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Seems pretty silly to build in deflation into a currency. It incentivises putting your money in a mattress for 100 years.
by Roark66 14d ago
Seems pretty silly to build in deflation into a currency. It incentivises putting your money in a mattress for 100 years.
- PowerElectronix 14d agoI like the alternative even less, as it incentivises spending more than you would and taking on debt you don't really need.
- velcrovan 14d agoWell, countries have experienced moderate inflation and moderate deflation, ask the ones who lived through both which one they preferred.
- eru 14d agoModerate deflation is fine, it's good even. But only as long as nominal GDP stays stable. See the so called 'Long Depression' in the 19th century. Which was only a depression of the price level, everything else did well. For a more sectoral example, see how computer hardware used to get cheaper and cheaper all the time, but total spending on hardware went up.
- morning-coffee 14d agoThat is https://en.wikipedia.org/wiki/Jevons_paradox https://en.wikipedia.org/wiki/Jevons_paradox
- rerdavies 14d ago> taking on debt you don't really need. How does that work? When inflation goes to 18%, borrowing rates go to 23%.
- snapcaster 14d agoIt's not silly, it harnesses some of the mechanics behind ponzi schemes to encourage viral spread. Early entrants are incentivized to evangelize it to newer ones
- benenrjdnz 14d agoDeflation is a good thing, it rewards delayed gratification. Those evil Keynesians have convinced the world a little bit of inflation is good. It isn’t. Losing purchasing power on your money is a bug. Nothing wrong with putting money under a mattress for 100y if the value of money is not evaporating. For most of human history the money was stable. It’s the disasters of 20th century wars that eroded the value, and 21st century lack of monetary discipline that keeps driving it down now.
- SR2Z 14d ago> Deflation is a good thing, it rewards delayed gratification. "Delayed gratification" is also provided by investments producing returns. An economy with lots of investors will outperform one where people stuff their cash into their mattress, and deflation makes it very hard for potential investments to beat that strategy. > For most of human history the money was stable. [citation needed] The Spanish empire was driven to collapse by hyperinflation. Even in the US, there were financial collapses in the 19th and 18th century. Bank runs have been a thing for as long as banks have: https://en.wikipedia.org/wiki/Bank_run https://en.wikipedia.org/wiki/Bank_run Your premise is based on faulty assumptions. The existence of credit itself is what causes monetary instability, and without credit the world would look very different.
- pjc50 14d ago> The existence of credit itself is what causes monetary instability, and without credit the world would look very different. Indeed. Credit is money; ultimately anyone can expand the money supply with an IOU.
- benenrjdnz 14d agoMoney is destroyed when a loan is paid back. Private credit does not expand the monetary supply permanently. Only the state can increase the money supply.
- IAmBroom 14d ago
- FeepingCreature 14d agoI suspect it was a deliberate strategy to create scarcity, allowing the original creators to massively cash out. If you make an inflationary distributed currency, it may work better but it's a bit harder to get rich on it.
- eru 14d agoDuring much of the industrial revolution, gold also rose in real price. But people still did business in gold standard countries. (Hint: the gold might be under a mattress or in a vault, but you can still an almost arbitrary amount of gold denominated debts and loans and deposits.)
- chabska 14d agoThere is zero evidence that deflation has any effect on spending. At the micro level, the change in price is too small for every day purchases. Would you starve yourself for one day because the pizza will be one cent cheaper tomorrow? At the macro level, every interest rate will be adjusted based on the base inflation/deflation rate, so the net effect is zero. Banks will offer a higher profit rate for their savings account to entice people to deposit their money in the bank instead of their mattress.
- nickez 14d agoThe other option is to make everyone gamblers, either speculate on properties or stocks. Pick your poison.
- andrewla 14d agoThe idea that deflation is built into Bitcoin is exactly equivalent to saying "the real value of bitcoin will always increase" which is an absurd premise. Bitcoin is deflationary only in a hybrid Keynsian - Austrian worldview. In the Keynsian worldview it cannot by definition be deflationary because that would mean that the value is always increasing which is just kind of a mad thing to believe. In the Austrian worldview it is not deflationary because the amount of Bitcoin is always increasing by design. Only if you accept the Austrian framing of "deflation is when you decrease the money supply" together with the Keynsian framing of "money supply is measured in real terms not nominal" do you arrive at the idea that it could be deflationary, and there are exactly zero economists who believe both of these things.
- osigurdson 13d agoBitcoin is more like an asset than a currency. Unless a country makes Bitcoin its only currency it doesn't really matter that it is deflationary.