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I am sorry - this is something I do not understand. Where is the problem in deflation? You can always pay in fractions of a bitcoins, e.g. nanobitcoins, picobit
by wuschel 13y ago
I am sorry - this is something I do not understand. Where is the problem in deflation? You can always pay in fractions of a bitcoins, e.g. nanobitcoins, picobitcoins, etc.
There is not really an agreement in the ivory towers that a limited amount of currency is a bad thing per se.
Could someone explain this to me?
- nhaehnle 13y agoI don't know which ivory towers you frequent and what you mean by "limited", but the idea that the money supply should be flexible has been pretty well established after some failed experiments in the 1970s and 80s. As for the inflation / deflation thing: I'm pretty sure we all agree that the faster the relative prices of things can change to reflect changes in the underlying reality, the better. A priori, it seems that these relative adjustments should be independent from the average adjustment and hence the overall price level. However, economic actors tend to resist a nominal decrease of income much more than a real decrease of income. You may not think that this is rational, but you have to work with the reality that you have. This means that inflation is beneficial, because it allows real decreases of income without nominal decreases of income, and this means that real income can decrease more easily, which is what you need for relative prices to adjust reasonably quickly.