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While I understand the desire to have 2% inflation across the economy, wouldn't the individual parties prefer to hold their cash in a deflationary currency? Pu

While I understand the desire to have 2% inflation across the economy, wouldn't the individual parties prefer to hold their cash in a deflationary currency? Put differently and going fast forward; how can you have a mildly inflating currency (eg. EUR) when there's a deflationary currency (eg. BTC) as a viable alternative around? Would you propose we prohibit crypto currencies? (What would you propose?)

jbrun 9y ago
Crypto currencies can exist for those who want them, I don't see any reason to block them beyond ponzi scheme and marketing issues - similar to stock issues. So probably they need some regulation to not defraud unwitting people. Bitcoin is not an alternative to Euros. That is the whole point. If you switched all euros to bitcoins and asked people to trade those, the economy would collapse as no one would want to trade their bitcoins because mathematically, they increase in value due to the limited issuance of them. Without modest inflation, the economy cannot grow as no one would spend money for investment purposes.
marcosdumay 9y ago
Well, inflationary currencies have the natural tendency of displacing deflationary ones out of the market. Not the other way around. It takes a lot of inflation to reverse that relationship.
mcguire 9y ago
"While I understand the desire to have 2% inflation across the economy, wouldn't the individual parties prefer to hold their cash in a deflationary currency?" Typically, they'd prefer not to hold currency; they'd prefer to make an investment that gives a supra-inflationary return. This is, in general, good for the economy and the society. "Put differently and going fast forward; how can you have a mildly inflating currency (eg. EUR) when there's a deflationary currency (eg. BTC) as a viable alternative around?" I dunno, why isn't everyone parking their money in gold?
dragonwriter 9y ago
> wouldn't the individual parties prefer to hold their cash in a deflationary currency? Net (currency-denominated) creditors would. Net (currency-denominated) debtors would prefer inflation-adjusted currency. Those whose significant assets and obligations are not currency-denominated (e.g., who own mines or are committed to deliver commodities) don't really care, directly.

jbrun 9y ago

Crypto currencies can exist for those who want them, I don't see any reason to block them beyond ponzi scheme and marketing issues - similar to stock issues. So probably they need some regulation to not defraud unwitting people. Bitcoin is not an alternative to Euros. That is the whole point. If you switched all euros to bitcoins and asked people to trade those, the economy would collapse as no one would want to trade their bitcoins because mathematically, they increase in value due to the limited issuance of them. Without modest inflation, the economy cannot grow as no one would spend money for investment purposes.

marcosdumay 9y ago

Well, inflationary currencies have the natural tendency of displacing deflationary ones out of the market. Not the other way around. It takes a lot of inflation to reverse that relationship.

mcguire 9y ago

"While I understand the desire to have 2% inflation across the economy, wouldn't the individual parties prefer to hold their cash in a deflationary currency?" Typically, they'd prefer not to hold currency; they'd prefer to make an investment that gives a supra-inflationary return. This is, in general, good for the economy and the society. "Put differently and going fast forward; how can you have a mildly inflating currency (eg. EUR) when there's a deflationary currency (eg. BTC) as a viable alternative around?" I dunno, why isn't everyone parking their money in gold?

dragonwriter 9y ago

> wouldn't the individual parties prefer to hold their cash in a deflationary currency? Net (currency-denominated) creditors would. Net (currency-denominated) debtors would prefer inflation-adjusted currency. Those whose significant assets and obligations are not currency-denominated (e.g., who own mines or are committed to deliver commodities) don't really care, directly.