I had a conversation with a Keynesian friend. When I explained that Bitcoin will cause deflation he was instantly worried that it will cause a “deflationary spiral” and destroy the economy.

He had a debtor-mindset. He believes it is good for people to be motivated to go into debt to purchase houses and cars, because it stimulates the economy. He said that hard money will cause deflation which will cause people to hoard money and slow down the economy. He didn’t seem to grasp that people will still buy what they want, but be incentivized to be wiser with their spending if they had hard money that might appreciate in the future.

Our difference in opinion came down to what we believed a good economy was. He believed that any and all economic activity that increases GDP is good. I believe that such aggregates don’t capture the health of the economy, rather, the accumulation of capital by individuals and steady deflation is a sign of a good economy.

What are your thoughts?