Well, I don't think there will be an iphone 34 or that anyone should buy any drm iphone.

In any case, ok, deflation doesn't fully stop consumption but it does halt investments.

Say you have 10,000 btc and are considering investing them on building a cell-phone factory, for example.
If you have 10% annual deflation, the factory must yield more than 10% (more than 1000 btc annually) for the investment to make sense.

Just saving you don't grow the economy, you need to invest what you don't consume (savings) in order to make that happen.
An economy without investments actually contracts, since real capital (like Freicoin and Gesell's free-money but unlike capital-money) perishes.
I think my claim "deflation reduces money velocity" isn't particularly crazy or controversial among economists.

Even if that were true, savings is a type of investment.

Not at all. Let's say I buy 100 shares in a company, each valued at one bitcoin. Over the next year, deflation increases the value of each bitcoin by 50% (Unrealistic, but let's run with it). Meanwhile, the company has made a paltry 1% profit, with a commensurate increase in it's stock price - 1%. So my 100 shares of this company are now worth 1.01 bitcoins a piece. But the bitcoin itself is worth 50% more...  So if I could have bought $10 000 worth of merchandise with those 100 bitcoins a year ago, I can now - after selling that stock - buy $15 150 worth. If I had merely kept those coins in a paper wallet somewhere, I could only buy $15 000 worth.

Investment is still profitable in a deflationary economy, as long as the company you're investing in is.


It encourages long-term investments, such as savings, and might make investors a little more cautious, but honestly, I'd rather have that than the inflation-induced bubbles.

inflation is very nice see
thanks to it a government that i didn't vote for because i wasn't born made some very good investment!
Those investment where so good and yield a fantastic return. Right now i have a 30 000€ debt over my head because everybody in france have.
I'm still waiting for this very nice inflation to reimburse that

But you know what? The best would be to increase Inflation and raise this debt to 60 000€/ person. This way we can rebuild public service and made economy bounce back on the track.

Inflation is a tax of the weakest. The weakest is the one that can't avoid this inflation. Basically the middle class

Who's arguing for inflation? Freicoin monetary base converges at the fixed quantity of 100 MM Freicoins.
Demurrage fees pay for security, just like transactions fees will pay alone in bitcoin. In freicoin we expect lower transaction fees because demurrage fees are already funding the security.
Gesell himself predicted hyper-inflation for usd-like currencies. He predicts that first central banks lower interest rates to zero and then hyper-inflation eventually occurs when all the hoarded money comes out to the market suddenly. Sounds familiar?

https://www.community-exchange.org/docs/Gesell/en/neo/part3/13.htm

Extrapolating his predictions, the yen should die first, then the usd, gbp, the eur...

Say we have an imaginary currency called stablecoin that has a constant value throughout time.

Year 0
1 stablecoin = 1 share = 1 btc

year 1
1 share = 1.01 stablecoins
0.5 btc = 1 stablecoin
1 share = 1.01 * 0.5 btc = 0.505 btc

(your math is wrong, I corrected it - btc is worth 50% more, not 100%)

Well, that's just wonderful, but the company's business is not transacted in "stablecoin," but in bitcoin. So if it has made a 1% profit in bitcoin, then the actual calculation would be:

year 1
1 share = 1.01 btc
1 btc = 1.5 stablecoin
1 share = 1.01 * 1.5 btc = 1.515 stablecoin

As I pointed out, making the profit in the first place would be difficult, because of the deflation, but if it made profit, that would translate to being a great investment.
Year 0:
parts to make a phone cost 1 bitcoin = 1 stablecoin
market price of a phone is about 1.1 bitcoin = 1.1 stablecoin

Year 1:
market price of a phone is about .733 bitcoin = 1.1 stablecoin
the parts to make that phone (back in year 0) cost the company 1 bitcoin, a net loss - in bitcoin - of 0.267.

Tough to keep up with the price of your product, since you necessarily have to buy the supplies before you can sell your product.

