💾 Archived View for nomadpengu.in › thoughts › deflation captured on 2023-04-26 at 13:09:08. Gemini links have been rewritten to link to archived content
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Posted on 2022-02-25
I'm responding to StackSmith's critique of Left Adjoint's post:
gemini://gemini.ctrl-c.club/~stack/gemlog/2022-03-26.crypto.gmi
gemini://inconsistentuniverse.space/gemlog/2022-02-25-defi.gmi
First of all, it's ridiculous to say that somehow inflation is capitalist, and by implication, deflation is not. Perhaps, if there is some seizmic shift in the relations of production, it would be possible to have some sort of crypto-based market that does not result in capitalist exploitation. However, inflation is not an inherent feature of capitalism -- deflation happens _all the time_ in capitalist economies -- and deflation is not some way out of capitalism. In fact, I would argue that deflationary currency does exactly the opposite and concentrates power in capital owners.
The problem is not that the initial early adopters of cyrpto were unfairly rewarded, the problem is that _earlier_ entrants to the market will be _continuously_ rewarded, and later entrants will be _continuously_ disadvantaged.
Who has the ability to be earlier adopters? Certainly only those who have enough disposable income to absorb the risk of a buying into a nascent technology.
What's more, saying that a deflationary currency increases the value of your savings over time overlooks the fact that currency is only that -- at some point, you must exchange it for goods or labor, or else it's just a number in your wallet. Sure, it's more advantageous to horde it away for some big future payday, but if you're a regular working person, you have groceries to buy and bills to pay. So, again, the only people who benefit from deflation are those who do not have to spend significant chunks of their earnings. As much as the idea that inflation incentivizes investment can be argued to be bullshit, it's at least better than a system where it's by all metrics better to horde abstract wealth.
That's not even getting into the disasterous macroeconomic consequences of deflationary spirals.
Stack argues that we are too dependent on "men with guns" to settle transactional disputes, and that we should take responsibility for our own transactions.
This is wildly impractical. How many hours a day do you have to vet every purchase you make? Do you have domain specific knowledge of every purchase? They say that most losses to bad actors can be attributed to foolhardy purchases, but I think this is demonstrably not true -- case in point are the continual scams that were run on The Silk Road. It is very easy for a bad actor to operate legitimately for enough time to gain community trust before pulling the rug away. Is someone buying weed from a well-regarded seller making a foolhardy purchase? Perhaps you could argue that buying illegal drugs is inherently risky, but this generalizes to all forms of business, especially when you don't know the exact identities of who you're transacting with.
But let's grant that whoever is reading this has enough time, diligence, and skill to vet all their purchases. But what about your aging mother? What about your disabled child? Do you expect and want them to have to do their own due diligence? There are vulnerable people in every community that must be protected.
I think all of this is a bit of a pointless hypothetical in any case. If suddenly we woke up and everyone's finances were instantly transferred to crypto, it would only be a matter of time before the same institutions we had before would be formed by communities. It would only be a matter of time before real men with guns show up and use a rubber hose to reverse blockchain transactions. This is extreme of course, but I don't see how it won't devolve to this if there is absolutely no built-in mechanism to mitigate harm from bad actors. There can be trustless currency, but there cannot be trustless society.