That would make sense if Bitcoin price surged to a million dollars per coin
Since Bitcoin is likely to be even more deflationary than any other currency out there. What fiat currency do you know that has grown in value a few times within a year? There is no such currency since the growth of that scale would be devastating to any economy. In this manner, the whole effort may be aimed at substituting the Japanese Yen with Bitcoin in the savings of people so that greater amounts of local currency entered circulation (which would be good for inflation)
Since Bitcoin is likely to be even more deflationary than any other currency out there. What fiat currency do you know that has grown in value a few times within a year? There is no such currency since the growth of that scale would be devastating to any economy. In this manner, the whole effort may be aimed at substituting the Japanese Yen with Bitcoin in the savings of people so that greater amounts of local currency entered circulation (which would be good for inflation)
But why? In my opinion it doesn't matter how much 1 bitcoin costs. What does matter is that people take their money out of a closet and start buying it. That's what's good for the economy.
I'm a biology student, not an economist, so please explain if I get something wrong.
You get everything right, in general
What you don't get is that to make this policy of "people taking their money out of a closet and buying Bitcoin with it" even remotely successful, literally millions of people will have to buy bitcoins, and that would produce an exponential demand with Bitcoin prices hitting astronomical figures. In other words, there are not so many bitcoins as there should be people wanting to buy them if the Japanese government were really going to implement something along these lines and hoped to achieve a noticeable result at that
Thanks for the explanation. Indeed you've noticed what I can't understand so far. Even now I think that a limited number of bitcoins can't be a problem because that only would lead to the increasing of bitcoin price. Why is it bad for the economy if the price of one satoshi was $1? But I have a feeling that I can't get it because I'm not aware of some mysteries of the economy
Even self-proclaimed gurus of economics here can't grasp that
But the answer is pretty simple though. If we assume that fiat dies and Bitcoin takes over, the constant appreciation would be devastating to the economy. I've even created a thread where I explained everything in pesky details, and no guru or otherwise ventured to challenge that explanation. In short, the reason is that the profit margins of producers (if we calculate them in bitcoins) change non-linearly in respect to change in Bitcoin appreciation rates. In other words, they would decline faster than Bitcoin might appreciate. To add injury to insult, they may and will in fact turn negative at some level of appreciation, i.e. profits will become losses (when the proceeds stop covering expenses), and thus the producers will have to shut down their businesses altogether and fire their stuff. How can that be good? On the other hand, if Bitcoin continues to remain outside the economy, then its price will be mostly irrelevant
I've read it three times, but it's really hard to grasp. What I understood is that if fiat dies it would be bad for all of us and that in that case we wouldn't be able to enjoy even an enormous price of bitcoin whatever high it was.
What's the purpose of money appreciation if you are unemployed?
Indeed, it will never come to that (I mean Bitcoin taking over fiat), but if we imagined that, than constant appreciation would make production a losing deal because producers would be better off overall if they fired their stuff and kept their bitcoins rather than invested them into their production. In other words, they would get more profits via mere Bitcoin appreciation, and without doing anything at that. Right now idly sitting on money is a losing game since inflation is constantly eating away its value
Thanks for taking time to elaborate and clarify. Now, first time in my life, I understand it. Inflation stimulates production and, hence, employment. The situation when money is constantly rising in value encourages people to do nothing and that's definitely a bad thing for the economy.
