no Austrian ever argued for a fixed number of monetary units.
Or that a permanent structurally deflationary environment was ideal.
#bitcoin maxis need a new term to describe their economic philosophy.
how about #Saifedeanian?
#asknostr
Discussion
Worth noting is that until bitcoin there was no such thing as a fixed commodity money. The concept of perfect/known scarcity is a new phenomenon.
perhaps also worth noting that Mises and Rothbard specifically say that the number of monetary units doesn't matter.
I agree with them but probably for a different reason from you.
at the risk of preaching to the choir 😅
Mises defines inflation as increase in the money supply ABOVE increase in the demand for money.
so according to him,
increasing the money supply along with demand for money isn't inflation at all.
I’ve always had trouble with this because all else equal prices don’t change but under what circumstances is there the same demand and supply (no change) of products and services but an increased demand for the money? Breaks my brain a little. But I’m not deeply studied in these things.
If Satoshi's coins move to a burn address, demand for that money likely goes up.
If Satoshi's coins move to Binance, demand for money likely goes down.
(all else equal)
Sorry I’m late to this party…
You can have the same demand and supply of goods and services, but an increased demand for money when people choose to hold onto money instead of spending it, usually due to fear, uncertainty…So that will reduce the velocity of money, leading to deflation.
I think Bitcoin's fixed supply is a meme and nothing more. I believe money needs a certain amount of inflation or else hoarding becomes more important than spending which defeats the entire purpose of money as a neutral MoE. This is why I love Monero's tail emission, it solves the fixed supply hoarding issue and also long term protects the chain's security.
on a Bitcoin standard, it is against peoples interest to invest their own money,
since everyone's money automatically becomes more valuable from the investments made by *other people*
why NOT just hold when you can reap the value creation of other people without any effort?
Here’s why I don’t believe a fixed money supply would stop investment.
Human nature plays a key role, where people are driven to accumulate more. Even in a Bitcoin-based system, the incentive to grow wealth remains. Investing in companies involves risk, but the potential reward is earning more sats. That incentive structure doesn’t go away just because the money supply is fixed.
If global productivity increases by 2–5% annually, individuals will naturally seek out investment opportunities that outperform that baseline. The pursuit of returns above average productivity is what drives capital allocation, innovation, and entrepreneurship.
A fixed money supply doesn't inherently cause harmful deflation, it simply reflects improved output. Money acts as a measuring stick. If there's only one week of food left in the world, the price of that food will skyrocket, even under a Bitcoin standard, not because of the monetary system, but due to scarcity.
Investment thrives on incentive, and incentives don't disappear in a hard money system.
I could be wrong, but I haven't found a compelling argument as to why it is yet.
Tbh i don't think you're really wrong. an equilibrium will be reached and there will still be investment.
but in setting up a permanently deflationary condition, we are actively discouraging it.
the more economic growth that exists, the greater the incentive for each individual to not invest.
in addition to my concerns about setting the barrier to entry too high, its just a bad incentive structure to have everyone profit at the expense of those who actually generate economic activity.
That's a fair concern. I'm not sure however if I agree with the framing that everyone profits at the expense of those who generate economic activity.
I don't like leeches, which is partly why I hate the current welfare state. But I do like that everyone benefits from technological advancements over the long term, even if they didn't directly contribute to it.
isn't that what it is though?
the amount on monetary deflation is directly proportional to the increase in economic activity.
only some people generate the increased activity.
but everybodys profits through increased in buying power.
Yes, but wouldn't those who generate the increased productivity outperform the price deflation, gaining more purchasing power than the average non producer?
i dont think it's necessarily true that they outperform. as long as their investments are profitable right? because they get the deflation plus whatever extra.
but they're not necessarily profitable of course.
they're business owners VCs and whatever who are targeting some amount of return and increasing economic activity over what it would otherwise be.
but they increase GDP and contribute to the deflation even if individually theyre not profitable.
the deflationary level becomes a target they need to beat to justify investing their capital. it raises the bar and slows economic activity.
its understandable after decades of irresponsible debasement everybody is excited for deflation. but its really just PTSD and not good economic thinking.
I think I understand what you’re getting at. Essentially, the need to outperform the deflation rate sets a higher bar for investment returns, which raises the barrier to starting a business and could slow overall economic growth. Is that the core of your argument?
You may be right, and it’s something I’ve thought about too, but I tend to believe the stronger argument is that economic growth would actually accelerate under a fixed money supply, not decelerate.
