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> I am not about to take out a loan in a hard currency when perfectly good inflationary currencies are easily at hand. Assuming the interest rates are the same

> I am not about to take out a loan in a hard currency when perfectly good inflationary currencies are easily at hand. Assuming the interest rates are the same, I'd agree. Would they be?

slurry 13y ago
> Assuming the interest rates are the same, I'd agree. Would they be? I doubt they'd be the same in either nominal or real terms. But that's a side issue. You could already do what you're talking about with gold. A bank could offer gold savings accounts that pay interest on gold loans. They don't do it. Borrowers are deflation-averse and no one wants to deal with the exchange rate fluctuations. BTC has some legit uses (like buying unjustly banned consciousness-expanding products over the internets) but the built-in deflationary death spiral in its design pretty much ensures that it will never be a serious full-spectrum parallel currency, much less a replacement for the dollar and euro.
- natrius 13y ago
  When gold was the primary currency, there were interest-bearing gold deposits. When paper currency was pegged to gold with full convertibility, interest-bearing currency deposits were effectively interest-bearing gold deposits. When Bitcoin is the primary currency, there will be interest-bearing Bitcoin deposits.
- mike_hearn 13y ago
  It isn't designed to deflate. That's a common misconception: http://bitcoin.org/en/faq#wont-bitcoin-fall-in-a-deflationary-spiral http://bitcoin.org/en/faq#wont-bitcoin-fall-in-a-deflationar...
icambron 13y ago
This is an important point, because interest rates would exactly make up for the undesirability of the inflationary currency; i.e. the inflation risk would just be "baked into" a lower interest rate for the dollar-denominated loan. Unless you had a substantially different inflation risk tolerance than society as a whole, you'd be neutral about what currency to make the loan in. Same goes for the borrower and deflation risk. Edit: I guess if the deflation risk tolerance for the borrower and the inflation risk tolerance for the bank are asymmetrical, then you would just end up with being able to loan one or the other. I suspect, per Slurry's point, that it's BTC that loses here.

> I am not about to take out a loan in a hard currency when perfectly good inflationary currencies are easily at hand. Assuming the interest rates are the same, I'd agree. Would they be?

slurry 13y ago

> Assuming the interest rates are the same, I'd agree. Would they be? I doubt they'd be the same in either nominal or real terms. But that's a side issue. You could already do what you're talking about with gold. A bank could offer gold savings accounts that pay interest on gold loans. They don't do it. Borrowers are deflation-averse and no one wants to deal with the exchange rate fluctuations. BTC has some legit uses (like buying unjustly banned consciousness-expanding products over the internets) but the built-in deflationary death spiral in its design pretty much ensures that it will never be a serious full-spectrum parallel currency, much less a replacement for the dollar and euro.

natrius 13y ago
When gold was the primary currency, there were interest-bearing gold deposits. When paper currency was pegged to gold with full convertibility, interest-bearing currency deposits were effectively interest-bearing gold deposits. When Bitcoin is the primary currency, there will be interest-bearing Bitcoin deposits.
mike_hearn 13y ago
It isn't designed to deflate. That's a common misconception: http://bitcoin.org/en/faq#wont-bitcoin-fall-in-a-deflationary-spiral http://bitcoin.org/en/faq#wont-bitcoin-fall-in-a-deflationar...

icambron 13y ago

This is an important point, because interest rates would exactly make up for the undesirability of the inflationary currency; i.e. the inflation risk would just be "baked into" a lower interest rate for the dollar-denominated loan. Unless you had a substantially different inflation risk tolerance than society as a whole, you'd be neutral about what currency to make the loan in. Same goes for the borrower and deflation risk. Edit: I guess if the deflation risk tolerance for the borrower and the inflation risk tolerance for the bank are asymmetrical, then you would just end up with being able to loan one or the other. I suspect, per Slurry's point, that it's BTC that loses here.