Deflation is not something desireable in macroeconomics. It incentivizes hoarding cash instead of spending it on productive things (hiring people, capital investments to improve productivity, etc).
Slow and steady inflation is a stated goal for most governments and central banks.
If that "productive thing" isn't productive enough to yield better than an asset that just sits there in a cold storage, I would argue it wasn't all that productive and/or efficient to begin with.
People will always spend for things they need, they'll also spend it for things they want, but the current fiat system is forcing to spend it just for the sake of spending it forcing over/pointless consumerism on everyone.
Yes, it allows you to buy more for the same amount of money, increasingly as time goes on. This is why it results in economic slowdowns, because people are more hesitant to spend money when it may be worth more later.
In fact we see this in a small scale in the tech sector all the time: products get more powerful or cheaper or both, meaning people who might want to upgrade often agonize over waiting to spend their money to a point where it will obtain more per unit of value.
Or with Crypto, consider the HODL mentality. BTC would have made a lot more progress towards use as a medium of exchange if an enormous number of people weren't simply buying it on the hope of future value, or speculate by continuously selling the peak and buying the dip. There's even the cautionary tales in the crypto community against actually using any if it to cash out for purchases, such as the person who paid for a Pizza with enough bitcoin to be worth over $100,000,000 today. The message is "Never use it, always HODL" Of course there's always the anecdotal person here an HN who will chime in with, That's not true, I just bought X with it!". Which is fine, but an extreme outlier.
It will never deliver on it's goals when that, and investment speculation, are the two dominant use cases. Bitcoin is trapped in a cul-de-sac right now, and absent some unexpected event, mainstream everyday use of crypto by average people-- if that comes to pass-- will bypass BTC by as it circles around that cul-de-sac.
… then your boss says sales are down and your salary is being cut. “Don’t worry, your purchasing power hasn’t changed!”
… then you need to go to each creditor and try to renegotiate your balance so you’re not overpaying at the current value rather than what it was when you bought your house or car.
… meanwhile the economy slowly grinds to a halt as people and businesses hesitate to get loans for the same reason. That’s when the layoffs start ramping up, which does not improve the state of the economy.
This used to happen periodically and it was ruinous — it’s why systems like the Federal Reserve were created and almost all serious economists target consistent low inflation levels since that has the opposite effect of incentivizing economic activity.
You didnt mention the role of capital, which is stored savings. Dig in to the role and benefits of stored monetary reserves, how bitcoin does this and cant be inflated, and you might get pissed off when you realize savers have a great escape mechanism from the huge government bailouts of failing industries (airlines, cruise ship lines).
If you can get out of debt, you may see the benefit of bitcoin as a store of value. If you are in debt slavery, you of course want easy money to make your debts easier to pay.
Do you want everyone to go back to the farms as laborers? Our food abundance is produced mechanically. Automation and technology brings deflation, which allows me and my children to not toil in the fields.
It appears some here believe in the labor theory of value. For me, if I cant do better than the machine, then I am not adding value and need to do something else.
Automation doest not bring deflation. It brings a higher standard of living where people have more money so they can buy more things. Prices still increase though-- inflation. The key is to have wage increases, and therefore quality of life, increase at a rate that at least slightly exceeds inflation so that people continuously have increasing amounts of money to improve quality of life.
This is why wage stagnation or when wages do not keep pace with inflation it's bad.
Nah. When things are cheap, people will go shopping. When things are expensive, people will save. It's a naturally self-correcting mechanism.
Every deviation from the expected deflation would be an opportunity for arbitrage. Also, the deflation isn't guaranteed, so it carries a risk, which disincentivizes hoarding.
Slow and steady inflation in the US has resulted in economic growth leading to some of the highest quality of life increases in the last century. A poor person today nonetheless has a higher quality if life than a poor person 100 years ago.
And if you need to spend it from day to day it's both inconvenient and often worth a fair bit less than the day before. It's increased float price vs. USD over the years may make it a reasonable investment for those with a tolerance for high risk. Not so much for a population where the median annual income is about $4,000 and the average person is probably living close enough to the bottom of Maslow's hierarchy that they can't just sit back and HODL when BTC prices go into hibernation for a year.
If there's a place in the world that would currently be a good test bed for a country to make BTC legal tender, it's not El Salvador. Its population simply isn't in a position take much of a risk moving from hard currency like the USD to a volatile asset class.
I'd even take ~99.99% daily drops (which is a great opportunity to harvest some capital losses btw) if it means I'll get 300% YoY and needless to say that has paid off very well so far.
From the time you posted this, bitcoin's price has fallen more than nine percent. That's not a currency I'd ever want, regardless of its price one year from now.
The Fed doesn't print money, and the fact that so many people on HN repeat that falsehood is just sad. The Fed expands the money supply through the banking system, and they also decrease the money supply the same way. It is entirely different from printing money.
Sounds like one is exhibiting features of a currency and the other isn't.
I don't think you're supposed to store your wealth in cash if you want to preserve it (diversified equity holding are a popular investment too in case you find cryptocurrencies too volatile).
