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First you have missed the all things equal caveat, second people hoarding cash will not lead to a deflationary spiral, who give that idea? It will lead to a ne
by vrotaru 14y ago
First you have missed the all things equal caveat, second people hoarding cash will not lead to a deflationary spiral, who give that idea?
It will lead to a new equilibrium. The greater the cash balances and lower the prices the greater the temptation to spend, and to break the spiral.
- Nursie 14y agoWhy spend when you can buy tomorrow even cheaper? A deflationary currency is not a good idea.
- vrotaru 14y agoa) Time preference (I guess you have a phone, even if..) b) Marginal utility of every extra unit of money decreases when a person holds more of them. Couple that with falling prices and you have the killer of deflationary spiral. A nice theory, though. The deflationary spiral one. But just a theory. Never happened.
- Nursie 14y agoa) That's a downward pressure on sales any way you paint it. b) Obviously this is why the well-off never want any more. You have no concept of history or the problems associated with a gold standard do you?
- vrotaru 14y agoa) Now, that's a different assertion from the original one. (People will stop buying stuff). I'm glad we agree on this one. Ain't gonna happen. b) Are saying the well-off never squander money on stupid things? Is the last sentence some kind of "ad hominem"? Because, it would be a pity.
- Nursie 14y agoa) No, it's not different at all. If money is worth more tomorrow than today, that exerts negative pressure on purchases, suppressing the retail economy. People will still buy things, just less of them. What's so hard to understand? b) I really have no idea where you're trying to take b. "Is the last sentence some kind of "ad hominem"? Because, it would be a pity." An ad hominem would be if I said your arguments were invalid because of who you are, that's what it means. I was making an observation about your ignorance based on the content of your arguments, entirely different.
- scotty79 14y ago> You have no concept of history or the problems associated with a gold standard do you? I think that's not applicable to bitcoin since it's as comfortable to pay with microbitcoins as with bitcoins.
- Nursie 14y agoSubdivision of BTC is irrelevant to talk about deflation. Talking about this (as the BTC wiki does) is just handwaving and does nothing to address the economics.
- scotty79 14y agoI thought one of the problems with deflation was that people used to hoard cash and there was not enough money availale to facilitate normal daily trades. Such thing won't happen with bitcoin.
- redblacktree 14y agoUh, what? Were you asleep in History class? "but then a deflationary spiral started in 1931." https://en.wikipedia.org/wiki/Great_Depression https://en.wikipedia.org/wiki/Great_Depression
- vrotaru 14y agoWell, I disagree, with the interpretation of events known as Great Depression as a deflationary spiral. Yes, there was a deflationary event. As there were many before, and the last one before in 1920-1921, when the wholesale prices fall by a whopping 40%. But a deflationary event does not make a deflationary spiral. There were also a lot silly activism both from the part of the Hoover and Roosevelt. The later speaking, beside other things about outright nationalization, and driving thus the busyness investment into ground.. So a lot happened than which make the Great Depression Great but deflationary spiral is not THE explanation.
- tbrownaw 14y agoThis is why I don't have a computer, or phone, or any other electronic gadgets. The prices are falling so quickly that every time I think about getting one, I decide to put it off for a few months so I can get a better one instead. (And before you ask, I'm posting this using pen and paper with IP-over-carrier-pigeon.)
- Nursie 14y agoOh for god's sake. Is the entire world monochrome to you? It doesn't have to stop all purchases to have a negative economic effect.