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InclinedPlane, your anti-deflationary arguments can be refuted in 4 different ways: 1. A deflationary currency strongly encourages businesses to maximize reven
by mrb 14y ago
InclinedPlane, your anti-deflationary arguments can be refuted in 4 different ways:
1. A deflationary currency strongly encourages businesses to maximize revenues today instead of tomorrow, because they know they can get more units of the deflationary currency today rather than tomorrow. This incentive does not exist with inflationary currencies.
2. If you had 100% confidence in Bitcoin being deflationary, you would invest in bitcoins. But the fact you do not (I presume) shows a very important point: you, like many, doubt Bitcoin will remain deflationary on the long term (eg. it might crash to zero). This uncertainty is why, despite being in theory deflationary, Bitcoin will continue to see a growing economy. People will continue to invest and spend bitcoins, because the future of Bitcoin, like the future of any currency (inflationary or deflationary), is fundamentally uncertain.
3. There is an often-cited counter-example to the argument that "people will not spend if they know prices will decline in the future" (as prices will in a deflationary currency): the electronics industry. Laptops, smartphones, servers, etc: prices are always decreasing. Yet this industry is very successful. Buyers are not afraid to spend money today, even if they know they can get the product for less tomorrow. This is because prices decreasing over time stimulate spending.
4. The traditional arguments against a deflationary currency only work within a self-contained economy anyway. Bitcoin currently exist as a side currency next to all other (USD, EUR, etc). People will still want to invest these currencies, and the Bitcoin economy being tightly coupled to
others will naturally benefit from these investments. That's why for example we are seeing a bunch of Bitcoin startups popping up: Coinbase, BitPay, BitSpend, BitcoinStore, CoinLab, etc
Edit: downvoting me, seriously? I would like to know why.
- InclinedPlane 14y ago1. Deflationary currency encourages extractive businesses, such as property ownership and renting. Inflationary currency encourages people to re-invest their profits in their business, and to grow their business as much as possible. In other words, with a deflationary currency people operating a business are encouraged to keep value in money mostly, with an inflationary currency people are encouraged to keep value in the business. It seems pretty obvious which of these encourage economic growth more. 2. I'm making an argument about deflationary vs. inflationary currencies in the abstract, Bitcoin itself is too complicated to fit into that argument except in so far as people arguing that deflationary behavior is a benefit to bitcoin as a currency. It certainly could encourage purchasing of bitcoins but I'm not convinced it encourages use of bitcoins as currency. 3. This is not a counter-example at all, because goods are not currency, they have an innate value. The cost of waiting for years to purchase some good that you desire (such as a computer or a cellphone) comes at a cost of spending years of your life without the benefit of being able to use those goods. And that cost may be significantly greater than the value of saving money. 4. Bitcoin as an investment only makes sense as a pyramid scheme, in order for it to have value it must be used as a currency. Regardless of the interaction at the edges that means that it must have some core use as a currency, which is currently not the majority use, and that's a bit troubling. As to downvoting, HN wouldn't let me downvote your reply even if I wanted to so I can't help you there. I suspect someone disagrees strongly with what you've written but doesn't want to take the time to write a rebuttal.
- deleted 14y ago[deleted]