Topic: Inflation and Deflation of Price and Money Supply - page 24. (Read 1451054 times)

Inflation (Latin Inflatio - swelling) is the process of reducing the cost of money, as a result of which you can buy a smaller amount of goods and services for a certain amount of money after a while. In practice, this is expressed in an increase in prices.
 
The opposite process is deflation - a decline in prices (negative growth). In the modern economy is rare and short-term, usually seasonal. For example, grain prices immediately after harvest are usually reduced. However, deflation is typical for the Japanese economy (within -1%)

Thanks for the article. I think, that Money Supply will be grown up and bitcoin will become more popular.

In case of bitcoin, there is only inflation, because continuously increasing valuation of bitcoin signifies that it would never be stopped in the coming future, this increasing valuation has attracted millions of people to be part of it and the future is not that far away that it would be accepted world wide and might be use for online transactions . The only thing left is bitcoin is not yet centralized by the government, its continuously inflation prices would also make government to legalized it and thus help in making great future

thanks for this post.

This is  a comfortable topic/fun and one that wouldn't boring.
I know that the bitcoin master would be as good as his word.
To me, it`s as if new sight were given to the blind.

Excellent post, thanks for that. I took ECON201 course at my university and this topic will help me about my that topics.

Thanks a lot for this post. It cleared my confusion for both.

Inflation and deflation and the result of several poorly balanced economies, let's pause to think a little we would have a possible solution with the release of credit to all with lower rates. Producers, industry, traders and consumers had access to money with interest for half of what is charged here today and if the government encouraged and did not allow the corporate loan or personal loan to be an extortion, as it is known here, it would not be better for the economy to turn and present more positive numbers

what ive studied iso far it is that when price inflated money supply increase in order to cover that inflation and wen prices deflated money supply decreases so that demand wll be conrolled

for sure you have declared it when you said "there is an inverse relationship of price and value" and that simple sentence will simplify the mission for non-economists to understand the meaning and the the difference between the two terms

In any business, inflation and deflation rate usually relies of the supply and demand trade structure. So, the exchange rate for bitcoins could be influenced on this.

 economics, deflation is a decrease in the general price level of goods and services. Deflation occurs when the inflation rate falls below 0% (a negative inflation rate). Inflation reduces the real value of money over time, but deflation increases it.

inflation is the worst phenomenon because it reduces the purchasing power of money. At the same time deflation is the opposite because prices of goods and services are falling

As a barometer of healthy money, the world’s best economies have average annual inflation rates below 1.5%.

In economic terms, low to zero inflation is a sign of healthy money because the value of the currency does not fluctuate significantly and is therefore reliable. However, in a country like Argentina, the annual inflation rate is estimated to be close to 40% today.

That means if you’re an Argentinian citizen and you save 100 Argentine Pesos, one year from now the value of those 100 pesos will be worth only 60 pesos relative to the world’s stable currencies. In Argentina, holding money means losing money, and so its citizens are actively looking for alternative stores of value to simply preserve the money they have earned and worked for.

Other examples of problematic economies with high inflation rates are Venezuela, which is expected to have annual inflation of 180% in 2015, and Zimbabwe, where the rate of inflation for the Zimbabwean Dollar was so high that this year they decided to stop printing it and the government is abandoning their currency altogether.

Zimbabwe went through a period of what is known as hyperinflation; their annual inflation rate in 2008 was recorded as high as 11,000,000%. What currencies could citizens from these countries use if not their own? The US dollar? Gold? M-Pesa? Bitcoin?

The reasons for such high inflation rates are complicated and they vary from country to country, but a common theme is that these rates are only found in government-backed fiat currencies.

Governments can lose control of their money in various ways because as with all fiat currencies, their values are tied to the laws of supply and demand. If a government prints too much money then the value of its currency can deteriorate, as seen recently in Zimbabwe, and after WWI in Weimar Germany.

History is full of stories underscored by the failures of money, and if history repeats itself, the future will be no different.

Given bouts of high volatility in bitcoin, it may be difficult to understand how this new Internet currency can act as a store of value. However, comparing the rate of fluctuation of the price of bitcoin to some of the fiat currency examples above, bitcoin contends as a candidate for an alternative currency.

Part of its appeal in countries with strict currency controls is the relative ease in which it can be acquired and used, especially considering all one needs is an Internet connection. Once money is converted into bitcoin, the inflation rates of local fiat currencies do not affect bitcoin holdings and it can be sent anywhere through the Internet for free.

