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Author Topic: cryptocurrency collapse  (Read 3006 times)


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Re: cryptocurrency collapse
« Reply #30 on: July 17, 2022, 09:55:01 PM »
It seems to this simple mind that if something like Bitcoin was dis-inflationary then there would be an incentive not to use it as money and rather to hold it as a store of value which means that it would not be a good form of money.

Something like gold is better in this respect because it inflates slowly over time and more closely matches the economy.

Definitely encourages saving, which in the old school model I heard in another thread drives investment and growth. And I think Pat may be onboard with that and possibly the Austrian perspective(?). Which dislikes inflation as a tax on the poor and a driver of malinvestments/the boom-bust cycle I think. As well as possibly being a symptom and enabler of government overspending and fiscal/market overreach. (Most of what I know is either hearsay or the result of me googling stuff about the Keynes v Hayek rap battles, so I’m not the best source.)

Though I guess a Keynesian counter-argument might be circular flow in spending, which deflation discourages because goods depreciate relative to the currency. Circular flow and spending helping those who produce goods to reinvest in production while also creating value by putting goods in the hands of those who most value them. While cycling cash through the economy and driving down unemployment. Also maybe less Keynesian, if inflation incentivized investment and that’s part of why it’s a tax on the poor… Investments will be disincentivized under deflation, because they are tied to real value that drops relative to the currency over time. Safer investments with lower yields that would otherwise have grown the economy may even become worthless from the perspective of an investor, I think? So GDP and its growth may fall as a result.

 Though wages are hard for workers to get raised once hired, and so deflation would help prevent (and in fact reverse)  loss of real wage value over a career at one company or employer, and thereby raise the working class standard of living(?), I guess. Though Keynesians would probably argue there is potentially a cost to be paid in unemployment, and supply/production since wages are the cost of labor and if marginal costs ever exceed marginal benefits…

 But take all this with a heap of salt. I kinda just learned most of this was even possibly a thing.

However bad inflation is, deflation is a nightmare. If the currency deflates then all debts become worth more in real terms, I don't think I have to tell you why that is a bad things. Farmers got fucked over horribly during periods of 19th century deflation which lead to a huge political backlash. In addition just "saving" in the abstract isn't good for investment and growth. If you just sock some money under your mattress or in a cryptowallet that's not any kind of investment in anything concrete (i.e. more industrial equipment or what have you) that helps the economy grow. Also with deflation people tend to put off purchases which can hurt companies a lot as they have to sell shit to survive (the other extreme isn't too good either as "aaaaaargh! I've gotta burn through my cash now or it'll be worth half as much next week!" has obvious downsides as well).

In general what'd be wiser is to have a system with nominal GDP targeting, where you'd do something like try to consistently hit 5% real growth + inflation a year and be really transparent about how you're going to go about that. Having monetary policy be predictable and stable is good for the economy, swings of inflation and deflation cause uncertainty which is bad.


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Re: cryptocurrency collapse
« Reply #31 on: July 18, 2022, 07:47:38 PM »
So it looks like cryptocurrency has collapsed.

How unsurprising.

When the gas station attendant tried selling me bitcoin I knew it wasn’t something worth looking into. Surprised these “digital currencies” still around.
American writer and programmer, since 2016.