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It's deflationary when viewed as money for the same reason that gold is.

lottin 4y ago
Again, there's no such thing as a deflationary currency. Under the gold standard, countries experienced periods of inflation and periods of deflation.
- alangibson 4y ago
  Check out the linked pdf by Bernanke from https://isps.yale.edu/news/blog/2014/06/the-perils-of-bitcoin-as-currency https://isps.yale.edu/news/blog/2014/06/the-perils-of-bitcoi... > The link between deflation and adherence to the gold standard, shown in table 2.2, seems quite clear. As noted by Choudhri and Kochin (1980), Spain's abstention from the gold standard insulated that country from the gen- eral deflation; New Zealand and Australia, presumably because they retained links to sterling despite early abandonment of the strict gold standard, did however experience some deflation. Among countries on the gold standard as of 1931, there is a rather uniform experience of about a 13% deflation in both 1930 and 1931. But after 1931 there is a sharp divergence between those countries on and those off the gold standard. Price levels in countries off the gold standard have stabilized by 1933 (with one or two exceptions), and these countries experience mild inflations in 1934-36. In contrast, the gold standard countries continue to deflate, although at a slower rate, until the gold stan- dard's dissolution in 1936.
  - lottin 4y ago
    Bernanke is talking about the deflationary period that started with the Great Depression in 1929. He does describe a "potential deflationary bias" of the gold standard during the interwar period (which was different from the gold standard that existed before 1914) that arose as a result of the sterilisation policies that some countries adopted: > In theory, under the "rules of the game", central banks of countries experiencing gold inflows were supposed to assist the price-spice flow mechanism by expanding domestic money supplies and inflating, while deficit countries were supposed to reduce money supply and deflate. In practice, [...] no sanction prevented surplus countries from sterilizing gold inflows and accumulating reserves. In other words, under the gold standard, surplus countries were expected to experience inflation, while deficit countries were supposed to experience deflation. Some surplus countries (e.g. France) conducted policies that prevented this mechanism from taking place by not letting the money supply grow with gold inflows. It was these policies, not the gold standard itself, what created a deflationary bias.

Again, there's no such thing as a deflationary currency. Under the gold standard, countries experienced periods of inflation and periods of deflation.

alangibson 4y ago
Check out the linked pdf by Bernanke from https://isps.yale.edu/news/blog/2014/06/the-perils-of-bitcoin-as-currency https://isps.yale.edu/news/blog/2014/06/the-perils-of-bitcoi... > The link between deflation and adherence to the gold standard, shown in table 2.2, seems quite clear. As noted by Choudhri and Kochin (1980), Spain's abstention from the gold standard insulated that country from the gen- eral deflation; New Zealand and Australia, presumably because they retained links to sterling despite early abandonment of the strict gold standard, did however experience some deflation. Among countries on the gold standard as of 1931, there is a rather uniform experience of about a 13% deflation in both 1930 and 1931. But after 1931 there is a sharp divergence between those countries on and those off the gold standard. Price levels in countries off the gold standard have stabilized by 1933 (with one or two exceptions), and these countries experience mild inflations in 1934-36. In contrast, the gold standard countries continue to deflate, although at a slower rate, until the gold stan- dard's dissolution in 1936.
- lottin 4y ago
  Bernanke is talking about the deflationary period that started with the Great Depression in 1929. He does describe a "potential deflationary bias" of the gold standard during the interwar period (which was different from the gold standard that existed before 1914) that arose as a result of the sterilisation policies that some countries adopted: > In theory, under the "rules of the game", central banks of countries experiencing gold inflows were supposed to assist the price-spice flow mechanism by expanding domestic money supplies and inflating, while deficit countries were supposed to reduce money supply and deflate. In practice, [...] no sanction prevented surplus countries from sterilizing gold inflows and accumulating reserves. In other words, under the gold standard, surplus countries were expected to experience inflation, while deficit countries were supposed to experience deflation. Some surplus countries (e.g. France) conducted policies that prevented this mechanism from taking place by not letting the money supply grow with gold inflows. It was these policies, not the gold standard itself, what created a deflationary bias.