> Because if you had a choice what would you store your money in?
That's actually noted as one of the problems with a deflationary economy. People tend to store their capital instead of spending it or investing it, which puts a hamper on economic growth (or even maintaining the economic status quo). If your job depends on receiving income then you can appreciate why it also depends on other people spending money.
> It also insures that bitcoins can never artificially be devalued by any central organization.
Countries have actually sometimes arranged to devalue their own currency to help with the local economy by boosting exports, so in that sense it is beneficial to have a central organization in your country's control to do that. Given the ongoing economic crises in Europe I'm just not sure how good an idea it is to have economic policy so completely decoupled from currency policy.
But on the other hand that feature of Bitcoin does make it very useful as a collectible or commodity. You can "invest" in it without worrying that the Central Bank of Satoshi will make your dilute your investment tenfold or worse.
>If your job depends on receiving income then you can appreciate why it also depends on other people spending money.
Well the point is prices adjust. If people aren't spending money, then prices just fall until the people that are spending money can afford it. Sure you make less income, but everything is cheaper too so it's not a loss. Actually it's a gain. The same amount of goods are in the economy, but since some people aren't buying things, everyone else can afford more things. The pie is the same size but the people saving money haven't taken any slices of it, leaving more for us.
Besides when people save money, they generally invest it or put it in a bank which loans 90% of it back out.
>Countries have actually sometimes arranged to devalue their own currency to help with the local economy by boosting exports, so in that sense it is beneficial to have a central organization in your country's control to do that.
Exporting more things isn't necessarily a good thing. Ideally we could import everything we need and not have to actually work to produce things to export.
> > If your job depends on receiving income then you can appreciate why it also depends on other people spending money.
> Well the point is prices adjust. If people aren't spending money, then prices just fall until the people that are spending money can afford it.
But remember that the reason the prices are dropping is because no one is spending money. This is a positive feedback loop: the only reason that sellers are dropping prices is because they are under extreme pressure to make some income somehow. So they drop prices and receive a bit of income. So these businesses are then unable to pay their suppliers, who are forced to either drop their prices or suffer default, and so on straight up the chain.
So it's not that deflation itself is hazardous per se, but that it tends to amplify its own effect. If you reach the "flashover" point the whole economy goes to crap, much as what happened when the mortgage failure rate finally got high enough with the sub-prime mortgage derivatives.
> Exporting more things isn't necessarily a good thing. Ideally we could import everything we need and not have to actually work to produce things to export.
That would perhaps be ideal, but it can't possibly occur that every country only imports and doesn't export. Someone has to lose in that transaction. Is that ethos really what we want to base a global financial system on?
>So it's not that deflation itself is hazardous per se, but that it tends to amplify its own effect.
It will stabilize eventually though as no new people start saving instead of spending, or as the people who were saving eventually need to buy things or decide to finally cash out and spend their money.
>That would perhaps be ideal, but it can't possibly occur that every country only imports and doesn't export. Someone has to lose in that transaction. Is that ethos really what we want to base a global financial system on?
The point was that we shouldn't strive to export more things as if that was a good thing in and of itself. The benefit of exports is the foreign money you get in return, and the benefit of that is the imports you can get in exchange for it.
> The pie is the same size but the people saving money haven't taken any slices of it, leaving more for us.
Until they do, and then the prices increase dramatically (at least in the short term) in response making it near impossible for the poor bitcoin users to afford anything. If you're only entering the economy after 10 years of deflation your salary will be a pittance compared to the savings of those who've been active in the BTC economy during that time.
> Ideally we could import everything we need and not have to actually work to produce things to export.
But who would trade with you and what would they trade for? If you aren't producing something (physical or intellectual) you'll eventually run out of funds to support your import only state.
That's actually noted as one of the problems with a deflationary economy. People tend to store their capital instead of spending it or investing it, which puts a hamper on economic growth (or even maintaining the economic status quo). If your job depends on receiving income then you can appreciate why it also depends on other people spending money.
> It also insures that bitcoins can never artificially be devalued by any central organization.
Countries have actually sometimes arranged to devalue their own currency to help with the local economy by boosting exports, so in that sense it is beneficial to have a central organization in your country's control to do that. Given the ongoing economic crises in Europe I'm just not sure how good an idea it is to have economic policy so completely decoupled from currency policy.
But on the other hand that feature of Bitcoin does make it very useful as a collectible or commodity. You can "invest" in it without worrying that the Central Bank of Satoshi will make your dilute your investment tenfold or worse.