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Here is an alternative line of reasoning for developed nations using btc. The US has been borderline deflationary for the recent past. When people buy gov bond

Here is an alternative line of reasoning for developed nations using btc. The US has been borderline deflationary for the recent past. When people buy gov bonds to hedge their bets against instable currency they deflate the currency by removing it from circulation. If that money was moved into a different asset, it does not deflate the original currency since it was not purchased from the gov. If you store your money in housing or land or any other asset everyone needs for products like precious metals you deprive others of that asset by inflating the costs beyond the actual demand for that asset. BTC seems useful as a value store with real returns that does not effect other parts the currency economy.

UncleMeat 9y ago
Bonds don't remove money from circulation. The government gets the cash and immediately spends it. The whole point of selling bonds is to obtain cash needed now to pay for things.
- spookthesunset 9y ago
  You are kinda right. Bond's don't directly increase / decrease the money supply but they can be used as a tool to indirectly do so. In the US the Federal Reserve Bank buys and sells bonds (US Treasury Bills to be exact) as a way to increase / decrease the supply of money. It doesn't actually issue any bonds -- it just trades already issued US Treasury Bills. At a high level, When the Fed wants to increase the money supply, it will buy bonds on the open market with money it creates out of thin air. To decrease the money supply, it sells bonds on the open market instead and pockets the cash--removing it from circulation. Quantitative Easing is basically the same idea, only instead of short-term government bonds, the Fed purchases large-scale assets (like mortgage backed securities) instead. Why? Because if the economy is shitty enough and the interest rates are almost at zero, the conventional methods of stimulating the economy stop working... Macro-economics is pretty cool, actually.

UncleMeat 9y ago

Bonds don't remove money from circulation. The government gets the cash and immediately spends it. The whole point of selling bonds is to obtain cash needed now to pay for things.

spookthesunset 9y ago
You are kinda right. Bond's don't directly increase / decrease the money supply but they can be used as a tool to indirectly do so. In the US the Federal Reserve Bank buys and sells bonds (US Treasury Bills to be exact) as a way to increase / decrease the supply of money. It doesn't actually issue any bonds -- it just trades already issued US Treasury Bills. At a high level, When the Fed wants to increase the money supply, it will buy bonds on the open market with money it creates out of thin air. To decrease the money supply, it sells bonds on the open market instead and pockets the cash--removing it from circulation. Quantitative Easing is basically the same idea, only instead of short-term government bonds, the Fed purchases large-scale assets (like mortgage backed securities) instead. Why? Because if the economy is shitty enough and the interest rates are almost at zero, the conventional methods of stimulating the economy stop working... Macro-economics is pretty cool, actually.