[ExI] [mta] Long Term Bitcoin Catastrophe?

Brent Allsop brent.allsop at canonizer.com
Sat Jun 1 19:43:09 UTC 2013

Future Theoreticians,

Multiple thoughts have been percolating in my mind that has further 
falsified my fears of a Bitcoin Deflationary Catastrophe. Help me see if 
I'm making any mistakes with this line of reasoning.

Currently, economies have a general instability in them, causing 
destructive boom and bust cycles.  During the boom, everyone is spending 
all their cash, to get into the stock market.  This tends to cause 
currency to become worth less, or inflation, since everybody is getting 
rid of it, to purchase stocks.  But when the herd goes to far in this 
direction it creates a bubble.  When a pull back starts the 'bubble' 
pops.  This is compounded as people want to sell stocks (or not buy 
them), but instead put the capital into something like Cash. reversing 
everything in a compounding the problem unstable way.

All this causes people to reduce spending and investing, which causes 
jobs to be lost, real estate values, where most wealth is, crash, the 
stock market crashes, and governments attempt to counteract this cycle 
buy pumping more money into the system. They attempt to stop the 
deflation, and further drive down interest rates, hoping to motivate 
people to move money back into the stock market and real estate.

What scared me was thinking of a fixed size inflexible currency, like 
Bitcion, if it was prevalent enough, it would really compound these 
unstable cycles.  I believe when the next recession hits, it will really 
drive up Bitcion valuations, and no government will be able to 
counteract this flow of capital out of everything else into rapidly 
increasing in value Bitcoins.

But what I realized was that this would make at least some people 
significantly more wealthy, and make them want to spend that much more 
money.  In other words, instead of the government being the only one 
spending and putting people to work, Bitcion holders would likely fill 
this responsibility.

The one problem would be, like most things, it makes the rich or those 
holding the most Bitcoins richer, making everyone else poorer.  Where as 
governments tend to spend money to help the poor, the rich would spend 
money on what they want, helping the poor the way they wanted, after 
funding themselves.

Also, when the rich really do get richer, eventually the people at the 
bottom, revolt, taking all the wealth away from the wealthy, as has 
occurred in so many revolutions in the past.  But Bitcoins would make 
this impossible.  As no government can steal a Bitcion from anyone, like 
they can a factory or farm.

So, what does everyone think?  Would Bitcion becoming the dominant 
currency increase or decrease boom bust cycles in the economy, and by 
how much?

Brent Allsop

On 5/29/2013 8:57 AM, James Carroll wrote:
> On Wed, May 29, 2013 at 3:25 AM, Carl Youngblood <carl at youngbloods.org 
> <mailto:carl at youngbloods.org>> wrote:
>     James, all I'm saying is that I don't think bitcoin will cause the
>     human race to go extinct against our wills. Anything more than
>     this is beyond my claim. If you do think that bitcoin will
>     probably cause the human race to go extinct, then you disagree
>     with me. Otherwise I think we agree.
> I think we generally agree that bitcoin is unlikely to have that 
> effect. I simply took slight issue with your stated reasoning for why. 
> But I think we agree in general.
> James
> -- 
> Web: http://james.jlcarroll.net
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