I guess this is been discussed many times, but maybe not with this exact focus.
I red some article of some 'economy expert' saying that bitcoin will fail because deflation gives people an incentive to save and store value instead of spending. Without an incentive to spend the economy would generally slow down.
Now, using the word 'economy' like this is an abuse in the sense that economy is not a synonym for "total amount of transactions".
Being born and raised in the country, one thing that puzzles me now that I live in a first world capital, is how pointless consumption became. In order for a business to become successful, it is necessary in the first place that it generates a big amount of transactions. There is no value in something that built with proper quality and will last for long periods of time with little or no maintenance.
Furniture, electronics, clothes, all these went from being medium term investments to almost disposable goods, and indeed this trend is moving forward. The current economical model forces production parties to keep making profit instead of just making profit.
This is fundamentally different.
Basically, deflation would enable people to hold on to whatever value they managed to collect through their work. I think it could lead to a much better sense of what 'need' really means. If the productive machine does add real value ten the currency would deflate naturally, so there wouldn't be much of a problem of people being tight to it as they would be holding more value in their pockets anyway (because of deflation).
Does this makes sense? Does it have any major flaw?
This would force a huge paradigm shift, and obviously established power would offer resistance to change. Hoever, bitcoin is proving that it is possible for the masses to push change from underneath. Can such changes be pushed to the extent of changing the core of world economics?
Spot on! This has long been my thinking, as well. The world's current financial system is debt based (especially the U.S. who happens to have the reserve currency) and inflation is only necessary because constant growth of nominal dollars is needed to keep the accrued debt of the past at bay. Inflation makes older dollars worth less, enabling newer dollars (created in more quanitity) to pay off the old debt. It's basically a giant ponzi scheme and the moment that the nominal growth stops and the value increases (deflation), the music stops and the system crashes. That's why they've kept interest rates so low for so long because it fosters creation of new debt and keeps everything running.
Inflation only benefits the group that creates the debt (government/banking system). Deflation hurts them, therefore all the propaganda against deflation.
