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Indeed people will hold onto deflationary currency, and spend inflationary currency: https://en.wikipedia.org/wiki/Gresham%27s_law https://en.wikipedia.org/wiki
by raiflip 9y ago
Indeed 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.