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The flip side is deflation, though. Which isn’t exactly pretty. If the value of my fiat money is increasing, then I will hold on to it, which is good for me. I
by sseagull 5y ago
The flip side is deflation, though. Which isn’t exactly pretty.
If the value of my fiat money is increasing, then I will hold on to it, which is good for me. If everyone does that, then the economy grinds to a halt.
The stock/bond market is, although not always efficient, at least somewhat enabling of economic activity, whereas just holding your currency (including bitcoin) is not.
- coralreef 5y agoRight, it doesn't necessarily grind the economy to a halt; it simply forces investments to be worthwhile, because now they have to generate enough return to satisfy a higher interest rate. If money is not cheap, speculation is less rampant, but also risk taking is more expensive; this is a forcing mechanism for efficiency. The interest rate (cost of money) simply returns to a supply/demand market equilibrium. The economy possibly smoothens out, rather than giving us artificial boom and bust cycles thanks to inefficient central bank policies.