“Inflation, then, confers no general social benefit; instead, it redistributes the wealth in favor of the firstcomers and at the expense of the laggards in the race” – Rothbard

The Economic Effects of Inflation – What has Government done to our Money? by Rothbard

To gauge the economic effects of inflation, let us see what happens when a group of counterfeiters set about their work. Suppose the economy has a supply of 10,000 gold ounces, and counterfeiters, so cunning that they cannot be detected, pump in 2,000 “ounces” more. What will be the consequences? First, there will be a clear gain to the counterfeiters. They take the newly created money and use it to buy goods and services. The new money works its way, step by step, throughout the economic system. As the new money spreads, it bids prices up—as we have seen, new money can only dilute the effectiveness of each dollar. But this dilution takes time and is therefore uneven; in the meantime, some people gain and other people lose. In short, the counterfeiters and their local retailers have found their incomes increased before any rise in the prices of the things they buy. But, on the other hand, people in remote areas of the economy, who have not yet received the new money, find their buying prices rising before their incomes. Retailers at the other end of the country, for example, will suffer losses. The first receivers of the new money gain most, and at the expense of the latest receivers.

Inflation, then, confers no general social benefit; instead, it redistributes the wealth in favor of the firstcomers and at the expense of the laggards in the race. And inflation is, in effect, a race—to see who can get the new money earliest. The latecomers—the ones stuck with the loss—are often called the “fixed income groups.” Ministers, teachers, people on salaries, lag notoriously behind other groups in acquiring the new money. Particular sufferers will be those depending on fixed money contracts—contracts made in the days before the inflationary rise in prices. Life insurance beneficiaries and annuitants, retired persons living off pensions, landlords with long term leases, bondholders and other creditors, those holding cash, all will bear the brunt of the inflation. They will be the ones who are “taxed.”

Inflation has other disastrous effects. It distorts that keystone of our economy: business calculation. Since prices do not all change uniformly and at the same speed, it becomes very difficult for business to separate the lasting from the transitional, and gauge truly the demands of consumers or the cost of their operations. For example, accounting practice enters the “cost” of an asset at the amount the business has paid for it. But if inflation intervenes, the cost of replacing the asset on the books. As a result, business accounting will seriously overstate their profits during inflation—and may even consume capital while presumably increasing their investments. Similarly, stockholders and real estate holders will acquire capital gains during an inflation that are not really “gains” at all. But they may spend part of these gains without realizing that they are thereby consuming their original capital. By creating illusory profits and distorting economic calculation, inflation will suspend the free market’s penalizing of inefficient, and rewarding of efficient, firms. Almost all firms will seemingly prosper. The general atmosphere of a “sellers’ market” will lead to a decline in the quality of goods and of service to consumers, since consumers often resist price increases less when they occur in the form of downgrading of quality. The quality of work will decline in an inflation for a more subtle reason: people become enamored of “get-rich-quick” schemes, seemingly within their grasp in an era of ever-rising prices, and often scorn sober effort. Inflation also penalizes thrift and encourages debt, for any sum of money loaned will be repaid in dollars of lower purchasing power than when originally received. The incentive, then, is to borrow and repay later rather than save and lend. Inflation, therefore, lowers the general standard of living in the very course of creating a tinsel atmosphere of “prosperity.”

Fortunately, inflation cannot go on forever. For eventually people wake up to this form of taxation; they wake up to the continual shrinkage in the purchasing power of their dollar. At first, when prices rise, people say: “Well, this is abnormal, the product of some emergency. I will postpone my purchases and wait until prices go back down.” This is the common attitude during the first phase of an inflation. This notion moderates the price rise itself, and conceals the inflation further, since the demand for money is thereby increased. But, as inflation proceeds, people begin to realize that prices are going up perpetually as a result of perpetual inflation. Now people will say: “I will buy now, though prices are ‘high,’ because if I wait, prices will go up still further.” As a result, the demand for money now falls and prices go up more, proportionately, than the increase in the money supply. At this point, the government is often called upon to “relieve the money shortage” caused by the accelerated price rise, and it inflates even faster. Soon, the country reaches the stage of the “crack-up boom,” when people say: “I must buy anything now— anything to get rid of money which depreciates on my hands.” The supply of money skyrockets, the demand plummets, and prices rise astronomically. Production falls sharply, as people spend more and more of their time finding ways to get rid of their money. The monetary system has, in effect, broken down completely, and the economy reverts to other moneys, if they are attainable—other metal, foreign currencies if this is a one-country inflation, or even a return to barter conditions. The monetary system has broken down under the impact of inflation.

