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0 pointspseudonym12y ago0 comments

I think people are more oblivious to the fact that a "deflationary currency" is inherently flawed because it by definition results in hoarding, which is not what you want people to do with your currency. Why would you bother loaning or investing it if you can make more money just sitting on it?

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fleitz12y ago

If USD was limited to currency in circulation then it would not be nearly as inflationary as it is.

Once an established lending system based on bitcoins is established it will have the same problems as our current currencies. It wasn't printing money that caused the real estate bubble, it was the way to banking system has the power to expand credit and the systemic risk that expansion of credit causes.

Once there are fractional reserve bitcoin banks it will no longer be a deflationary currency.

wintersFright12y ago

Will people want to borrow in defalationary biased currency though? Better to borrow in Bernanke Bucks where there is an unstoppable torrent being emitted monthly.

IMHO the Real estate bubble was from the Fed bailing the prior tech bubble by suppressing interest rates - which encourages borrowing. When loans are paid back, the currency created by taking the loan is extinguished but they have been juicing the system by continually suppressing rates via QE/bond purchases and not letting the real market decide the risk (ie: price of bonds). Now that interest rates have hit the floor - the next bubble to pop is the USD itself.

fleitz12y ago

If the USD pops then BTC may be less deflationary. The bubble did not pop because mortgages were paid back.

Loans are generally repaid in currency, paying back a loan creates even more currency as the additional currency created by the interest becomes an asset against which loans can be issued.

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zurn12y ago

Deflation is not desireable in itself, but it is not a crippling disadvantage. Eg Japan has had a very long deflation spiral and it didn't affect the usability of their currency. And the west has been living in a world of negative real interest rates since the 2008 crisis.

As long as we don't have a big bitcoin credit market and we don't want to regulate the bitcoin "printing press" to adjust for market cycles, it won't even be a disadvantage. = As long as it's only a secondary currency to most users.

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fleitz12y ago

If USD was limited to currency in circulation then it would not be nearly as inflationary as it is.

Once there are fractional reserve bitcoin banks it will no longer be a deflationary currency.

wintersFright12y ago

Will people want to borrow in defalationary biased currency though? Better to borrow in Bernanke Bucks where there is an unstoppable torrent being emitted monthly.

fleitz12y ago

If the USD pops then BTC may be less deflationary. The bubble did not pop because mortgages were paid back.

Loans are generally repaid in currency, paying back a loan creates even more currency as the additional currency created by the interest becomes an asset against which loans can be issued.

2 more replies

zurn12y ago

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