As I mentioned earlier, prices would become a key signal for productivity. If the price of certain goods drops significantly, entrepreneurs may not feel an urgency to act, since the potential reward wouldn't justify the risk of investing capital in that direction. But that’s the point: the market is signaling that no additional productivity is needed there at the moment. On the other side, even under a fixed monetary system, if a product or service becomes scarce, whether globally or due to local conditions like natural disasters, prices will rise. This rise signals an opportunity and incentivizes new production where it’s actually needed.
Personally, I believe a fixed money supply wouldn’t suppress innovation or productivity, it would redirect it more efficiently. Productivity would slow in oversupplied or low-demand areas, and increase in areas where supply is constrained and demand is high.
For example, if energy costs spike in one region, the market is signaling a potential profit opportunity. If costs are low elsewhere, it’s signaling that capital may be better allocated elsewhere.
Markets need elasticity, but the key question is where that elasticity should exist...
In a system with hard-capped money, I believe that flexibility would manifest in prices rather than in the supply of money itself.
Elasticity in pricing > elasticity in money
By the way, I don’t think enough Bitcoiners make a real effort to steelman the argument for monetary elasticity. Instead of just reinforcing their own views (which I do think are directionally correct), it would be valuable for more of them to understand how other economic schools actually see the world.
Also, just want to say, I really appreciate you. No homo 😂
When things become so easy to make that there is very little profit, they will be included in other services as a way to improve the other service. Calculators are essentially free now, yet we all expect them to be available on our phone and computers. It took effort to put them there, but it just contributed to a larger product.
For a more physical good example. Lets say for instance, it was no longer profitable to sell shoes because they were so easy and cheap to make, that there was an over supply and prices fell dramatically. Well people still need shoes. So maybe instead of buying shoes, theyre just available for free at the grocery store, with stores providing this as a service to attract customers. Something like that. Why would i go to a store without free shoes when i could go to a store that offers me free shoes.
Not likely to happen with shoes considering the premium people put in brands but i think it gets the point across.
There would no longer be much investment opportunity in shoes, but this is because there is no extra capital needed.
Would this lack of capital investment be bad for the economy? Not necessarily, because that capital can now be invested somewhere it is more needed, while everyone still gets free shoes and a better living standard.
Bitcoin is going to teach us that our hurdle rate for investing has been artificially low for almost a century.
Many investments that look as if they are NPV positive when viewed through the lens of an inflating currency are, in reality, value-destroying.
Discouraging bad investments is not a bad thing.
I agree about the hurdle rate and its understandable after decades of irresponsible debasement everybody is excited for deflation.
but to just set the hurdle rate as high as we fucking can is PTSD and not good economic thinking.
Not an economist. IMHO: This seems correct - a money with bitcoin's properties could not have been concieved by early Austrians. Also, the most *salable good* = best money is always relative - what is the best money available to humans? always a choice between different ones. Had they witnessed bitcoin it could have altered their theses.
I think, at its core, Austrian economics holds that money should emerge as a market goo, not something decreed by the state or defined by an arbitrary quantity. It's just that, in a free market, individuals are more likely to gravitate toward harder forms of money, which often means something with a limited supply.
Also, there's an important distinction between deflationary prices and a deflationary economy. The two are often conflated, likely because deflationary economies frequently result in falling prices. But they’re not the same thing.
Yeah I agree with that.
but tbh agreeing that the state shouldn't control the money is about the only similarity I'm seeing between maxis and Austrians
What do you think are the biggest differences? Also, what do you think the percentage of overlap must be for them to be similar enough, to be considered adjacent?
I dont think maximalism is a well-enough thought-out economic theory to warrant comparison. Its just memes and I'm pointing out those memes aren't Austrian economics.
Actually trained in economics here. Yes they did. So did Aristotle, BTW.
You're interpretating that wrong. It means literally exactly the opposite of what you're saying.
theres no "interpreting"
they explicitly say it.
The number of units doesn't matter **_as long as it doesn't change_**
Its not rocket science. Just read the whole thing.
"We conclude, therefore, that determining the supply of money, like all other goods, is best left to the free market. ...
no dictated quantity of money will do the work better,
and the free market ... satisfy the needs of consumers, as compared with all other productive goods."
Rothbard What has the Government Done to Our Money? End of Chapter 8
wtf are *you talking about?
nobody ever said "the number of units doesn't matter as long as it doesn't change."
ever.
Keep reading. I'm not doing your homework for you. They speak academic-ese, which is overly cautious to the layman.
dude stfu
"i actually studied economics"
gtfo lol
show me ONE place in the literature where anybody spoke on the price of money and said "what would be great is if we could just eliminate the entire supply side of the equation"
Rothbard advocated a fixed money supply and saw deflation as a consequence of economic growth.