This condition of hyper-inflation is familiar historically in the assignats of the French Revolution, the Continentals of the American Revolution, and especially the German crisis of 1923, and the Chinese and other currencies after World War II.

A final indictment of inflation is that whenever the newly issued money is first used as loans to business, inflation causes the dread “business cycle.” This silent but deadly process, undetected for generations, works as follows: new money is issued by the banking system, under the aegis of government, and loaned to business. To businessmen, the new funds seem to be genuine investments, but these funds do not, like free-market investments, arise from voluntary savings. The new money is invested by businessmen in various projects, and paid out to workers and other factors as higher wages and prices. As the new money filters down to the whole economy, the people tend to re establish their old voluntary consumption/saving proportions.

In short, if people wish to save and invest about 20 percent of their incomes and consume the rest, new bank money loaned to business at first makes the saving proportion look higher. When the new money seeps down to the public, it re-establishes its old 20–80 proportion, and many investments are now revealed to be wasteful. Liquidation of the wasteful investments of the inflationary boom constitutes the depression phase of the business cycle.

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Bitcoin – The Currency of the Internet

With Facebook Falling out of Favor, Will Instagram be Enough to Rescue Shareholders?

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Bitcoin is falling out of favor with one key constituency—criminals, says report

The price of the No. 1 digital currency, bitcoin, has been on a punishing tailspin of late, falling 40% in 2018 and more than 70% since its peak in December of 2017. And perhaps adding insult to cyber injury, the popular virtual currency finds itself out of favor with another group of users. According to a …
Google Alert – bitcoin

To all the people disappointed with their investment (in bitcoin) performance. Please do as a favor, cut your losses short and spare us the nagging about bubbles and all the negatives you clearly see now (but couldn’t see when the price was going up)

For the ones that are thinking to invest now please take Andreas Antonopoulos advice and invest in it as much as you understand it. If you feel that you understand 5% invest 5% but more importantly if you understand 0% invest 0% and no, "Block-chain is this new technology that will change the world" does not count as understanding. Take your money and put them somewhere that you feel comfortable with. The problem with all the recent FUD and negativity lies with the fact that 90% of the people in crypto are mostly people who "invested" at the end of 2017, and 99% of them the only reason they had in doing so was the price. When the only reason you have when you buy something is the belief that you are going to sell it for more guess what happens when the price drops. You are left with no reasons. No reasons to be in it. When your money are into something for no reason you panic, you loose your sleep, you get angry, you discover all the reasons why you shouldn't have invested in it. Please do your self a favor and educate yourself's. Try to understand and if you want to HODL do it for a reason other than the price. I am heavily invested and I sleep like a baby. And if I loose everything is going to be because of something I didn't see happening before it happened (and nothing of the sort has happened yet). Not something that I wish I knew (and I could have known) before I invested. In fact "investing" is not even the right word to use. "Backing up" the technology is…If you are here for the money please leave. If you are here because of the way the future can unfold (outside the potential coin price increase) then enjoy the ride. What I see now (all the work, the ideas, the ongoing development) if you take out the price visibility is so positive that I wonder where do the people find the FUD? If you can not then stick with the bloomberg, the FT and the CNBC articles that you so much like. They all have one common characteristic. All of them fail to accept that the current technology is continuously developing and what is today is going to be much better in a year. If you can not relate to what I am saying have a look at that article about why iphone will fail from 2006:


and that one on why internet will fail from 1995:


If you are already in…you have a chance to educate yourselfs even late and NOT be the guys who wrote these articles.

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Bitcoin – The Currency of the Internet

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