Why such agreement that Deflationary currency is a bad thing

[sgexpat]

Well in the case of BTConly enugh people have t trust in the usability of it then it could be used to save money. Which is beautiful. But i would assume we also need a cryptomoney that is designed for to be spend - Like many lokal currencys with demurrage http://www.digplanet.com/wiki/Demurrage_%28currency%29 or the brakteaten money in medieval times 12-15 century http://p2pfoundation.net/Brakteaten_Money.

Not sure why we would ever want demurrage - which is basically a tax on liquid monetary assets - unless we want even further expansion of the state?  All that does, anyway, is make the keeping of cash a money losing proposition.  One could still invest the money in savings instruments.  What's the point of it all besides expanding government power, anyway?

I'd urge against it and would never avoid a currency which participated in such a tax system if I had a choice.

Having Gold or BTC's and not spending them is one way to "save" ... it means consumables that you could have consumed are either consumed by others or don't need to be created, freeing other resources up for capital investments.  That's what your "savings" is in reality if you are talking strictly speaking about hoarding money itself.  A [usually] more profitable mechanism for savings would be to loan your money to someone else who will build a lasting asset with it, that creates future consumables (capital investment).  This can happen 1:1 or via a banking system.  Either way you look at it (cash hoarding or investing) it is not a bad thing to save instead of spend. The best is if people are 100% free to spend and save their own monetary instruments as they see fit, thereby deciding what gets consumed now or later.  I am 100% sure this is morally better as well as produces better outcomes than where some central planners try to favour spending over savings artificially. 

[Francesco]

I just don't understand where you guys take the idea that "in a deflationary world, free market will make interests negative"

Would you loan 100 BTC today, for the promise of 95 next year?
(if the answer is yes -we have a deal!)

In a deflationary world, you would have much less investment. No credit bubbles; but for that purpose, also all our current wealth is "bubble" -it has been made possible by debit expansion and state deficit spending. We would settle down to where a "solid" growth would have led us -that is, to a much poorer economy. Maybe then we would start growing "healthly" (albait for sure, much more slowly), but the transaction would be incredibly painful, destroying much of our productive system that simply cannot exist without easy credit and the compulsion to consume created by inflation.

[sgexpat]

I just don't understand where you guys take the idea that "in a deflationary world, free market will make interests negative"

Would you loan 100 BTC today, for the promise of 95 next year?
(if the answer is yes -we have a deal!)

In a deflationary world, you would have much less investment. No credit bubbles; but for that purpose, also all our current wealth is "bubble" -it has been made possible by debit expansion and state deficit spending. We would settle down to where a "solid" growth would have led us -that is, to a much poorer economy. Maybe then we would start growing "healthly" (albait for sure, much more slowly), but the transaction would be incredibly painful, destroying much of our productive system that simply cannot exist without easy credit and the compulsion to consume created by inflation.

think about it this way

if you promised me to give me 95 of [whatever 2014's major CPU is] in exchange for 100 of [whatever today's major CPU is] I'd take it

Of course we are strictly postulating something which is pretty unlikely for reasons which I have stated above (where you think money itself is GUARANTEED to buy more and more and more with no investment).

[Billy3]

I just don't understand where you guys take the idea that "in a deflationary world, free market will make interests negative"

Would you loan 100 BTC today, for the promise of 95 next year?
(if the answer is yes -we have a deal!)

In a deflationary world, you would have much less investment. No credit bubbles; but for that purpose, also all our current wealth is "bubble" -it has been made possible by debit expansion and state deficit spending. We would settle down to where a "solid" growth would have led us -that is, to a much poorer economy. Maybe then we would start growing "healthly" (albait for sure, much more slowly), but the transaction would be incredibly painful, destroying much of our productive system that simply cannot exist without easy credit and the compulsion to consume created by inflation.

This would only happen in a fixed fractional reserve situation whereas you have 100 BTC in your reserves and so you can loan out 500 BTC based on those reserves. Your 100 BTC would be worth 103% at end of year (deflation) and your 500 BTC worth of loans will be worth 110% (of 100BTC) as you loaned them out at a -1% rate (3% - 1%). So you now have 113 BTC (103 + 10 BTC) in reserve at end of year. You then can loan out 65 more BTC.