It's more an economic idea than a political one. But we believe that money should only be a means of exchange, not a so called "store of value". Silvio Gesell explains the problems caused by money trying to perform both functions at the same time.
One function distorts the other one. Personally I don't believe that an abstract store of value is even possible, but other in our community think that Freicoin should be used for exchange and Bitcoin for saving.


Yes, thanks for the correction. In any case, I was talking about the stock having to grow in value more than bitcoin in real terms.
And that applies to your example. The company stock hasn't grown in real value just 1%, it has grown in value more than 50% (more than Bitcoin).
I'm not saying it is impossible, just very unlikely. So less companies will be good investments (compared to hoarding) and hoarding will substitute part of the real investments.
My claim still stands: "deflation makes real investments less attractive".
I'm not saying bitcoin will destroy the economy because it is not monopoly money like gold was. Although borrowing a highly deflationary currency is quite crazy, people will just lend and invest other currencies.

Although I disagree that gold is completely useless (it is a valuable industrial commodity), its current value compared to silver cannot derive from their differences as industrial commodities or the difference wouldn't be so big.
No matter what Bernanke claims, gold is still money to some extend. So, yes, a agree that gold qualifies as an abstract store of value. Its value could collapse if all the users wanted to extract that "stored value" at the same time. Not to zero, but still collapse.
So I mostly agree with you in your analysis.

The aim of Freicoin is to provide a crypto-currency that is good as a medium of exchange but not suitable for "store of value".
A currency that makes sense to lend at zero interest (plus risk premium). Well, if you add the inflation premium (which is negative when there's deflation), it could even make sense to lend it at negative interest (of course, never below the demurrage rate).
In our extreme 50% deflation example, not even freicoin would be invested, but the user base will eventually stabilize and at that point freicoin should be more stable than bitcoin (as there won't be much "hoarding demand", which is more variable).

Thank you for pointing your friend to our project!!

Its value comes from the demand, just like with bitcoin. Of course is still to be proven if demurrage will destroy that demand or not.
Until now, demurrage currencies have been usually backed national currencies (worgl, chiemgauer...) or they were directly enforced by a state (Bernard Lietaer talks about demurrage currencies in the age of cathedrals in europe, Egypt or China; associating these currencies with long-term investments and big infrastructure projects).

I just think that if it has a price, merchants can accept it. And if merchants accept it will have demand. But although I've been investigating money for years I'm not an economist either, and even if I were I don't think anybody can predict what will happen with certainty.
It is an economic experiment in addition to a currency (well, bitcoin is a monetary experiment too as you point out).

Money systems are never in themselves resources, but money CONTROLS all consumption and production of resources through price signals.  Any economist will tell you that the most important price in the economy is the interest rate and the nature of the money and its supply are the drivers of that rate.  We do not believe that demurrage increases wasteful consumption of resources, if you look at the history of the industrial revolution you will see that mildly inflationary fiat has created an economy with lots of resource consumption and waste in it.  One of the drivers behind that is that interest must be payed in-order to avoid defaulting on loans.  The only way to repay all loans is to expand the economy PERPETUALLY.  Defaults would cause personal bankruptcy (bad for a few poor people) and most importantly without expansion the number of defaults would roughly equal the interest rate meaning lenders would lose in write-offs what they make from interest and all their profits would be gone (bad for very rich and powerful people).  Which reason is the one driving our expansionary paradigm, heck they seem to be very close to making it work for the later group despite the personal bankruptcies of the former.

You can also do some very simple math on NET PRESENT VALUE to see that a forest (or any other natural endowment with perpetual value creating potential) under interest bearing money is only worth a finite amount, at 5% interest its only worth 20 years of lumber production.  If you could make more then that by leveling it for a shopping mall that's what you SHOULD do according to interest.  Under reduced interest rates created by demurrage perpetual natural production is nearly priceless and you preserve it.  Likewise high upfront-low ongoing expenditures like solar, wind currently get out competed by low upfront-high ongoing solutions like goal and natural gas because future expenditure is also discounted by interest, it's well understood by renewable energy investors that financing is now the only real barrier to their cost effectiveness.