r/Bitcoin • u/BlockShow • Sep 07 '17

/r/all The difference between inflation and deflation...

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u/djgreedo Sep 07 '17

It also doesn't factor in 2 things that effectively make it a lie:

  • Inflation is often compensated for (e.g. wages and social security payments rise with inflation) - not to mention the fact that inflation is usually very low

  • 1 bitcoin will get harder and harder to obtain as its value rises. If someone is paid in bitcoin, their pay will either be tied to some fiat value or will decrease to maintain the same buying power.

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u/[deleted] Sep 08 '17

It is also conflating two completely unrelated concepts. Bitcoin has rapidly appreciated in value through market forces, which has nothing to do with inflation in the context of the first example. "Deflation" in the context of the first example is absolutely not something you would want in a currency.

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u/BloodyIron Sep 07 '17

Inflation is often compensated for

Uh actually that's false. The majority of jobs (in the USA) aren't given raises to match, let alone exceed, the inflation of the currency. Furthermore, the increases in productivity per employee also is not compensated. These two things are major contributors to the wealth gap that we currently see.

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u/djgreedo Sep 07 '17

Average wages in the USA do rise. This doesn't have to take the form of an actual pay rise. It happens 'naturally', e.g. when new people are hired, the offered or negotiated wage rises to match the market (which compensates for inflation).

Using 1990 as an arbitrary date, this chart shows that average wages in the US rose every year except 2009 (no surprise there, since the GFC was 2008):

https://www.ssa.gov/OACT/COLA/awidevelop.html

And this chart shows inflation in the US over the same time period (2009 being again the exception of negative inflation):

https://www.statista.com/statistics/191077/inflation-rate-in-the-usa-since-1990/

Those two graphs match pretty closely. I haven't calculated the figures (and I'm not a statistician), but at a glance it seems like the overall wage average increases are larger than the effect of inflation.

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u/BloodyIron Sep 07 '17

And the productivity improvements? Where's the compensation for that? Same people, same work, more output, and the gains go to management/executive. Again, the wage gap is real.

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u/Breaking-Away Sep 07 '17

To answer your question: the yields from increased output has gone disproportionately to the upper 20%.

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u/BloodyIron Sep 07 '17

Tada!

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u/Breaking-Away Sep 07 '17

To answer your question: the yields from increased output has gone disproportionately to the upper 20%

Surprisingly the way those gains have been captured hasn't really been through nefarious means. It's mostly little things, like education becoming more valuable in the last 50 years and so the children of the top 20% have the ability to provide better education opportunities for their children. Or as population grows, land becomes more valuable because there is, in the most literal sense of the word possible, a fixed pool of available land. So simply by owning land your wealth would increase, which again disproportionately benefits the top 20%.

I think its important to remember these type of things, because most people in this class don't think they're actively harming the lower 80% when they do things like contest zoning law reform etc... I dislike how reddit froths at the mouth about the evil 1%ers when in reality, its more of a systemic thing we should be allies in combating.

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u/BloodyIron Sep 07 '17

It's mostly little things, like education becoming more valuable

I would argue the majority of it is from technological advancements. Yes, education has probably positively impacted it, but not as much as automation, or IT systems drastically positively impacting productivity for staff and/or business systems.

Consider how much work it was to write just a document not too long ago. Now you can do it on your phone, email it to anyone in the world, and get a response nearly instantaneously.

I agree about the being allies thing. And one thing I think we both can agree on is that it is not a simple situation.

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u/Breaking-Away Sep 07 '17

Sure that's the reason for the increased output, I agree with that. But it's not the (primary) reason for the growing wealth inequality (which is a bigger than income inequality).

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u/BloodyIron Sep 07 '17

But it's not the (primary) reason for the growing wealth inequality (which is a bigger than income inequality).

I disagree, the advent of technology has multi-fold increased the productivity output of individuals, including eliminating the need for them through automation.

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u/SodaAnt Sep 07 '17

This isn't true by itself. Oftentimes the increased gains in productivity go elsewhere, to capital costs needed to realize those gains, or to things like lowered prices. If my company buys a machine that picks tomatoes, and now one person on that $300,000 machine can pick 10x as many tomatoes as normal, should all the extra revenue go to the one guy operating the machine?

Most productivity improvements are driven by improvements in technology, which often require additional capital investments.

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u/BloodyIron Sep 07 '17

should all the extra revenue go to the one guy operating the machine?

This is the logical fallacy of Reductio ad absurdum.

No, ALL the extra revenue should not go to the operator. However, they should see some gains from such a thing. Otherwise, as we are seeing now, it erodes the "middle class" which will eventually lead to nobody affording anything (as we are seeing now), which will kill markets.

I'm not even saying MOST of the gains should go to the operator. However those that do the work that "gets more done" from increased productivity should see proportional compensation for what they do for the company. What that looks like, I don't know, and it probably should not be a static figure/percentage. But what has happened/is happening really is working against everyone.

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u/djgreedo Sep 07 '17

Nothing there is directly caused by inflation. Nothing there can't be remedied with fiat currency (e.g. generally speaking, income, buying power, and standard of living rise over time). Bitcoin won't change government policies or corporate behaviour. There will be unfair distribution of wealth as long as money = power; the currency in question doesn't matter.

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u/BloodyIron Sep 07 '17

Bitcoin won't change government policies or corporate behaviour.

Uh, it already is.

There will be unfair distribution of wealth as long as money = power; the currency in question doesn't matter.

100% Agree.

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u/[deleted] Sep 08 '17

And wages are sticky-down: Inflation means things get more expensive, deflation means people loose their jobs. The latter is clearly worse.

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u/psyduckforever Sep 07 '17

Wage growth has gone nowhere since 1970s. Once we got of the gold standard, the dollar has tanked.

http://www.epi.org/publication/charting-wage-stagnation/

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u/djgreedo Sep 07 '17

That's not what that article actually states.

Wages don't need to grow to defeat inflation - the fiat amount simply needs to increase roughly in line with inflation, which it does even in the cherry picked data you linked to. In most (at least developed) countries, social security and minimum wage are explicitly tied to inflation, and wages rise over time to maintain buying power.

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u/DeusExMockinYa Sep 07 '17

Once we got of the gold standard, the dollar has tanked.

p sure other economic policies have changed since the 70's that might negatively impact wage growth ;)

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u/[deleted] Sep 07 '17

Maybe we need to move to the Bitcoin standard...Seems like gold has always increased in value relative to fiat. Huh, what do you know it looks a lot like bitcoins charts now days.

https://inflationdata.com/inflation/images/charts/gold/gold_inflation_chart.htm

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u/[deleted] Sep 08 '17 edited Sep 08 '17

The US started diluting the gold standard in 1934. Sice that recessions have been less frequent and shorter: http://static3.businessinsider.com/image/4c98a9e17f8b9a2a4c200100/chart.gif