Again, this deflation is caused by a lacking of demand, which printing more money will just make it worse long term wise. All new money is added in a form of debt, and raise the debt repayment cost later on. That large amount of debt repayment will decrease everyone but bank's spending power, but what they spend for? To buy more bonds (loan them out to trap more people in)

There is only one exit for this endless slavery, that is give up using fiat money as a transaction medium, but few realizes this

Everyone know now that it was the crazy credit expansion caused housing bubble and triggered that crash, the crash is inevitable under an inflation based monetary system, since it gave everyone a wrong judgement of real demand thus over invest and over spending

On the other hand, when you have a constantly deflative economy, everyone will expect that and prepare themselves well, the economy will be extremely stable



Producing loan is the same as buying bonds, MBS are also bonds in essential

The real problem is on the demand: When people were really poor, they had lots of demand, but now when they are relatively well established, there is no need for further expansion of economy, they don't need so many houses and cars and useless things, they might want to retire earlier

This is a very natural phenomenon, no matter you use inflation or deflation based monetary system, it will reach that stage sooner or later, monetary policy can only do minor adjustments

In such a long term trend, people will tends to work less and save more, so bitcoin will fit into the picture well, while fiat money is losing its value faster every year, and all the other investment baiscally have no return due to shrinking long term demand

In global commerce, price of everything from US is much more expensive now for the rest of the country, comparing with one year ago

Even a bear whale with 30000 coins can be slaughtered in couple of hours, anything less than 10000 coins can not be called a whale 

Actually I think they will raise the rate to a very high level, since there will never be a liquidity crisis in the foreseeable future. Now banks are sitting on a mountain of cash that is enough for the future 30 years, and those cash will earn them huge amount of interest in a high rate environment

So, when higher rates kill the expansion for normal business, it generated huge income for banking class, so the one that is most benefited from a higher rate is banks. They will become the major spender and driver for economy

Indeed, if you use cash as unit of value, you will have this problem. And Keynes said that people prefer a rising cash income and rising price over a dropping cash income and dropping price. It is this basic instinct make inflative monetary policy seems reasonable

The problem is, in today's inflation based model, most of the new money do not enter economy as increased projects and salary, those money were used to buy assets and debt, which makes majority of people poorer

However, if new money can not be created at ease, and money becomes more valuable over time, business can still profit if there is demand

Take a bitcoin mining business for example, a mining rig of 2000W power now generate far less bitcoin income than 2011, but as a thumb of rule, the mining operation still roughly holds a line of 6 months return on investment (btc wise), regardless of bitcoin's exchange rate. And now the whole mining industry is making much more income than 2011, they are building larger sites, hiring more people. Those employees have much less bitcoin income comparing to 2011 due to the rise of bitcoin's exchange rate, but their purchasing power increased due to the overall industry is expanding. The reason is simply because the market demand is increasing at a fast pace, it is the market demand, not money supply, decide if a business is profitable or not

On the other hand, during 2014, mining rig price dropped as a result of contraction of aggregate demand, but that is a important sign of market telling you that now demand is weak, you must scale down the supply. Artificially increase the demand by printing more money does not change the fact that now aggregate demand is lower: When you are tired, you should sleep, instead of drinking more coffee. Luckily, bitcoin has a fixed daily supply, so the only way to adjust to shrinking demand is to drop its price and scale down the mining operation, everything worked as it should

USD has crashed against BTC for thousands of times, and this is just a beginning. Everything's value drops together with USD does not make the loss go away

I'm afraid that nothing would happen, the trick has been done, banks successfully exchanged their useless MBS into cashes and now they are sitting on mountains of cashes that should have been added for the future 30 years. There will never be a liquidity crisis for decades, a market crash is very unlikely, and when it crashes, banks will immediately release some part of those cashes to push the price back, so much for price stability of assets

The only risk is the value of their cash might crash due to loss of confidence in fiat money (due to widely spread knowledge of banking scam, or alternative currency like bitcoin), but that is still too early, not one in a million understand banks' tricks. Even those widely spread videos like "Money as debt" serials and "The biggest scam in the history of mankind" does not clearly make people understand the double spending nature of modern money creation

Exactly, if you get rid of the illusion of stable value of currency, then all the talks about inflation or deflation will be dismissed. In fact, even if you use currency as benchmark of value, in a same day, something's price is going down and some other things' price is going up, inflation and deflation happens at all levels at the same time in the economy due to supply and demand change, it does not matter

But saying that deflation will destroy job and create recession is some kind of political campaign: Banks want to create more money for themselves, so they prefer an inflative model, so they first inflate it and then stop printing and crash the economy, and tell people that deflation is bad, so that they could print more money for themselves. Considering that FED has successfully printed money of future 30 years and handed them to commercial banks, the success of this political campaign is enormous

If the mainstream economists insists on a deflative model, the world will be a totally different world, at least banks won't get a chance to rob during a financial crisis, and there would never have been a financial crisis in the first place

Increased productivity means less value for produced goods, since the supply increased and demand does not change, this is the basic economy 123

Output and input should not be expressed in currency, since the currency's value is changing all the time (Ruble dropped 50% against USD in a year, is that mean Russian's productivity suddenly doubled?)

