Topic: Deflation based currency such as Bitcoin to counter promote economy. - page 3. (Read 12611 times)

I agree. therefore to enjoy the results of bitcoin we must become members and take advantage of opportunities well. many of the bitcoiners have set up businesses like their dreams, so they help economic rotation in a country

As you said, deflation based currencies such as bitcoin will only benefit to holders only. for the economy it could have a bad effect, when the amount of money is limited and many people actually hold their bitcoin in the hope that prices will rise, of course will make the price of goods cheaper and lower? of course it will slow down the economy

I don't think Bitcoin is a deflation based currency because you need negative inflation to be called deflation. Bitcoin is a non-debased currency with ~21 million supply. I think it would work since it promotes price stability and economic certainty, similar to the gold-standard era.

But Venezuela is already considering cryptocurrency as part of the solution to their recent crisis, they might not have implemented it but I am sure they are dare considering it and if they do agree to use it, then it will solve at least part of the inflation problem.

We don’t expect it to fully solve all the economic crisis of the world and that is why bitcoin was never even created to fully stand alone, there is a clause in the document that satoshi releases for the use of bitcoin, which states that it is to be used as an alternative but never stated that it will replace any FIAT, so why do we create some issue for cryptocurrency where there is none.

Actually inflation is needed to make industries gain more profit. When the inflation is big the the industries will get big profit too but the problem is the value of the money. Inflation makes the value of fiat decrease. Bitcoin deflation will makes industries gain lower profit every years but the value of bitcoin is increase. Actually both are inapropriate for the world economy although bitcoin is better because the long time holders of bitcoin will gain a lot of profit. The best currency is gold, it is good for the world economy buy it is not practical to use. Maybe combination between gold and bitcoin is good.

That's not really true. Eventually it will be deflationary, but right now Bitcoin's money supply is still subject to steep inflation. It's still 3-4% annual at the moment. A lot of people assume Bitcoin's price movements are based on deflation but really it's inflationary, and the market is just speculating about future utility.


That's difficult to answer. It's been done with gold and gold-backed currencies, but never a commodity with a predictable and hard scarcity like Bitcoin. Until we see how it plays out in real life, this will always devolve into the classic Austrian vs. Keynesian debate.

I think no, the countries still need to have their own currency even if is inflation they will still use the coins because they can control and create any time how much they need.

Sorry, but it doesn't work like that

When people can buy more with less tomorrow, the hoarding will in fact be encouraged since how otherwise can you encourage it if by not increasing the purchasing power of a currency? It is easy money. Indeed, people will have to spend something to provide for simple sustenance but it is the aggregate demand that counts in the end, which is going down when a currency appreciates. On the other hand, inflation incentivizes people to spend money as soon as they receive it to avoid losing its purchasing power

I think the deflationary nature of bitcoin won't matter too much if price move up gradually rather than quickly.
spending could even be incentivized, made attractive or made difficult to avoid.
The deflation should remain. It is very important part of bitcoin.

It will inevitably lead to disaster and ultimately to havoc and chaos

Though the term itself (a deflation-based currency) is not quite correct, i.e. a currency which has a limited supply is not necessarily deflationary since it may still be inflationary in terms of prices and exchange rates (as this is what OP obviously refers to in his post). The correct terms are appreciating currency and depreciating one. Fiats are typically depreciating, i.e. their purchasing power diminishes over time. On the other hand, appreciating currencies (e.g. gold when it was used as money) typically increase their purchasing power as the supply of money tokens or assets backing up a currency pegged to that asset is limited or scarce

It is. The supply is still increasing and it won't turn deflationary till the next century, by which time we'll all be dead!

It'll be hard to be completely reliant on a fully-deflationary currency such that there will not be a way to stimulate the economy and control the flow of cash in the event of a financial crisis. On paper, deflationary currencies seem to be "perfect" in storing value, but currencies are meant to be spent and not hoarded; it needs to go around in order to be useful. In a society where everyone is holding and very few is spending, how can one ensure the stability of the domestic economy?

