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Because people spend more money if they fear it becomes worth less?

• von_lohengramm 5y ago
  Exactly. If holding onto money made it go up in value, then why would you ever spend it? If you had BTC in 2010 and knew what would happen to its value over the years, would you still buy a pizza with it?
  • hammock 5y ago
    Yes, because you get hungry. You are using a common fallacy.
    • von_lohengramm 5y ago
      If I was really that hungry, then maybe I'd walk to the grocery store & get some store-brand pasta instead of getting pizza delivered. It's not like spending money is an absolute thing where you spend all or nothing. If I know it's worth my while to save, then I'm not going to spend as much as I would have if I knew that my savings was becoming worthless.
• aidenn0 5y ago
  Not just spend, but invest. Consider the reverse situation (deflation): If you just hide your money under your mattress it is worth 2% more per year. If you are primarily concerned with protecting your wealth, why would you invest in a company that might lose your money? Sure you'll invest some just to diversify and attempt to see larger real returns, but most of your money you can just hold as cash. With modest inflation, you lose wealth if it is not invested, so people will invest in an attempt to preserve their wealth (with real returns being a bonus). With extreme inflation, the currency is no longer stable enough to be used as a store of wealth, so you will try to get rid of money as quickly as possible (wile paying off debts denominated in that currency as slowly as possible).