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You should not sell your shares in the S&P 500 to buy pizza unless your financial situation changes drastically for the worse or I guess maybe you are near deat

You should not sell your shares in the S&P 500 to buy pizza unless your financial situation changes drastically for the worse or I guess maybe you are near death. As I said in the other thread, the problem is that btc is too desirable in the market to be a functioning currency and using it for pizza or impulsive daily purchases is a nonstarter in reality.

liontwist 2y ago
But you’re wrong. People sell S&P and BTC everyday even if they aren’t dying. This is time value of money. If I wait 20 years instead of buying a house, I can have more money. But that’s 20 years of my life I didn’t live in the house I wanted. I could invest more in S&P and not go on vacation, but then I won’t have as much time to go on vacations. Goods and services now can be more valuable than money later, and that’s why people sell. And that’s why deflationary currency is fine.
- chowchowchow 2y ago
  I notice you mentioned big ticket purchases which I specifically did not mention. Your argument looks a bit different if you replace houses and vacation with lattes and sneakers. We live in a consumer economy where a marginal drag on purchasing activity due to currency deflation would probably be pretty disruptive to put it mildly.
  - liontwist 2y ago
    If you’re arguing that people would think harder about their purchases and frivolous spending would decline. I agree. And I think that’s a benefits If you’re asking if people would not use their deflating currency to buy lattes and sneakers, I disagree. People like sneakers and lattes more than money. They prove this everyday by buying them instead of s&p. There is an issue of the cost of a transaction - which nis bad for btc and s&p. Nobody wants a tax form for buying a pizza. But the regulatory environment creating high selling costs is orthogonal to the deflationary property.
    - chowchowchow 2y ago
      More than money, yes. More than precious bitcoin? The argument simply is that exchange should be frictionless and deflationary currency will slow the velocity of money. I guess you agree this will lead to reduced prosperity and economic activity, though you call it frivolous purchases. Your comment about preferences doesn’t play into it; this is about mechanics of exchange, and a precious asset is an inefficient medium for commerce which would lead to reduced economic activity because not only do you have to factor in the opportunity cost of buying a good or buying some other good (sneakers or s&p), now you also have hodling, zero economic activity, as a 3rd option with its own expected return and opportunity cost to forgo. When I buy sneakers, the s&p 500, or btc, my dollars don’t disappear. A counterparty receives them and they stay in the economy. If you pay me in btc and I just hold it, then that money effectively does disappear from the economy. And I’m not even mentioning all the macro issues of not being able to provide liquidity in the form of new capital in times of crisis.
      - liontwist 2y ago
        > More than precious bitcoin? I’m advocating for stable currency. Not bitcoin. > you agree this will lead to reduced prosperity I agree that it will reduce the velocity of money and maybe “GDP”. But not prosperity, individuals being able to save wealth into the future is a better life outcome than more goods changing hands. > and a precious asset is an inefficient medium for commerce You are conflating liquidity with deflation. To be a currency it has to be liquid, we agree. We also agree btc is not as liquid as cash. But deflation or stability is orthogonal from liquidity. > now you also have hodling, zero economic activity, Already addressed. People want money to buy goods. > my dollars don’t disappear. The value isn’t lost in the exchange but it’s lost everyday due to inflation. And by “lost” I mean transferred to government projects. > that money effectively does disappear from the economy. No it merely is saved for a future consumption date. If we average consumption needs of participants in the economy there is no reason to expect a monotonic hoarding effect. That would mean consumers are not satisfying their desires for goods. Here is one last framing. The economy is not money, it’s goods and services. Money is just a tool for claiming them. So what does an inflationary currency do to help the economy? Does it cause more people to get out of bed and create new goods and services? No. It just transfers claims to resources to someone else.
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liontwist 2y ago

But you’re wrong. People sell S&P and BTC everyday even if they aren’t dying. This is time value of money. If I wait 20 years instead of buying a house, I can have more money. But that’s 20 years of my life I didn’t live in the house I wanted. I could invest more in S&P and not go on vacation, but then I won’t have as much time to go on vacations. Goods and services now can be more valuable than money later, and that’s why people sell. And that’s why deflationary currency is fine.

chowchowchow 2y ago
I notice you mentioned big ticket purchases which I specifically did not mention. Your argument looks a bit different if you replace houses and vacation with lattes and sneakers. We live in a consumer economy where a marginal drag on purchasing activity due to currency deflation would probably be pretty disruptive to put it mildly.
- liontwist 2y ago
  If you’re arguing that people would think harder about their purchases and frivolous spending would decline. I agree. And I think that’s a benefits If you’re asking if people would not use their deflating currency to buy lattes and sneakers, I disagree. People like sneakers and lattes more than money. They prove this everyday by buying them instead of s&p. There is an issue of the cost of a transaction - which nis bad for btc and s&p. Nobody wants a tax form for buying a pizza. But the regulatory environment creating high selling costs is orthogonal to the deflationary property.
  - chowchowchow 2y ago
    More than money, yes. More than precious bitcoin? The argument simply is that exchange should be frictionless and deflationary currency will slow the velocity of money. I guess you agree this will lead to reduced prosperity and economic activity, though you call it frivolous purchases. Your comment about preferences doesn’t play into it; this is about mechanics of exchange, and a precious asset is an inefficient medium for commerce which would lead to reduced economic activity because not only do you have to factor in the opportunity cost of buying a good or buying some other good (sneakers or s&p), now you also have hodling, zero economic activity, as a 3rd option with its own expected return and opportunity cost to forgo. When I buy sneakers, the s&p 500, or btc, my dollars don’t disappear. A counterparty receives them and they stay in the economy. If you pay me in btc and I just hold it, then that money effectively does disappear from the economy. And I’m not even mentioning all the macro issues of not being able to provide liquidity in the form of new capital in times of crisis.
    - liontwist 2y ago
      > More than precious bitcoin? I’m advocating for stable currency. Not bitcoin. > you agree this will lead to reduced prosperity I agree that it will reduce the velocity of money and maybe “GDP”. But not prosperity, individuals being able to save wealth into the future is a better life outcome than more goods changing hands. > and a precious asset is an inefficient medium for commerce You are conflating liquidity with deflation. To be a currency it has to be liquid, we agree. We also agree btc is not as liquid as cash. But deflation or stability is orthogonal from liquidity. > now you also have hodling, zero economic activity, Already addressed. People want money to buy goods. > my dollars don’t disappear. The value isn’t lost in the exchange but it’s lost everyday due to inflation. And by “lost” I mean transferred to government projects. > that money effectively does disappear from the economy. No it merely is saved for a future consumption date. If we average consumption needs of participants in the economy there is no reason to expect a monotonic hoarding effect. That would mean consumers are not satisfying their desires for goods. Here is one last framing. The economy is not money, it’s goods and services. Money is just a tool for claiming them. So what does an inflationary currency do to help the economy? Does it cause more people to get out of bed and create new goods and services? No. It just transfers claims to resources to someone else.
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