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Only for debt holders denominated in that currency.

Mikeb85 7y ago
Not just debt holders. Deflation encourages people to hoard cash, so economic growth slows, wages stay stagnant, investment doesn't happen, and there's far less opportunity for social mobility. Inflation reduces the value of money over time which encourages investment and economic growth. It also punishes those who hoard cash and rewards anyone who engages in economic activity like say, working or starting a business. There's a reason that governments support inflationary policies.
- api 7y ago
  You can see this in cryptocurrency. My hypothesis for a long time has been that the 2017 Bitcoin price blow off was actually a hyper-deflationary collapse. Before that peak Bitcoin was starting to see adoption. The peak and its aftermath coincided with the abandonment of Bitcoin by adopters like Coinbase and Steam. Now it's pretty much only for speculation. As it got adoption its deflationary nature really took off, igniting a speculative bubble that made it useless for actual commerce. Bitcoin is unbelievably deflationary, much more so than gold. You have a hard limit combined with breakage due to lost keys and hoarding which causes more deflation which causes more hoarding.
  - hndamien 7y ago
    This is incorrect. The people (god forbid "saving money") are getting a return on the currency appreciation, and are encouraged to save. The rate of return (risk adjusted) they are getting sets a base for what an investment would need to yield before a rational actor would exchange it for investment purposes. As the total "market cap" grows the % yield of capital gain declines, making investment more enticing and the amount of capital available for investing high. So savers both help the growth of the economy, and benefit from its growth (but at a slower rate than shrewd investors). The less shrewd get weeded out.
    - api 7y ago
      The supply of currency is fixed, so as its value grows the rate of return required to make an investment attractive increases. Eventually you only have HODLers. If Bitcoin were the only currency people would be forced to spend it on essentials, but that's it. A less extreme version of this happened with gold, but gold is far less deflationary than Bitcoin. Bitcoin is absurdly deflationary. I don't think it was intended to be a Ponzi but there is no other outcome. Of course too much inflation is also very bad. The ideal in most cases is a very slight rate of inflation. There's a reason everyone abandoned hard currency. No country with hard currency has been able to compete. Flexible currency allows real world economic growth to be prioritized over monetary religion. Wealth is measured in goods, services, knowledge, health, etc. not bank balances. Of course the Fed system does have huge problems. It sucks, but it sucks less than most alternatives. I'll say stick with it until an actually better alternative is found. My favorite quote on central banks is from a colleague with a military background: the Fed is a weapon and abolishing it would be akin to unilateral disarmament. Countries with more flexible currencies like China would run right over us. He also pointed out that loose money (Reaganomics) is how we won the cold war. In the end it was not nukes or Star Wars but high deficits.
      - hndamien 7y ago
        “All holders” is not a reflection of reality in how markets work. Everybody has their price. Utility of the means of exchange means that you have market participants passing through. It is just economic BS that you would ever get all holds. The price would either go North or South and would change some minds. Or life, and the time value of money would kick in. Gold’s problems had more to do with wars (WW1, WWII, Vietnam) than how good it was at being hard money. Fed is a weapon, and your wealth is it’s ammo.

Not just debt holders. Deflation encourages people to hoard cash, so economic growth slows, wages stay stagnant, investment doesn't happen, and there's far less opportunity for social mobility. Inflation reduces the value of money over time which encourages investment and economic growth. It also punishes those who hoard cash and rewards anyone who engages in economic activity like say, working or starting a business. There's a reason that governments support inflationary policies.

api 7y ago
You can see this in cryptocurrency. My hypothesis for a long time has been that the 2017 Bitcoin price blow off was actually a hyper-deflationary collapse. Before that peak Bitcoin was starting to see adoption. The peak and its aftermath coincided with the abandonment of Bitcoin by adopters like Coinbase and Steam. Now it's pretty much only for speculation. As it got adoption its deflationary nature really took off, igniting a speculative bubble that made it useless for actual commerce. Bitcoin is unbelievably deflationary, much more so than gold. You have a hard limit combined with breakage due to lost keys and hoarding which causes more deflation which causes more hoarding.
- hndamien 7y ago
  This is incorrect. The people (god forbid "saving money") are getting a return on the currency appreciation, and are encouraged to save. The rate of return (risk adjusted) they are getting sets a base for what an investment would need to yield before a rational actor would exchange it for investment purposes. As the total "market cap" grows the % yield of capital gain declines, making investment more enticing and the amount of capital available for investing high. So savers both help the growth of the economy, and benefit from its growth (but at a slower rate than shrewd investors). The less shrewd get weeded out.
  - api 7y ago
    The supply of currency is fixed, so as its value grows the rate of return required to make an investment attractive increases. Eventually you only have HODLers. If Bitcoin were the only currency people would be forced to spend it on essentials, but that's it. A less extreme version of this happened with gold, but gold is far less deflationary than Bitcoin. Bitcoin is absurdly deflationary. I don't think it was intended to be a Ponzi but there is no other outcome. Of course too much inflation is also very bad. The ideal in most cases is a very slight rate of inflation. There's a reason everyone abandoned hard currency. No country with hard currency has been able to compete. Flexible currency allows real world economic growth to be prioritized over monetary religion. Wealth is measured in goods, services, knowledge, health, etc. not bank balances. Of course the Fed system does have huge problems. It sucks, but it sucks less than most alternatives. I'll say stick with it until an actually better alternative is found. My favorite quote on central banks is from a colleague with a military background: the Fed is a weapon and abolishing it would be akin to unilateral disarmament. Countries with more flexible currencies like China would run right over us. He also pointed out that loose money (Reaganomics) is how we won the cold war. In the end it was not nukes or Star Wars but high deficits.
    - hndamien 7y ago
      “All holders” is not a reflection of reality in how markets work. Everybody has their price. Utility of the means of exchange means that you have market participants passing through. It is just economic BS that you would ever get all holds. The price would either go North or South and would change some minds. Or life, and the time value of money would kick in. Gold’s problems had more to do with wars (WW1, WWII, Vietnam) than how good it was at being hard money. Fed is a weapon, and your wealth is it’s ammo.