In fact, there is no good way to measure the value, fiat money usually were used as an approximation, the precision of this approximation is about +-20%, any deflation or inflation is much lower than that scale, the pro-inflation talk can be regarded as an excuse for banks to print more money for themselves to spend



Speculation is also part of the economy, and in fact majority of today's economy is driven by speculation on assets, all of the newly created money directly goes to assets, not consumption, it is also the speculation of those assets caused the financial crisis


Again, it is a common mistake by economists to use currency as an absolute measure of value. But I understand that it is extremely difficult for them to understand that currency's value fluctuates all the time, since they have been using currency to measure value since they barely can do 1+1. If they start from an international point of view by looking at FOREX market, then they will understand that currency's stable value is just an illusion. Get rid of that illusion, then people will not look at the numbers in their account to decide if they are profitable or not, they will look at what they really gain from a certain economy activity

If exchange rate keeps going down then you can get more and more coins with same fiat, the hard part is to get more coins when exchange rate keeps rising

All of these problem of deflation is based on one assumption that fiat money's value is constant, and it is used as a benchmark of value, which is not true

For example, when you see a house's price going up and everything else's price keep the same, you think it is the house become more valuable. But the reality is your dollar worth less and everything else also worth less against that house

Why people stubbornly use fiat money as a benchmark of value, like using meter to measure length and using minute to measure time?

If you give up the belief of absolute value of currency, then all the claimed problems of deflation will disappear: When price of something drops, the purchasing power of the currency is increasing, means productivity is higher thus everything become more and cheaper, people will spend more, just like when bitcoin reached $1200, the amount of spent bitcoin is highest

On enterprise side, although the amount of currency they earn decreased, but currency appreciated, their real income will increase, salary become cheaper, they could hire more people and drive larger projects. This also happened when bitcoin price reached $1000+, lots of projects were setup back then

So, the claim of deflation's negative impact is just based on a stubbornly hold belief that currency is a benchmark of value. In fact the whole modern monetary theory is constructed on this blind belief

Value is never a stable thing, since supply and demand are changing all the time, stable value is just a wishful thinking. People look at the price label and feel that the price does not change, call that stability, but that is because the value of fiat money and those goods are all dropping at the same speed

Current large price swing of bitcoin is partly caused by extremely low liquidity due to low value, and partly due to large advances in mining technology. After the advance in mining technology has stabilized at more predictable speed, then price volatility will drop

States money does not have power against another nation, it is the currency war we are experiencing right now, eventually all those currencies will depreciate faster and faster fighting each other, while the universally accepted bitcoin will become the last stable ground of value

Actually mining rigs investment will be the same as bitcoin, buy low and sell high, now it is a good time to buy.  A large scale of hash rate increase will not happen due to highly concentrated production and low profit of mining farms. If chip makers make  alliance like OPEC to limit the chip production, then mining cost will rise quickly for retail customer

For an inflation based economy, deflation is kill, just like penicillin to bacteria

The deflation in 2008 is a cure for the disease that US has caught since 1971, however the bacteria has not been killed, they kidnap the whole world by printing more money

The slaveholders were sick, and the king decided to have all the slaves voluntarily double their work for free to make them recover from the disease.

The interesting thing is, the slavery is not intended, but a natural result of countless human's selection over hundreds of years, all the other solutions had been unstable and abolished (like gold standard), is it a human nature to prefer slavery over instability?

Before human mass adopt bitcoin, machine will. In future when human is going to request some service from machine, they must pay bitcoin, since machine does not know anything about fiat money, they only recognize blockchain

Human's ignorance is the source of their slavery, there is nothing you can do about it, but not every human is ignorant

The only one will be destroyed are the banks, and the whole scam exposed. People will learn from it and reorganize the economy with what they have left. However, FED printed 30 years' money to save the banks and now people did not learn anything from it and they have been ripped off even more due to this large scale of money printing

It depends on the person

From a consumer's point of view, deflation stimulate spending, since his money now have more value, he can buy more things. Inflation will stimulate saving, since his money can buy less things and he will save the money to buy more important things

From an investor point of view, deflation will increase his cash holding, and inflation will increase his investment and asset holding

So, for a consumer driven economy like US, deflation is good; for an investment driven economy like China, inflation is good

Reading this thread clearly make me understand why it is so important to have an alternative monetary system: You can write a novel about the topic but still no one understand if it works, so it is better to have 2 opposite systems running side by side and compare the effect

As observed during the past year, when bitcoin becomes more valuable (deflation), people spend more bitcoins, and when price of bitcoin crashed (inflation), people like to hoard more. So, this is against the traditional claim that inflation will stimulate spending and deflation will encourage hoarding