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Inflation is considered a bad thing however, it doesn't necessarily mean that it’s a bad thing - if it's anticipated or unanticipated and it’s the sign that an

Inflation is considered a bad thing however, it doesn't necessarily mean that it’s a bad thing - if it's anticipated or unanticipated and it’s the sign that an economy is growing (although too little/much inflation can cause issues). What I'm arguing about Bitcoin is a potential liquidity trap because these new injections into the market may fail to stimulate economic growth (especially as Bitcoins can only add 25 new Bitcoins to the market every 10 minutes which is being halved every 4 years from 2017). I believe that, there is potential for the Bitcoin economy to run into the problem of a limited money supply & the Bitcoin-hoarding because; there will not be enough currency. Since a long-run inelastic and fixed supply currency is not useful for a real world economy, the result will be a recession and due to the limited money supply it will evolve into a depression. This is the opposite of what happens with fiat currencies as I highlighted with the American Recovery and Reinvestment Act of 2009[1] government spending and lending can have a positive impact on the economy in particular through kick-starting the multiplier effect. [1] http://en.wikipedia.org/wiki/American_Recovery_and_Reinvestment_Act_of_2009 http://en.wikipedia.org/wiki/American_Recovery_and_Reinvestm...

scotty79 14y ago
Inflation is just sign that the supply of money printed by government and blown up by banks is higher than actual demand for the means of exchange (which is probably correlated with growth of economy). Inflation isn't very bad if it's predictable. I can be made sort of predictable by hand-managing the supply to match the actual growth of economy but the process is very fuzzy. I'm not sure if inflation is good though. I think that the fact that you have to give your money away to the bank just to keep your saving from deteriorating is horrible. Deflation is sort of bad because people start to save money and reduce inessential purchases. They also have higher standard for considering investment to be good. I think that economy build on currency so solid as bitcoins will be somewhat different than what we have now. I think it will be much less volatile than current situation and that it will much better reflect the development of humanity.
dragonwriter 14y ago
> This is the opposite of what happens with fiat currencies as I highlighted with the American Recovery and Reinvestment Act of 2009[1] government spending and lending can have a positive impact on the economy in particular through kick-starting the multiplier effect. Fiscal stimulus like ARRA isn't impossible in a Bitcoin economy. Monetary stimulus such as that practiced by the Fed (QE, QE2) might be impossible in a pure Bitcoin economy, but fiscal and monetary stimulus aren't the same thing. (Actually, I think that monetary stimulus is possible in a Bitcoin economy via a sufficient subset of the network reaching consensus on evolving the protocol. Sure, the entity making the decision would be a different coalition of bankers than those running an existing government central bank, but it wouldn't be all that different fundamentally, still filtered by wealth and involvement in the financial system, but even less accountable than government central bankers are now. But much of the premise on which Bitcoin is sold is that such a consensus to alter the money supply would never actually occur.)

scotty79 14y ago

Inflation is just sign that the supply of money printed by government and blown up by banks is higher than actual demand for the means of exchange (which is probably correlated with growth of economy). Inflation isn't very bad if it's predictable. I can be made sort of predictable by hand-managing the supply to match the actual growth of economy but the process is very fuzzy. I'm not sure if inflation is good though. I think that the fact that you have to give your money away to the bank just to keep your saving from deteriorating is horrible. Deflation is sort of bad because people start to save money and reduce inessential purchases. They also have higher standard for considering investment to be good. I think that economy build on currency so solid as bitcoins will be somewhat different than what we have now. I think it will be much less volatile than current situation and that it will much better reflect the development of humanity.

dragonwriter 14y ago

> This is the opposite of what happens with fiat currencies as I highlighted with the American Recovery and Reinvestment Act of 2009[1] government spending and lending can have a positive impact on the economy in particular through kick-starting the multiplier effect. Fiscal stimulus like ARRA isn't impossible in a Bitcoin economy. Monetary stimulus such as that practiced by the Fed (QE, QE2) might be impossible in a pure Bitcoin economy, but fiscal and monetary stimulus aren't the same thing. (Actually, I think that monetary stimulus is possible in a Bitcoin economy via a sufficient subset of the network reaching consensus on evolving the protocol. Sure, the entity making the decision would be a different coalition of bankers than those running an existing government central bank, but it wouldn't be all that different fundamentally, still filtered by wealth and involvement in the financial system, but even less accountable than government central bankers are now. But much of the premise on which Bitcoin is sold is that such a consensus to alter the money supply would never actually occur.)