Additionally, no one but the account owner has access to their bitcoin. This is especially important in light of the financial crisis.

In 2013, banks in Cyprus became insolvent but were bailed out by European and international monetary authorities. However, one of the conditions for Cyprus to receive the emergency funding was that bank depositors had to pay part of the tab.

That meant depositors, those who had their money in the banks for safe-keeping, found their individual accounts drained 6–10% by the government, overnight. That would be impossible with digital currency like bitcoin, which makes it valuable for many who reside in parts of the world with deteriorating economies and/or currencies.

Bitcoin also provides an option for those living in countries whose currencies are restricted or not free floating (eg China, Russia), looking to get money out of the country.

Even in the strongest economies the question of how stable certain fiat currencies really are is being tested. In a post-Great Recession world, governments of some of the leading economies decided to essentially print their way back to prosperity in one of the most massive economic experiments ever conducted: Quantitative Easing (QE).

The US led the way with QE in November 2008 with Ben Bernanke, then the head of the Federal Reserve, spearheading the experiment.

After Lehman Brothers collapsed, as the economic debacle unfolded, developed-market central banks became fearful of deflation as opposed to inflation, an experience Japan had been dealing with since the early 1990s.

Deflation is an insidious economic plague where citizens choose to hoard rather than to spend money, expecting lower prices for goods and services tomorrow relative to today.

However, an economy can only improve when its citizens spend money. When companies have too few customers because the masses are scared to spend, employees are laid off in order to cut costs, and unemployment rises, reducing income streams and thus spending power.

It’s a vicious downward spiral, and Mr. Bernanke decided that the best way to stimulate the economy would be to increase inflation and lower unemployment, and he aimed to achieve this through massively increasing the money supply of the US dollar.

The US printed trillions of newly minted dollars over the six year period from 2008 to 2014 in an effort to stimulate the economy. The program worked to a degree, inflating asset prices per design due in part to the US dollar representing the world’s strongest economy as the global reserve currency.

The European Union (EU) has seen the success of QE in the US and has launched its own program to try to aid their unstable economy. The EU will print over 1 trillion new Euros by the time their version of QE is over.

Whether QE works in the long run remains to be seen, but the fact is governments have the power to print as much of their own money as they want. If QE does not work and inflation becomes rampant, there are severe economic consequences as history has shown us.

To understand inflation and deflation its key to read the following:

https://mises.org/library/theory-money-and-credit

there is no need of big discussion about it, if you just read this. ^^

You have to stop a bit a consider trustworthiness. You can not have it, neither in real money regard nor costs. In case you by some methods make sense of how to do the abnormal regardless of its trouble, you pick up the structure static and no ground is possible, and you in like manner murder all danger. The wiping out of risk, without any other person changes the structure. So it is doubly unfathomable.

It takes after fishballs in white sauce. If you crush one down, another flies up. The best (and as consistent as you get) is to just leave everything drifting.

MoneySupply-Inflation is when the value of Bitcoin decreases when the total supply of Bitcoin increases. In our current state, this is at a generation rate of 25 BTC every 10 minutes.

MoneySupply-Deflation will essentially never occur. It is when the value of Bitcoin increases when the total supply of Bitcoin decreases. This may happen, say, when someone loses their private key and all the BTC associated with it are lost. This effectively "makes the rest of us richer". That being said, there is a SET DECREASE in the generation rate of BTC, so you have sort of a "deflationary effect" in the value, as long as more exchange occurs for BTC at a rate which is faster than that set generation rate.

Asset backed currencies have been the ONLY succesful models tried. They stood for centuries, none ever "failed" they were all replaced by fiat systems.
The dollar was removed from gold backing in 1971, but it was weaned from gold onto oil and the "petrodollar" was formed, it was a brilliant plan and when put forth to Saudi "leaders" they realised that if they got in on the ground floor of the pyramid scheme they would greatly benefit.
Fiat moneys have ALWAYS failed. The ability to "print your way out of trouble" is in fact "printing your way into trouble" and will always end bad for the users (good for the bankers).

Hey all,

I’m conducting a research on cryptocurrencies and I’m especially interested in why people choose Bitcoin. And since you are bitcoin users/experts, I thought you would be the best people to ask. It would be great if you could take the time to answer my questions (anonymously), I promise it will take no more than 10 minutes.

Click on the following link to go to the survey - https://uvacommscience.eu.qualtrics.com/jfe/form/SV_3lzs2sI13cKH1m5?source=bitcointalk

If you are interested, I could post my main findings here.

Thank you