Post
Topic
Board Economics
Re: Bitcoin. In no way deflationary.
by
drhobomanxxiii
on 04/05/2013, 22:25:38 UTC
And how exactly do you see this happening when hoarding seems to be everyone's favorite pastime? As you can see, lost coins don't drive BTC's deflation... No spending = no deflation.

No spending doesn't mean no deflation. Besides, if the only thing that's being traded is USD for BTC, that's still spending.

But here's why you're wrong on the no spending = no deflation idea...

If people horde the currency rather than spend it (rather, their demand for the currency increases,) then there is less of that currency actually being circulated to service the function of exchange. This will naturally create higher equilibrium prices as defined in that currency than would come about if people were to spend all that they had been hording.

As for deflation in the money supply sense, that one is dependent upon how you measure the money supply. If you measure only what is being circulated, then reducing the number of coins being spent necessarily reduces the money supply.