When describing the currency itself, bitcoin is strictly not deflationary as the supply of it is never reduced, it's actually inflationary for the next hundred years or so until the full 21 million is mined. It might create a deflationary economy in that everything gets cheaper over time, priced in bitcoin. What is so wrong with that? Why can't you expect to purchase more goods in the future than today with the same amount of bitcoin?There never has been a fixed supply world reserve asset, even gold has always been inflationary. I think it will usher in a "Golden" age for humanity where goods and services consistently increase in quality and value, while constantly reducing in cost. I'm very excited to step into the bold orange world.
P.S. I'm a bitcoiner not a cryptocurrency advocate.
qwytw|2 years ago
Imagine an economy with both ultra high interest rates and very high deflation at the same time. Let's say CPI growth somehow falls to - 20% and the Fed decides to hike interest rates to + 20%* what do you think would happen? Well take the Great Depression and multiple it by N (no idea, I'd assume N >= 20 though).
Sound great?
How does close to zero capital investment into the economy sound? No loans, no VCs, no new factories/offices/shops/etc. no new anything... Investing into anything would be both very risky and likely still have a negative return compared to just hoarding money.
> I think it will usher in a "Golden" age
I think it would usher societal collapse and the end of human civilization (I seriously do.. of course I'm close to 100% certain that it can never happen, then again I'm not great at predicting the future).
*I would assume the numbers would be higher with btc.. but whatever
HashBasher|2 years ago
I don't think so. There will definitely be companies and startups that yield better returns than bitcoin. Especially when bitcoin stabilizes at a very high value, holders will start speculating.
notahacker|2 years ago
Because then investment ceases to be about trying to capture a share of the growing pie, and more a zero sum game which the small minority of people holding most of the financial wealth have little incentive to participate in, and so the mechanism by which stuff gets cheaper over time, priced in Bitcoin, isn't economic growth but just increasing desperation of people without Bitcoin to obtain it.
So all the worst parts of capitalism and none of the actual good parts, though I appreciate the idea is more appealing to people who imagine themselves as being the minority of idle rich.
For related reasons, the world would not adopt a deflationary currency for very long...