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by bunderbunder
4589 days ago
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> A similar question can be asked about USD: why would you ever save it instead of spending it immediately, since it's only going to lose value over time due to inflation? The answer to this question lies at the heart of why economists generally believe a little inflation is better than no inflation nowadays. That little bit of inflation makes it more attractive to invest money in things that increase one's ability to generate money in the future instead of just stuffing it under a mattress. That makes the economy as a whole more vigorous, which means everyone tends to get more wealthy in the long run. As for deflation in Bitcoin: Since the total number of BTC that can ever exist is asymptotically bounded, but potential economic productivity of a population of humans isn't (as far as we know), there's really only a few scenarios where BTC deflation might level off, and arguably all of them fall under the category of "economic crisis". |
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Just like monetary policy attempts to set inflation at such a rate (~1%) that it isn't irrational to save, but it is slightly more rational to spend.
I think, though, that if everyone agreed, BitCoin could eventually change to borrow some concepts from PPCoin, and restart the production of currency, once it reached a plateau of adoption. It isn't impossible to change the current production limits - just difficult. At that point BitCoin would probably splinter into two currencies, one which has a deflationary monetary policy and one which has an inflationary one.
At that point - is it still a libertarian currency? We've just traded one governing body - the US govt - for another - the BitCoin Foundation.