The deflationary spiral argument goes as following: Let's imagine an economy that only uses Bitcoin, solely, as currency. When the productivity rises, the price of goods and services decrease.
This is perfectly how an economy should be run. because going by this no one will feels hoarding any currency is the next available option, we tend to hoard because of fear of the future outcome. nothing can bring down productivity as long as law of return on labour is effective.
People don't hoard if they're just fearful of the future, they do it because there's deflation; respectively when there's inflation. People consume by the belief that their purchasing power will decrease. Inflation harms the savers and deflation the spenders.
There is no "key difference", is the same reasoning as with fiat currencies, if I live in a poor country and I know the currency is going down the drain against the $, would I spend by $ for bread? No!
That's exactly what I'm saying. Bitcoin favors saving. I can't comprehend what's the "key difference".
The actual reason why bitcoin won't contribute to deflation is that by the time it will reach the status of global currency and it's the only one left the value will be so big a 10% increase in purchasing power overnight will simply be impossible as there would be no economic growth to match that, so there will be little incentive to hold coins while making sacrifices on your shopping list.
This opens up another topic, regarding the stability of the price. I'll skip that and assume the price stabilizes with -2% to 2% yearly changes (which is a sci-fi scenario, but anyway); will it bring economic growth? Remains to be seen. Shouldn't there be little
disincentive instead of incentive?
BTW, the entire world using Bitcoin is, by far, the most sci-fi scenario, amongst all.
Did you mean to say this? I don't quite get your point here. It seems you are comparing two similar bananas.
I say that if prices tend to decrease, you're more encouraged to keep your coins than to let them circulate in the economy.
If the prices of goods and services are decreasing, people won't be hoarding money. Spending would be encouraged because things are affordable.
But, if they tent to decrease
perpetually, it would
perpetually incentivize you to keep your coins as you'd
perpetually be able to afford more.