Forbes contributor and Bitcoin Foundation board member Jon Matonis (@JonMatonis) shares the argument by Austrian economists that price deflation is nothing to fear. Excerpts:
“Deflation is not a problem in the traditional monetary system and it will not be a problem in the bitcoin economy.”
“Although the supply of [bitcoins] will be relatively static with the exception of attrition through permanently lost coins, I will refer to the monetary phenomenon as deflation because as bitcoin’s asset value increases compared to political numéraires, its effect on price expression will be seen as deflationary.”
“An economy with a monetary unit that increases in value over time provides significant economic benefits such as near zero interest rates and increasing demand through lower prices.”
“‘During an inflation, you want to get rid of the money. You want to consume. You want to spend. But you don’t become wealthy by spending and consuming; you become wealthy by producing and saving’ [writes Doug Casey, of Casey Research]”.
“‘Deflation puts a break–at the very least a temporary break–on the further concentration and consolidation of power in the hands of the federal government and in particular in the executive branch.” [writes German economist Jörg Guido Hülsmann]”.
“Ultimately, the market will reach an equilibrium between investment and savings because in the absence of an equilibrium the benefits of a savings-only strategy would evaporate. Proper economic growth through sound investments will lead to a productivity-driven deflation.”
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