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Practical issues aside and from an individual’s perspective, why use an inflationary currency at all if you can use a deflationary one?
by kekeblom 9y ago
Practical issues aside and from an individual’s perspective, why use an inflationary currency at all if you can use a deflationary one?
- secondbreakfast 9y agoBecause you can buy more with a deflationary currency tomorrow than you can today. So the tendency would be to not buy things with a deflationary currency and instead buy things with an inflationary currency.
- Retric 9y agoGenerally you can only pay taxes in a specific currency. Deflationary currency's lower debt risks which is a really nice feature when paying taxes, so considering taxes such a large expense deflationary currency's become far more appealing than you might think. You also reduce risks by paying taxes in the same currency you conduct business in. So, while having large savings in deflationary currency is not a great idea, for the average person deflationary currency's are surprisingly appealing. PS: Remember, many things like socks are valued in USD, but are not actually USD. Total USD supply is actually fairly low per person limiting average losses from inflation.
- rhino369 9y agoIf all else is equal, you wouldn't. But all else isn't equal. Since the deflationary one induces people to horde, you might have sudden, extreme inflation if people panic sell. Bitcoin and other crypto are only deflationary if their economies grow faster than the supply. But that isn't at all guaranteed.
- FooHentai 9y agoWhat I really want to know at this point is how come my landlord won't accept all of these Linden Dollars I've been saving up to pay my rent? :)
- teemwerk 9y agoThe first thing that comes to mind is that debt stops making sense. In addition to your interest rate, your principle becomes more expensive over time. A mortgage, a car payment, becomes more expensive over time since the deal was struck when prices were higher. A bitcoin can buy you a heck of a lot more now, but the mortgage you signed in 2014 was for 200 bitcoins. Uh oh... Now, of course you can argue the necessity of credit until the cows come home. The bottom line is whatever credit is to you, deflation really throws a wrench in it. Naively, other things the same, the best time to take out credit for something you need is now. Under a deflationary currency that time is never.
- option_greek 9y agoCan't the interest rate be negative ? (of course the some stability in price increase is needed for it to work).
- Retric 9y agoWhy loan money at a negative interest rate? Just keep it.
- KilroyThe5th 9y agopoint is, deflationary currency has already been tried before (the gold standard), and it was observed that years of deflation was not good for the economy. There's a reason we don't use it anymore.
- AnimalMuppet 9y agoDepends on what you mean by "use". Gresham's Law states that bad money drives out good. In this context, that means that everyone stores their value in (hoards) the deflationary currency, and spends the inflationary one.