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However, with Bitcoin the percentage claim on the total economy is constant. So, in a sense, the real price of all consumer goods also remains constant. In this
by Bootvis 13y ago
However, with Bitcoin the percentage claim on the total economy is constant. So, in a sense, the real price of all consumer goods also remains constant. In this view there is no inflation or deflation and inflation indeed is a purely monetary phenomenon.
What is correct view? I don't know, the only thing I remember about the monetary economics class I took, is that the professor and I didn't agree. About what I don't know. I do know that these are interesting times for him and colleagues. When/if Bitcoin stabilizes they can study the effect of monetary policy, the PPP, etc. I almost want to become one.
- maaku 13y ago> So, in a sense, the real price of all consumer goods also remains constant. No, you're ignoring GDP growth. As the bitcoin economy grows (more goods and services available), the share of the pie 1 bitcoin represents correspondingly grows. This results in decreasing prices, i.e. price deflation.
- scotty79 13y agoThat's right. Government through banks has to issue new money just to keep up and keep prices of consumer goods fairly constant and prevent deflation which is considered bad because last few times people tended to stuff cash in mattresses then and there was not enough physical cash left on the market to facilitate the trades. Also deflation increases tendency of consumers to save what they earned and noone in America wants that.