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Investment means (among many things) taking risks for various reasons, which includes creating an income-flow. This reasoning remains valid regardless of curren

Investment means (among many things) taking risks for various reasons, which includes creating an income-flow. This reasoning remains valid regardless of currency's nature. Also, the same can be said about saving. Why would one save money in an inflationary currency if the money will loose value? I agree that a lot of people out there don't save, yet there are people who do. How come?

sentenza 13y ago
A currency that on average increases its value over time means creating an income flow without any risk. So all other investment options have to be that much more attractive to offset their attached risk. There will always be some investments that are worth it and there will always be some reasons to save instead of spend, but the interesting things happen in between these two extremes. The inflation-to-deflation point is special because once there is deflation, it is not sufficient any more for a business venture to make money to be attractive. If the currency under consideration has wide spread adoption, deflation means a system-wide slowdown in investment (_averaged_).
- dpatru 13y ago
  > If the currency under consideration has wide spread adoption, deflation means a system-wide slowdown in investment (_averaged_). The computer industry is deflationary. All you have to do to be able to buy more computing power is wait. Yet, somehow, investment in computers keeps happening. Just because money is increasing in value, doesn't mean that demand for money goes away. Just the opposite in fact. A money that increases in value is more valuable and thus more in demand. Since the only (legitimate) way to get money is to earn it by labor or investment, it seems that either labor or investment or both will increase as money becomes more valuable.
- Zigurd 13y ago
  Gold has a much higher total value than bitcoin, and already has the potential to be a massively deflationary currency substitute. It is very easy to buy gold. many people have no idea how to buy bitcoin. Clearly, gold didn't suck all the value out of paper money. If the "bad" scenarios ascribed to bitcoin actually occur, they won't be caused by bitcoin itself. They will be caused by mismanagement of conventional currencies.

sentenza 13y ago

A currency that on average increases its value over time means creating an income flow without any risk. So all other investment options have to be that much more attractive to offset their attached risk. There will always be some investments that are worth it and there will always be some reasons to save instead of spend, but the interesting things happen in between these two extremes. The inflation-to-deflation point is special because once there is deflation, it is not sufficient any more for a business venture to make money to be attractive. If the currency under consideration has wide spread adoption, deflation means a system-wide slowdown in investment (_averaged_).

dpatru 13y ago
> If the currency under consideration has wide spread adoption, deflation means a system-wide slowdown in investment (_averaged_). The computer industry is deflationary. All you have to do to be able to buy more computing power is wait. Yet, somehow, investment in computers keeps happening. Just because money is increasing in value, doesn't mean that demand for money goes away. Just the opposite in fact. A money that increases in value is more valuable and thus more in demand. Since the only (legitimate) way to get money is to earn it by labor or investment, it seems that either labor or investment or both will increase as money becomes more valuable.
Zigurd 13y ago
Gold has a much higher total value than bitcoin, and already has the potential to be a massively deflationary currency substitute. It is very easy to buy gold. many people have no idea how to buy bitcoin. Clearly, gold didn't suck all the value out of paper money. If the "bad" scenarios ascribed to bitcoin actually occur, they won't be caused by bitcoin itself. They will be caused by mismanagement of conventional currencies.