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Excellent point. The truth is we have not had any real deflationary currencies compete against state issued currencies. Even commodity monies like gold and sil
by anonymous5133 9y ago
Excellent point.
The truth is we have not had any real deflationary currencies compete against state issued currencies. Even commodity monies like gold and silver aren't deflationary since the existing in-ground resource base is still very large and can continue to be mined for millions of years.
Crypto, on the other hand, will eventually stop creating new coins based on programming. It is essentially the ultimate deflationary currency.
From the end-user stand point, the currency of choice is always going to be deflationary. The end-user has absolutely nothing to gain by using an inflationary currency. The benefits of the inflationary currency is that is encourages people to get rid of their currency as fast as possible because it is losing value. That doesn't benefit the end-user. It benefits businesses and the people those businesses employ. The inflationary currency ideals are mostly based on the socialist ideas that we need to spend our money as fast as possible to "move the economy forward" but that does not benefit the user of the money. It benefits other people.
I believe that most people are self-interested and will do actions that maximize their benefit in most situations. Thus, it is easy to see that users will prefer to keep their money in deflationary currency rather than inflationary. Will it seize up the entire economy? My theory is no it won't and it will have the side effect of encouraging people to wisely spend their money. People will only buy stuff they really want or need rather than this idea of "I better buy it right now before the price goes up (due to inflation)".
- raiflip 9y agoSee https://en.wikipedia.org/wiki/Gresham%27s_law https://en.wikipedia.org/wiki/Gresham%27s_law. If given the choice between holding bitcoin and USD people will hold bitcoin, but they will still want to buy stuff. People then have an incentive to use USD to buy stuff, and since USD is used to buy stuff they will want to have USD on hand to buy stuff when they want to. Hence Gresham's Law.
- jstanley 9y ago> People then have an incentive to use USD to buy stuff, Yep. > and since USD is used to buy stuff they will want to have USD on hand to buy stuff when they want to Nope! Starting from a position of only having BTC (because you've already got rid of the USD you had, and you immediately convert any USD you receive into BTC), what is the advantage of buying USD to spend instead of spending your BTC directly?
- raiflip 9y ago"Nope! Starting from a position of only having BTC (because you've already got rid of the USD you had, and you immediately convert any USD you receive into BTC), what is the advantage of buying USD to spend instead of spending your BTC directly?" Based on a false premise. Under no scenario will people only have BTC. With regards to what people will be paid in, insofar as people are planning to spend money, they'll want it paid in USD.
- jstanley 9y agoWhy? If I can get paid in USD or BTC, and the BTC will buy me more when I come to spend it, why would I prefer to get paid in USD?
- raiflip 9y agoThink of it this way. For any given transaction, the spender will want to spend USD, the receiver will want BTC. Lets say the receiver gets his way. Then the spender will want to hold onto the BTC anyway, unless the product/service is something they really need. The receiver will have an incentive to give in because if they demand BTC, then for most people they get nothing, but if they demand USD, they'll get USD and could in theory convert it to BTC while holding it.
- jstanley 9y agoMy thoughts exactly.