No.
Rothbard specifically says the number of monetary units doesnt matter.
Nowhere does he say it should be a fixed number.
nobody is saying deflationary periods shouldn't happen.
just that it wasn't ever suggested the maximum structurally deflationary environment is the best for human flourishing.
because its a ridiculous idea.
Rothbard said the size of the money supply is not important as long as money production follows the market process. He was therefore implicitly in favor of a naturally limited money supply whose growth is extremely slow.
True, no one called for artificial deflation. But he viewed productivity-driven deflation as healthy.
Why do you view maximally deflationary environment so critically?
Rothbard generally seemed to come back to gold as his "naturally limited money supply"
so 2-3% supply inflation wasn't a concern for him.
I'm critical of the "maximum deflation is gud" argument because deflationary conditions penalize the investors of capital.
This is Keynesian thinking. Deflation only disadvantages investors who rely on debt and credit-financed expansion, because falling prices increase their fixed cost burden and real debt burden.
that's just obviously false.
deflation incentivizes ALL market participants to hold their money.
all holders of the money reap the reward of the economic ventures of others. if economic growth occurs, their money increases in purchasing power whether ir not they participate.
purchasing power increases directly along the economic activity generated by *anyone*
it is a poor incentive structure where everyone benefits from the activity of the few.
also the prospective entrepreneur or any capital venture needs to be confident they can not only beat the market but has the additional hurdle of needing to beat the rate of monetary deflation.
i agree deflationary cycles are normal and good.
permanent structural deflation is not.
btw
John Keynes was loudly against constantly increasing the money supply. I know what you mean but its more accurate to call it "MMT" than "Keynesian"
Bitcoin maxis just started calling everything they dont like "Keynesian."
No. You’re confusing incentive with entitlement.
In a deflationary system, holders earn increased purchasing power because they delay consumption, which is itself a form of economic discipline, not parasitism.
Investors have no guaranteed nominal growth. they must create real value, otherwise they simply don’t earn capital at all.
The fact that unproductive capital fears deflation proves its fragility.
Permanent mild deflation driven by productivity is not a bug - it’s the healthiest form of wealth distribution.
And please stop whitewashing Keynes: he was the pioneer of government monetary control, even if today's MMT supporters are now even surpassing him.
You’re not debating Bitcoin maxis - you’re debating economic reality.
But they do gain capital. Holders siphon capital off of productive people chasing what they hold. It's not just delaying consumption that generates this increase in purchasing power, it's others producing things that they want to trade for the money they hold, it's delaying consumption *until more things are produced by others* that results in this gain. It's Tue exact inverse of the cantillion effect.
Deflation doesn't deprive anyone of capital. No one is expropriated, no one is exploited.
Well, maybe tortured at some point.
Are you conflating capital with money?
Think of it. In an inflationary system, your money loses purchasing power as money is printed. Who receives that purchasing power? The person who gets the newly printed money of course. Where did that capital come from? It was siphoned from the productive people, because now it can be used to buy their goods with no effort.
In a deflationary system, your money gains purchasing power. Where did that gain in purchasing power come from? It came from the fact that more production is chasing the same amount of money. You gain capital produced by someone else.
Both of these have terrible secondary effects. Inflationary environments encourage production above market optimum, deflationary markets do the opposite.
No, capital and money aren’t the same.
Inflation steals purchasing power via dilution, deflation rewards patience as others voluntarily increase production.
Deflation doesn’t siphon - it reflects higher output chasing stable money.
Inflation misallocates capital, deflation corrects it.
Where does that reward for patience get produced?
creation of value
Yeah, whos creating that value?
who is in the kage to create added value for others
I don't follow.
because you are a marxist and do not understand subjective value theory
Lol I'm a Marxist? Do you know where my quote in my bio is from?
I've followed you a little while. Youre a very smart person. Smarter than this. Youre dodging the question for a reason, it's because you understand exactly what I'm getting at.
the answer to the question is that the capital allocator creates the reward for the saver. the saver is rewarded for risk they didn't take.
that isn't "earning."
lionizing it as reward for deferred gratification is just some Protestant headtrip.
if anyone is espousing socialist ideas its you, trying to rationalize the structural reallocation of the value created by the speculator and entrepreneur.
Savers take risks - the risk of opportunity costs, future uncertainty, and deferred consumption.
Without savers, there is no capital to deploy. Entrepreneurs rely on deferred consumption to finance production.
Calling voluntary exchange "structural redistribution" is absurd - it's basic market coordination, not socialism.
Socialism is forced redistribution.
there is no opportunity cost or any risk when the hoarder is guaranteed a return for doing nothing.
