Quote from: Minecache on November 28, 2013, 02:10:49 PM

So a currency can both inflate and deflate at the same time?

inflationary in short term (# coins is still increasing thru mining), and deflationary in long term (after reaching the 21M limit the # coins will start to decrease). But this 21M hard limit has a very strong psychological effect even in short term, so people have been trying to save as many bitcoins as they can, knowing that the bitcoin supply will eventually decrease. Thus even though the total number of bitcoins is still increasing in short term, the bitcoins truely in circulation (being spent daily buying goods) are already decreasing. (It's increasing in terms of USD value, but descreasing in bitcoins number). Not very long ago there must have been someone who spent thousands of bitcoins buying a hamburger. That was circulation. But now how many bitcoins can be earned by selling a hamburger?

So over all it is a deflationary currency. But bitcoin's deflationary nature won't cause an economic recession simply because it is not the only currency. Don't worry about it. The world economy will move on happily because we still have other currencies like the fiat. In ancient times, we had the gold standard. Gold did not cause economic recession also because it was not the only currency. The nobel class uses gold, while at the same time they minted coins and printed paper notes, which were very inflationary, for the poor people to use.