Quote from: BunnyWunny on July 20, 2024, 06:10:43 PM

If Bitcoin becomes widespread enough that most people hold their savings in it, then it will greatly and permanently reduce liquidity in the financial system, lead to a decrease in consumer spending and cause major ructions in the global economy.

Well, we all know that before Bitcoin people tend to hold their savings, invest in stocks and real estate and bonds. With Bitcoin being available, it will just be another investment or saving diversion. I do not think that Bitcoin being widespread will cause problem in the global economy.

Quote

People part with their money easily these days because in the back of their heads they know that what they have in their hand right now, will be worth far less in the future due to inflation. So they spend their money on gratifying goodies now rather than save it for later when, due to a negative real return, it will be worth less. In a Bitcoin world this behavior is reversed. People will understand the resilient and long lasting value of their Bitcoin and not want to part with it unless they are getting something very favourable in return. The psychological hurdle to spending money will be raised in each individual's mind.

This change in the mass consumer psychology that is so important and relevant in the world today will lead to a liquidity crunch. Central banks usually solve the problem of a liquidity crunch by printing money and lending it out cheaply but they won't be able to do this as faith in fiat currencies will already have been so severely degraded by Bitcoin's ascendancy. There will be no answer to people becoming more prudent with how they spend their hard earned bitcoin. It will simply shrink the economy.

There are psychology of purchases, you forget the fact that Bitcoin being adopted in globally can enable consumer to have a borderless transactions, which can promote purchases. People will always buy what they wanted and desires. Even if it in Bitcoin or in Fiat currency, it makes no difference. The thing is that Bitcoin enables financial inclusion which can possibly bring more positive input than negative one since people who can't participate in global purchases can now be able to.
It is also believe that with digital transaction, the easiness and convenience of transfers, can boost spending.