when prices are falling
people delay spending
and economic activity slows.
its a fact
Discussion
If econominc activity slows, do we produce less, you mean?
yes that follows
If we produce less, are less goods competing for the same fixed supply?
We tend to produce less when there is less demand
There won't be less demand though... Demand doesn't change based on supply. They are two separate metrics for a reason.
I didn’t say that one is tide to the other, I used the word “tend” for a reason
When we have more resources, they economy grows. People have more children. Growth is precisely a factor of how many resources are available. Abundant resources is what allows for growth. Bankers have confused you so much that you actually believe growth comes from having less resources today than we did yesterday. That's backwards.
Wut? Did I say that? You are confused about what I said.
Your position is that deflation (more good for less, ie more available resources) cause economic decline.
Is that not right?
My hypothesis is that deflationary nature of the fixed supply may hinder the circulation of the said currency.
I don’t take positions on the topics I don’t care too much about, in general
this is a commonly accepted fact.
I have no expertise in the area, so all I can do is hypothesize and extrapolate based on whatever logic circuitry in my head 😂
I think you are not entirely wrong to think that. But it's a fallacy to think that you have more incentive to hold than to spend just because it's fixed supply. If all of your money is held in Bitcoin, it's easier to understand. I don't have dollars... I still have to eat, I still desire to build things. That means I still have to spend money. Doesn't matter what kind it is. Spending is spending. What it really create disincentive for is malinvestment. You are more careful with spending. You still spend. You just make better investments with that money.
Spending is spending. Contrary to popular belief, saving is high time preference. In order to grow wealth, I mean really grow wealth, you make investment that have a return on those investments. People that make good investments will outperform those that hodl in a world entirely on a Bitcoin standard.
You are right that it's circulation will be hampered by its massive increase in purchase power. But it's not the fixed nature that's the cause. It's because Bitcoin has to monetize from zero. It's hard to know where you are in the S curve. It also doesn't matter when you no longer have any other form of money. People still want to just do things.
its an established economic fact that people delay spending when their money will be worth MORE in the future.
ie, the economy slows.
maxis armchair dismissal of the deflationary problem is just bad economic theory.
And you can make more by making good investment than you can just sitting on your hands waiting for technology to improve. The ones improving the technology (spending money) will be making more than those hodling.
incentive to make any investment at all is drastically reduced
because prices fall when you are just sitting on your money
I'm not saying there's ZERO economic activity.
obviously there will tx for essentials.
but theres a spectrum
and erring completely on the other end of that spectrum is equally stupid.
ideally
the number of monetary units would generally track with economic growth and there would be stable prices.
The incentive is to make investment in things you know will outperform the deflationary effects of technology. Something that is true today.
under *highly inflationary conditions
investment becomes gambling.
there is a spectrum.
its easy to make a good case for monetary inflation that follows economic growth.
that would be the safest and likely the most prosperous condition. its just impossible to achieve algorithmically.
but any sane and known monetary policy would solve most of these problems.
unfortunately a hard cap on the number of monetary units is a knee jerk reaction to inflationary insanity.
it is NOT sane monetary policy.
"2%" is what has caused the gambling... You are the one being ignorant.
its not 2%, and nobody believes it is or has been
.
so no. it isn't 2% inflation that has caused the degenerative environment.
In other words it's reduced to the appropriate level with proper incentives that actually match the real world. Any more investment than that will only serve to create more malinvestments.
no.
a purely disinflationary environment doesn't create some magic level of "appropriate investment"
it incentivizes not investing at all.
unless you can be *sure the investment will beat the appreciation the money would have anyway.
Which creates the environment for appropriately investing... You should not be investing in something that you don't know will provide you a return on investment... That's the whole point.
whatever dude.
at this point you're just wilfully ignoring what I'm saying.
good luck with your binary thinking.
sounds logical to me
How does that affect prices?
well
thats upward pressure of course
and because growth is deflationary (downward pressure) an equilibrium is reached somewhere
between growth and peoples reluctance to spend
I'm contending that under a hard cap of monetary units
that equilibrium is a stagnant economy where people ONLY buy absolute necessities as much as possible
I would be curious, how an aging population plays a role in this, in your opinion?
Also could be an interesting thing to think about that delayed gratification is hard: eating healthy, excercising, investing. Not something too many are capable of. Could be interesting if such people would change in a deflationary environment.