Nostr Web Client

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.

Nic ⛄ 6mo ago 💬 2

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 😂

Reply to this note

Please Login to reply.

Discussion

DustRG 6mo ago

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.