Bitcoin's yearly inflation is right now %3.78. Source:
https://www.bitcoinblockhalf.com/

Next year it will be as low as %1.80

Right now bitcoin isn't a complete deflationary currency but we will get very close in 2028. (%0.45)

Everything will go nuts after 2024 imho. ($1m+/coin) Most of us probably will cash out in the next pump when it hits $50k-100k so I don't really expect many people holding a full coin by 2024, only the smartest and the youngest ones.

A deflation based currency like bitcoin would be superior in terms of promoting long term economic stability and value. The main reason fiat currencies are heavily promoted involves the vast majority of financial markets focusing on short term profit to the exclusion of long term perspectives. We've seen proposals for publicly traded corporations to shift from 3 month reporting cycles to 6 month terms to encourage a greater emphasis on long game strategy.

Investment banking, hedge funds, HFT trading, derivatives and many modern investment vehicles are built around utilizing short term leverage in an effort to maximize gains. The necessity of short term focus meshes well with inflationary currencies which carry a variable supply. This format of short term investment however clashes and is more difficult to integrate with deflationary currencies like bitcoin, which constitutes the main motivation for negative outlooks regarding them.

Current inflation rates are subject to debate. There has been some effort made to redefine how inflation is calculated. The official numbers cited linger in the 2% to 3% range. However utilizing older methods of calculating inflation its easy to end up with a number far closer to 10%. Inflation is similar to unemployment in this way, in terms of the number typically cited by the media perhaps not representing the best or most accurate statistic a person would expect when discussing topics like inflation.

No. And for some reason many people around this forum are unable to understand this.
Inflation don't realy boost spending, it boost export of the country. So it is much easier to buy different things in another country when their money are cheaper than yours. For example China artificialy inflate their currency to boost their export and Germany forcrd EU to create Euro in order to deflate getman mark and boost their export.
This is not about that case.
Without any extra barriers people would always buy the cheapest product. There is no way to provide a high demand on expensive goods that could be easily bought somewhere else much cheaper. Especially when those things are happening on the global international level.

The problem with your question is that it assumes there can only be one currency. I think a deflationary currency can work in conjunction with an inflationary one: the first to promote savings and the second to promote spending. There is room for cryptocurrencies and fiat currencies to coexist.

The thing with bitcoin is it is a currency that is not being wildly used in different fields, not like the fiat where there needs to money in trading banking markets shops ect, meaning that money needs to be available when people need it, because they can't just go an print money while the demand increases, and when the demand on bitcoin increases the amount of bitcoin produced increases at a slow rate that does not make it able to keep to wheel turning if used in real economic.

A simple answer is that, it won't work

It could technically work in a simple economy like those of the Middle Ages (and before) but with complex economies which came about after the Industrial Revolution (the second half of the 18th century and even more so from the beginning of the 19th), a deflating currency (more correct, an appreciating currency) will be constantly creating imbalances in the economy (by discouraging producers from production in different fields), so instead of facilitating economic growth it will be impeding it


In more mundane terms, people will be hoarding money instead of spending it

No it won't work. The economy works on the concept of 'scarcity' i.e. limited resources. Hence, the resources which are relatively scarce are more expensive than others. The value of the resources are measured in terms of Fiat currencies which are inflationary in nature. The basic reason why currencies are inflationary is due to the concept of Marginal Utility. In economics, we consider the MU of currencies to be constant because of the unlimited supply of money. That's the reason inflation exists.
Now consider a situation where currencies are substituted with Bitcoin. Now Bitcoin has limited supply hence we cannot take the MU of Bitcoin to be constant. Every unit of Bitcoin spent will make the remaining units of Bitcoin more dearer to the holder. When both the resource and the currency become more affectionate with reducing supply, it will become impossible to conduct economic transactions after one point of time. So it is theoretically impossible for deflationary currencies like Bitcoin to become mainstream currency.

It would work but there is no government that would make Bitcoin as their based currency.
We have 21 Million Bitcoin as a max supply and 1 Bitcoin could be divided into small unit called Sats so even if the Max supply has been mined we wouldn't have a problem.