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> If your currency is worth X today and more than X tomorrow you will see less economic activity than otherwise. This is something that's confused me for a whi
by clarkm 13y ago
> If your currency is worth X today and more than X tomorrow you will see less economic activity than otherwise.
This is something that's confused me for a while. If the value of your currency is going up, doesn't that mean your purchasing power is going up too? Which means you feel richer because the relative prices of goods are going down.
So your argument seems to be saying: falling prices depress economic activity. Which is true in some cases, but isn't true as a general rule. I think it's more of a threshold effect.
No one ever says "I'm never going to buy an iPhone because the price keeps going down."
They say "Once the price drops to $X, I'll buy one."
- Steko 13y ago"Once the price drops to $X, I'll buy one." This is a naive view of how supply works. If fewer people are buying today this lowers the demand curve. This decreases the amount of the good that will be produced in the first place. You don't get a chance to buy those lost phones later because they never got made.
- clarkm 13y agoYes, but the standard supply and demand model makes assumptions about the nature of money markets that I don't think apply in this case, which is why I'm confused. Bitcoin has some unique features (e.g. non-repudiable "teleporting") that aren't normally considered -- Econ 101 assumptions prove too little. However, this doesn't take a deflationary death spiral off the table. It could easily be Bitcoin's downfall, I just think other things are more likely.
- dnautics 13y ago...And this whole time I thought supply-side conservative economics was all about propping up and subsidizing the holders of capital.