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The reason the dollar is a currency is because of the existence of a force (in this case, the Fed) that can tamp down speculation and deflation. Cryptocurrency

The reason the dollar is a currency is because of the existence of a force (in this case, the Fed) that can tamp down speculation and deflation. Cryptocurrency doesn't have this, and that is its central failing.

HPsquared 6y ago
What's inherently bad about deflation? It's happened routinely throughout most of history until recently. Speculation is a good thing, it's a form of entrepreneurship. Example of historic deflation: https://en.m.wikipedia.org/wiki/The_Great_Deflation https://en.m.wikipedia.org/wiki/The_Great_Deflation
- reducesuffering 6y ago
  Deflation causes a positive feedback loop of reducing trade. If it's better to hoard currency so you can buy 10% more things next year, everyone starts hoarding currency and reducing trade, leading to suppliers dropping prices to encourage purchases, leading to further deflation, and so on. Trade grinds to a halt as everyone holds currency in anticipation of buying more later. Stake: 0.05 BTC, 1.2 ETH
  - deleted 6y ago
    [deleted]
  - gher-shyu3i 6y ago
    It will stabilize at some point. We've been trading in deflationary currencies (gold, silver) for most of human history.
  - tom_mellior 6y ago
    > If it's better to hoard currency so you can buy 10% more things next year, everyone starts hoarding currency But they don't. Not if it's things they need now, like food, or want now: electronics have been deflationary for the last 70 years or so -- when you bought the device you typed your comment on, you knew full well that a year later you would get a better one for cheaper, and yet you didn't hoard your currency. Trade in electronics doesn't seem to be grinding to a halt. Useless crap people don't actually need? Sure, that might suffer from deflation. But ideally the world economy wouldn't be founded on useless crap that people don't actually need. Stake: Held some Bitcoin ca. 2011-2021, just enough to buy a nice (not fancy) apartment slightly below market price. Divested now. Miniscule amounts of Monero and Tezos, basically written off.
    - Weebs 6y ago
      I would even argue that it's a good thing in our current environment that we don't facilitate trade for things that aren't needed. Much of the arguments of deflation seem to rely on an economy that has maintained high and ideally growing output, while we live in a world of resources being depleted due to inefficient use and failure to reign externalities.
- tim333 6y ago
  The example in that link >prices of goods, materials and labor decreased, although at a low rate of less than 2% annually you can deal with. Crypto style 50% drop in months type deflation would make debts in that currency unpayable.

HPsquared 6y ago

What's inherently bad about deflation? It's happened routinely throughout most of history until recently. Speculation is a good thing, it's a form of entrepreneurship. Example of historic deflation: https://en.m.wikipedia.org/wiki/The_Great_Deflation https://en.m.wikipedia.org/wiki/The_Great_Deflation

reducesuffering 6y ago
Deflation causes a positive feedback loop of reducing trade. If it's better to hoard currency so you can buy 10% more things next year, everyone starts hoarding currency and reducing trade, leading to suppliers dropping prices to encourage purchases, leading to further deflation, and so on. Trade grinds to a halt as everyone holds currency in anticipation of buying more later. Stake: 0.05 BTC, 1.2 ETH
- deleted 6y ago
  [deleted]
- gher-shyu3i 6y ago
  It will stabilize at some point. We've been trading in deflationary currencies (gold, silver) for most of human history.
- tom_mellior 6y ago
  > If it's better to hoard currency so you can buy 10% more things next year, everyone starts hoarding currency But they don't. Not if it's things they need now, like food, or want now: electronics have been deflationary for the last 70 years or so -- when you bought the device you typed your comment on, you knew full well that a year later you would get a better one for cheaper, and yet you didn't hoard your currency. Trade in electronics doesn't seem to be grinding to a halt. Useless crap people don't actually need? Sure, that might suffer from deflation. But ideally the world economy wouldn't be founded on useless crap that people don't actually need. Stake: Held some Bitcoin ca. 2011-2021, just enough to buy a nice (not fancy) apartment slightly below market price. Divested now. Miniscule amounts of Monero and Tezos, basically written off.
  - Weebs 6y ago
    I would even argue that it's a good thing in our current environment that we don't facilitate trade for things that aren't needed. Much of the arguments of deflation seem to rely on an economy that has maintained high and ideally growing output, while we live in a world of resources being depleted due to inefficient use and failure to reign externalities.
tim333 6y ago
The example in that link >prices of goods, materials and labor decreased, although at a low rate of less than 2% annually you can deal with. Crypto style 50% drop in months type deflation would make debts in that currency unpayable.