Otherwise you are correct, you would be better just to hang on to the coin.

[townf]

Another mechanism which breaks the above: if a currency system experienced such dramatic appreciation on an ongoing basis and for so long as to convince people it would never end it will be supplemented with other means of exchange and would basically be a store of value and not a means of exchange  AT ALL..  So what?  Other currencies will be used... 

That's my point. Other currencies will be used. You aren't motivated to spend or do anything except hoard when the value of the money is constantly rising. I'm not saying everybody is going to quit their jobs, they'll probably just use a different currency to buy stuff with, like you said. What good is that for bitcoin?

A lot of people here are drunk on the deflationary koolaid because they feel like they are getting richer for doing nothing (and they are, even with the current inflation until 2040) and they love it and want to rationalize it.

There is nothing else to do with bitcoins other than sit on them currently, but them being used as currency is going to be hampered by people saying stuff like "I'm not paying that much for item X, it's worth it for me to wait it out until item X is cheaper". Meanwhile, producer of item X is going broke, and will accept other currencies instead that won't make him go crazy.

Some people get hurt by inflation, the opposite people get hurt by deflation. If you're going to say one is bad, you have to say the other is bad if you want to be impartial. You could also say both are great! (for some people, and opposite people)

[niniyo]

Bitcoin is not inherently deflationary.  It is in fact inflationary until it reaches 21M coins and then it's stable.  Deflation occurs when the money supply *shrinks*, which doesn't happen with bitcoin unless people lose their private keys.

Prices in bitcoin will fall as it becomes more popular and valuble, but this is just a result of the demand for bitcoins increasing.  Once it reaches maturity and 21M coins, hopefully the growth in adoption has reached saturation, at which point the supply/demand for bitcoins (and hence price) will be determined by the demand for money.  Monday has a utility value (it is needed to facilitate business) so as the economy grows, the demand for money will increase and so bitcoin becomes more valuable (encouraging people to be less speculative with their spending/investments).  If the economy goes into recession then the demand for money decreases and prices go up (inflation) encouraging people to spend more and be more speculative.  Overall it forms a nice equilibrium where the price of money is determined by the business cycle.

[townf]

Keep in mind, if BTC were the only currency then only productivity increases and workforce increases would deflate things, so deflation wouldn't be a sure thing at all times.

It will always be pretty deflationary because the population is always growing, there is going to be a hard cap on the quantity, and over time inevitibly coins will be lost at more or less a steady rate. All those things together will put pressure on commerce. I'm not saying it's guaranteed to be useless, but other currencies will be favored as a medium of exchange, IMO. Hopefully other decentralized currencies

[niniyo]

I don't think it would put much pressure on commerce.  As people need money (bitcoins) they will offer a higher and higher price for it  (or, for example, they will offer to work for cheaper and cheaper wages).  As with any market, there is an equilibrium that will balance this, not a positive feedback loop that makes it worse.

In the positive feedback loop scenario, everyone sees that there is deflation so they decide to withhold their purchases because they are "profiting" from holding money.  However this is the greater fool theory - if I don't spend my money now, someone will pay even more for it in the future.  This type of thinking can crash back in the opposite direction. Ie, someone cashes in which cheapens the price of money, which triggers fear in all the hoarders who race to spend their money as inflation comes back.

The value of money will be priced according to the demand for money.  This will be kept in check through supply/demand equilibrium.  Of course there will always be speculation, bubbles etc, but in the end the fundamentals of supply/demand will determine the purchasing power of a bitcoin.

Thats why in my opinion, a steady growth in population, causing a steady appreciation in the purchasing power of a money, is not going to disrupt the economy.

[chrono.v]

This "deflation" argument is bullshit and propped up by people who are still seeped in Keynesianism and Monetarism, which are the same thing. If people understood Austrian economics they would realize that these terminologies (deflation and inflation) only mean something because of the central planning phase that the world is currently undergoing.

If people want to learn economics, they should read http://library.mises.org/books/Gene%20Callahan/Economics%20for%20Real%20People.pdf, David Stockman's "The Great Deformation", and https://mises.org/journals/qjae/pdf/qjae14_3_3.pdf.