Post
Topic
Board Economics
Topic OP
Bitcoin Deflation can cause economic problems?
by
freebitcoinwin
on 09/02/2014, 20:56:31 UTC
It is true that deflation has traditionally been associated with economic problems, but there is no reason to think that this will be a problem for Bitcoin.
Right now in the United States, salaries, loan payments, rents , ect.. are priced in U.S. dollars. As a result, if the value of the dollar rises unexpectedly, can cause severe economic distortions. Unable to cut wages, trouble making payrolls. Unable to renegotiate their debts, homeowners have trouble making paying their mortgage payments.  The result is a recession.

Hardly anyone uses Bitcoin as a unit of account. You'd be insane to sign a contract promising to repay a loan of 100 BTC in 10 years or to take a job where your salary was priced in bitcoins. Even the Bitcoin Orrganization, which pays its employees in bitcoins, still sets its employees' salaries in dollars, converting employees' salaries into the corresponding number of bitcoins on each payday. As a result,  volatility in the value of bitcoins don't cause  economic disruptions that fluctuations in the value of traditional currencies do.