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> The whole point is we DON'T want people to just hold onto a currency. I understand that that is the point you're making. The point we're making is that it d
by jstanley 9y ago
> The whole point is we DON'T want people to just hold onto a currency.
I understand that that is the point you're making.
The point we're making is that it does not matter what you want. Given the opportunity to hold deflationary currency instead of inflationary, (all else being equal) rational actors will prefer to hold the deflationary currency.
This is economics 101 indeed.
- raiflip 9y agoIndeed people will hold onto deflationary currency, and spend inflationary currency: https://en.wikipedia.org/wiki/Gresham%27s_law https://en.wikipedia.org/wiki/Gresham%27s_law Hence in a world of rational actors the only currency in circulation will be inflationary currencies.
- jstanley 9y agoYou keep bringing up Gresham's Law but I think you're neglecting the fact that it only holds in the long term when the bad money and the good money have the same face value. If they have a floating exchange rate, the good money will drive the value of the bad money towards 0. Edit: perhaps read the section of the Wikipedia article entitled "reverse of Gresham's law". It argues exactly the point I'm arguing.
- raiflip 9y agoThats a good point, I was thinking of Gresham's law as simply regarding more or less valuable currencies. Nevertheless in my other reply explain why I think the USD would still drive BTC at least out of circulation.