Topic: Why the Economic Principles of Bitcoin Are Game-Changing (Read 1753 times)

The gold standard has failed in the past. The money supply must be controlled by mathematics and equations.

I think the biggest issue with the Keynesian model is that it's based on the assumption that the bankers and politicians are the ones who decide for everyone what is money.  Bitcoin is a game changer because it allows monetary systems to compete so that individuals are able to make that decision for themselves.

What an ironic comment. Speaking of wasting time...why did you post at all?

Thanks for providing yet another example of my point that it is futile to explain to the obstinate ignorant.

Don't worry, we won't.

Nonsense. Like most of the threads on this forum. I can't post this in every thread but suffice to post in one.

Don't ask me to explain. Waste of my time.

Bitcoin is digital money which is not backed by any asset or any third party. so its intrinsic value cannot be valued by our existing methods, or popular economic theories.

Keynesian economists have stated that a deflationary currency, one which increases in purchasing power relative to other goods over time, is inherently negative for an economy because it creates a financial ecosystem which entices individuals and businesses to save money rather than using it to create jobs and invest in companies. They claim that a deflationary currency incentivizes the individual to adopt a buy and hold strategy because they know it will be worth more tomorrow than it is today. This is often referred to as hoarding and it can lead to lower interest rates and increase long term investments. In doing so, this decreases the velocity of money in the economy, or the speed at which units of money change hands. In a healthy economy, a high velocity of money is a very good thing, so a decrease in velocity would be unfavorable. Because the monetary base of bitcoin cannot be expanded, the currency would be subject to severe deflation, and this is something which we have seen to be true thus far.

The Austrian school of thought counters the idea that deflation is inherently negative, claiming that as deflation occurs in all stages of production, entrepreneurs who invest benefit from it. As a result, profit ratios tend to stay the same and only their magnitudes change. In other words, in a deflationary environment, goods and services decrease in price, but at the same time the cost for the production of these goods and services tend to decrease proportionally, effectively not affecting profits.

Read the full article on Diginomics.