? The "economy" is just people buying and selling things. If they choose not to and save instead, that's great. It's called freedom.

It's like saying - "if we have some money that keeps going up in value, we won't need to work anymore and unemployment figures will go up - that's terrible - we must not allow it to happen!"

It's of course not that bankers put this spin on it to give them an excuse to continuously print money (all the money in fact) out of thin air and charge interest on it.

Remind me, why is the target inflation rate 2-3% again? It couldn't be that it's the amount of money creation they can get away with without devaluing the currency so much that it destabilises into hyperinflation could it?

I'm just having fun - I'm sure I'm completely wrong

That 'LOL' comes across as very arrogant for someone who seems to have a tentative grasp at best on what they're commenting on. We have already experienced stagflation which runs counter to a lot of Keynesian ideas about inflation. It turns out it doesn't always encourage spending and employment. Similarly there is no evidence deflation will lead to stagnation of productivity[1]. People will always want to spend more than is needed for survival and doing so in a deflationary environment makes people think harder on how money is spent.

[1] Read this for a more comprehensive view of deflation from an economist who lived through it: https://www.amazon.com/Economic-Changes-Production-Distribut...

> If doing nothing is more profitable than doing something then society as a whole will gravitate towards generating no economic activity.

You're operating off a false premise. Do you think all economic activity would be less profitable than the interest rate offered by deflation?

The whole point of investing in any business is to make a return. Giving businesses competition in the form of deflationary currencies will not eradicate businesses from being formed, and there's no evidence to suggest these businesses will be less profitable than holding a deflationary currency.

We see this in various cryptocurrencies claiming to be deflationary with the concept of 'yield', which shows investing to be a function of their wealth, interest, and expectation of return. Inflation does not need to be in the equation for this type of development.

> Remind me, why is the target inflation rate 2-3% again?

Because empirically it seems to yield a pretty sustainable mixture of consumption, investment, and savings, while also not risking a wage-price spiral.

You tell me what the target inflation rate should be and point to some moments in history informing that target so I can go read about them.

It should be a negative, just as the value of consumables are over time. But that's not possible in a system heavily indebted and addicted to interest rates under the free market rate (only possible because banks create money effortlessly and hold it artificially low to enable a monopoly on "debt"). Such a policy would quickly collapse the current system as the value of the debt would increase over time instead of decrease, and so instead the banks inflate the value of the currency down to 0 which takes more time for the system to collapse (which fiat currencies always do and always will).

Starting again with a hard money, we would thrive, instead of being enslaved by a system that continuously stealthily, steals the value out of the fruits of our labour (at a rate of ~7% year) and gives it to the bankers and those closest to them.

That implies that 1. it is a problem and 2. that people are rational. The latter is definitely not true, and the former is definitely arguable.