Making sense of dollars and cents
Many in the community believe bitcoin is deflationary. That’s ok with me Here is the start of the debate. Demand for goods decreases since consumers delay purchases, expecting lower prices in the future.
This compounds itself as prices drop further in response to decreasing demand. But they will buy what they need immediately and what they desire eventually so is not net consumption of all needed goods eventually the same?
Want to add to the discussion?
The only effect I can see here is that it slows things down and restricts wasteful un-necessary spending to a degree. Consumers expect to earn less, and will protect assets rather than spend them. Its ok to earn less in nominal terms if your buying power increases accordingly?? Negative GDP may not be so bad If basic food and utility cost inflation to the least well off is stopped and their standard of living actually rises as a result?
Full employment is a more important issue. Bank lending drops since borrowing money makes less sense in regards to the real cost. This is because the loan would be paid back with money that is worth more than it is now.
Time for the Banks, who due to their Govt license and central bank favoritism have the monopolistic opportunity to create money and profit from “thin air” for the wealthy few at the expense of everyone else. Deflation ensures that borrowers which loot to purchase assets lose since an asset becomes worth less in the future than when it was bought. Is looting good LOL? The more indebted you are, the worse your condition since your salary will likely decline while your loan payments remain the same.
During inflation, there is no upper limit on interest rates to control the inflation. During deflation, the lower limit is zero.
Lenders won’t lend for zero percent interest. At rates above zero, lenders make money but borrowers lose and won’t borrow as much.