There’s never a guaranteed return in a free market. The risk is real: time, uncertainty, technological shifts, and opportunity cost.
"i should get paid for doing nothing because life is uncertain"
get a helmet.
You confuse doing nothing with deferring consumption.
Savings provide the capital that makes production possible - no capital, no entrepreneurship.
The helmet is for those who think you can have investment without prior savings.
There is no assurance the money is ever spent. Nothing prevents the hoarder from just sitting on theor stack and reaping the reward of *other peoples* economic ventures.
in fact they're incentivized to do so.
You have no way to distinguish between "doing nothing" and "deferred consumption".
you just making it up and saying "trust me bro, they'll invest at some point."
If hoarders just sit on their stack, how exactly does the purchasing power of their money increase without others voluntarily producing more goods and services?
Who is forcing anyone to produce for them?
yes.
their purchasing power increases because of the economic ventures of other people.
the hoarder gets a free ride.
there is no coercion. you want to structurally design it to be that way.
pretty sure we're just talking in circles now
┐( ˘_˘)┌
Exactly, no coercion.
The saver enables capital formation by delaying consumption.
Without savings, those ventures you speak of wouldn’t have capital to operate.
Calling that a free ride is like calling oxygen a parasite for feeding fire.
thats a extremely tortured metaphor and you didn't respond to my point at all
we're done here.
No saving = no capital.
No capital = no investment.
No investment = no growth.
No growth = stagnation & poverty.
Consumption alone doesn’t build wealth. It burns it.
nice strawman you got there 👍
lol horseshit
to recap
there is no austrian economist ever that advocates for creating the most deflationary environment possible
or a cap on the amount of monetary units
nothing you've said has shown otherwise
characterizing my argument as if I was against saving is a retarded strawman
But hey
I guess when you really don't have anything to say
except for repackaging Human Action
it's best to just strawman and claim victory
Mises, Hayek and Rothbard rejected government monetary expansion, which means keeping the money supply constant or decreasing.
Rothbard was against the state and didn't know about crypto, so gold was money for him. With a natural upper limit.
Hayek wanted currency competition and was in favor of deflationary currencies becoming dominant in the market.
Or the workers make make the wheels turn...
Yes I'm aware of the maxi rhetoric about fiat everything and how Bitcoin fixes it.
That doesn't mean setting up structural deflation is a good idea.
so your stance is
because of the buyers virtuous restraint
they somehow "earn" greater purchasing power
and that increases as to the amount of total economic expansion that occurs, which they had nothing to do with.
sounds very scientific.
I didn't "whitewash" Keynes, I corrected your mistake that advocating for amounts of monetary expansion is a Keynesian position. It isnt.
The saver earns purchasing power because they delayed consumption and allowed capital to be allocated by others who took the risk.
Without savers, there is no capital pool to finance production at all.
The increase in purchasing power is the market reward for patience and for not consuming scarce resources prematurely.
That’s called time preference, a term in austrian economics, long before bitcoin.
Yeah yeah human action.
Mises didn't argue the money supply should be set up so that AS MUCH AS POSSIBLE it was structurally deflationary.
just that a tendency towards deflation was natural and good.
and I'm not disagreeing.
You're based, fren. For me, there's nothing negative about the amount of money going down. Most people don't even understand money.
Was wondering about this as I'm no expert on Austrian Econ. I always kinda assumed they argued for it, but seems it's just sound money. Maybe they didn't conceive of more sound alternatives?
Related sorta, have you read Todd's write up on how emissions aren't inflationary? It's short and sweet, recommend if you haven't checked it out
I haven't seen that in a while but I did read it.
I think it comes back to semantics actually....
what is inflation? Mises has a whole write up where he says inflation isn't clearly defined and if, IF we're going to use the term the only sensible definition is "money supply inflation ABOVE the increase in demand for money"
So according to Mises, supply inflation that tracks with the increase in demand isn't "inflation" at all.
Interesting. That one word seems to have countless dense essays devoted, and I just can't care enough to dive deeper.
I've always liked fixed supply for simple reasons that jive with my earliest intuitions about money. The shrinking supply in practice as a result of loss over time is a bit discomforting to think about, but not that much.
On Todd's paper, I reposted a drawing (don't ask me why I felt compelled to draw an analogy, a physically flawed one at that) recently that sums up the math in a few lines. It's a short read anyway though, and waxwings post on topic is good too, if you wanna revisit.
Why are you doing this to me Kanzan? I just finished writing two big proposal, and now you're triggering me into wanting to get into round 2 of this past discussion 🤣