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The poor and lower middle class do not spend 100% of their money 100% of the time. But nearly 100% of any saved money a poor person has is in the form of raw ca

The poor and lower middle class do not spend 100% of their money 100% of the time. But nearly 100% of any saved money a poor person has is in the form of raw cash, or non-interest paying bank accounts. The rich can afford to move their money to more stable currencies and commodities in an inflationary environment. They are more likely to have insights and are way less likely to spend a large portion of their wealth year-to-year. I disagree that deflation discourages investment. Given a stable deflationary rate rational actors will look at the returns their fellow citizens are getting (from say a mutual fund, or even government bonds) and will conclude that their purchasing power can be furthered. Furthermore, the United States had a (quazi) gold standard for years, as did most of the world, and investment continued.

alenlpeacock 15y ago
Deflation removes some of the incentives for investment, but I agree -- not all of them. And in practice, to most rational actors a mild deflation is almost indistinguishable from a mild inflation. It's when either of those swing wildly that we have issues. Bitcoin increased in value 11x in the six months from Sep'10 to Feb'11. That would be a major problem if we were all using bitcoins instead of dollars.
- notahacker 15y ago
  It's not just the wild swings; it's the systematic tendency towards deflation [mild or otherwise] inherent in Bitcoin: a closed Bitcoin economy reaches zero deflation only where population and productivity growth is zero. Mild deflation is indistinguishable from mild inflation to a rational investor only where he expects said mild deflation to be temporary, offering him positive average returns on long term investments.