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Just the deflationary nature of a currency isn't enough to destabilize cycles. Cycles run on credit-worthiness, or how likely is someone to return x% return in

Just the deflationary nature of a currency isn't enough to destabilize cycles. Cycles run on credit-worthiness, or how likely is someone to return x% return in the future on an investment made today. Compared to the Fed, which makes arbitrary (non-cyclical) adjustments to the "cost of money", Bitcoin's more predictable deflationary attributes might lead to more predictability in financial cycles. This is of course, assuming the hundreds of other problems with Bitcoin as a currency, or credit-instrument have been solved.

ucaetano 8y ago
> Just the deflationary nature of a currency isn't enough to destabilize cycles. No need for cycles: a deflationary currency means that you're better off holding it than investing it. This is disastrous for the economy. > Compared to the Fed, which makes arbitrary (non-cyclical) adjustments to the "cost of money", Bitcoin's more predictable deflationary attributes might lead to more predictability in financial cycles. Quite the opposite. The money supply wouldn't adapt dynamically to the demand for money, leading to harsher crises.
- logicchains 8y ago
  >This is disastrous for the economy. This is FUD. The US experienced deflation through much of the 19th century, yet saw higher growth rates then than in the 20th century. For instance, from https://www.investopedia.com/ask/answers/040715/were-there-any-periods-major-deflation-us-history.asp https://www.investopedia.com/ask/answers/040715/were-there-a... (don't have time to find a more formal source): "The period between 1873 and 1879 saw prices drop by nearly 3% per year, yet real national product growth was almost 7% during the same time." And overall "the price level (the average of current prices across the entire spectrum of goods and services produced in the economy) was actually 50% higher in 1800 than it was in 1900." So clearly it's possible to have strong economic growth during deflationary times.
  - ucaetano 8y ago
    You're confusing deflation with deflationary currency.
    - radiusvector 8y ago
      > a deflationary currency means that you're better off holding it than investing it. It is ridiculous to assume that any artificially designed deflationary digital asset will produce long term returns greater than an index like SPY, which is intrinsically tied to human productivity in the economy. An average, semi-rational investor will always have the incentive to lend to a credit worthy person/business/asset, regardless of how much artificial deflation you can induce in your asset.
      - ucaetano 8y ago
        It isn't returns. It is deflation. You're literally creating a broken system by design. Don't complain when it doesn't work.
  - Glyptodon 8y ago
    So in some segment of the 1800s economic growth was larger than deflationary pressures which might have been linked to increasing economic efficiency... Seems pretty narrow. Unfortunately I don't see how bitcoin would be likely to maintain a deflationary rate anywhere near balanced with economic growth if it were used as a primary currency considering its hard capped at 21 million BTC, and an unknown number of coins are pretty much permanently lost. I think it'd have an effect of making primary interest rates have to exceed the rate of Bitcoin's deflation which sounds like a death spiral to me.

ucaetano 8y ago

> Just the deflationary nature of a currency isn't enough to destabilize cycles. No need for cycles: a deflationary currency means that you're better off holding it than investing it. This is disastrous for the economy. > Compared to the Fed, which makes arbitrary (non-cyclical) adjustments to the "cost of money", Bitcoin's more predictable deflationary attributes might lead to more predictability in financial cycles. Quite the opposite. The money supply wouldn't adapt dynamically to the demand for money, leading to harsher crises.

logicchains 8y ago
>This is disastrous for the economy. This is FUD. The US experienced deflation through much of the 19th century, yet saw higher growth rates then than in the 20th century. For instance, from https://www.investopedia.com/ask/answers/040715/were-there-any-periods-major-deflation-us-history.asp https://www.investopedia.com/ask/answers/040715/were-there-a... (don't have time to find a more formal source): "The period between 1873 and 1879 saw prices drop by nearly 3% per year, yet real national product growth was almost 7% during the same time." And overall "the price level (the average of current prices across the entire spectrum of goods and services produced in the economy) was actually 50% higher in 1800 than it was in 1900." So clearly it's possible to have strong economic growth during deflationary times.
- ucaetano 8y ago
  You're confusing deflation with deflationary currency.
  - radiusvector 8y ago
    > a deflationary currency means that you're better off holding it than investing it. It is ridiculous to assume that any artificially designed deflationary digital asset will produce long term returns greater than an index like SPY, which is intrinsically tied to human productivity in the economy. An average, semi-rational investor will always have the incentive to lend to a credit worthy person/business/asset, regardless of how much artificial deflation you can induce in your asset.
    - ucaetano 8y ago
      It isn't returns. It is deflation. You're literally creating a broken system by design. Don't complain when it doesn't work.
- Glyptodon 8y ago
  So in some segment of the 1800s economic growth was larger than deflationary pressures which might have been linked to increasing economic efficiency... Seems pretty narrow. Unfortunately I don't see how bitcoin would be likely to maintain a deflationary rate anywhere near balanced with economic growth if it were used as a primary currency considering its hard capped at 21 million BTC, and an unknown number of coins are pretty much permanently lost. I think it'd have an effect of making primary interest rates have to exceed the rate of Bitcoin's deflation which sounds like a death spiral to me.