Why such agreement that Deflationary currency is a bad thing

[mastermojo]

I think that in moderation, stable inflation and deflation are both manageable in an economy.

[bitchess]

As somebody who has studied economics, can I just state that stable low inflation is the BEST course for any currency (whether virtual or fiat)?

Why else do the largest most established central banks try to achieve inflation rates of around 2%?

To slightly go into detail but not too much because I don't want to be pedantic.

Inflation encourages investment.  If on average you expect your holdings to be worth less in the future you will logically invest it to hedge against value loss.  Investment leads to economic stimulation in the real economy.  That is a positive cycle.  

Also, there is probably an optimal number for inflation that economies target to balance everything out.

I would include a link to a random article for support but I'm lazy.  Just google "optimal monetary policy".

[Rodyland]

As somebody who has studied economics, can I just state that stable low inflation is the BEST course for any currency (whether virtual or fiat)?

Why else do the largest most established central banks try to achieve inflation rates of around 2%?

To slightly go into detail but not too much because I don't want to be pedantic.

Inflation encourages investment.  If on average you expect your holdings to be worth less in the future you will logically invest it to hedge against value loss.  Investment leads to economic stimulation in the real economy.  That is a positive cycle.  

Also, there is probably an optimal number for inflation that economies target to balance everything out.

I would include a link to a random article for support but I'm lazy.  Just google "optimal monetary policy".

You're looking at the "problem" wrong.  You're looking through the glasses that have been coloured by the current fiat monetary systems.  In our fiat systems, debt is money.  In these instances deflation causes the real value of debt to increase, reducing the willingness of people to lend, reducing the availability of debt, reducing the supply of money, and there you have your deflationary spiral. 

In a non-debt-based system, at lease one link in that chain (reduction in supply of money) is broken, so deflation doesn't need to lead to a deflationary spiral.

And as for your arguments in favour of fiat... you say "inflation encourages investment".... who says that a monetary system needs to either encourage or discourage investment?  One could argue that inflation encourages malinvestment, as it lowers the cost of debt, and lowers the return required for investment to be considered worthwhile.   Productive investment is good for all, malinvestment is not.

But you know what - your opinion, my opinion, all worthless.  We live in interesting times, and with some luck in my lifetime a significant number of people are going to be proven so incredibly, ridiculously wrong that future generations will look back upon that group as we currently look upon those who believe the earth is flat.  Which group that is remains to be seen, and in the meantime all else is hot air.

[AlphaWolf]

As somebody who has studied economics, can I just state that stable low inflation is the BEST course for any currency (whether virtual or fiat)?

Why else do the largest most established central banks try to achieve inflation rates of around 2%?

A:  Because they get the money first, while it is literally more valuable than by the time it reaches us plebes.

B:  Because they're not consumers and are largely unaffected by inflation, except through A, which benefits them.

The thing I question about a deflationary economy is... do people take pay cuts every year in such an economy?  It is customary in many businesses to give "cost of living" raises on a regular basis... but in a deflationary economy, the business will receive less and less money per unit sold, so it would have to give its employees less and less money to avoid going bankrupt.  It matters not that the money on a per-unit basis is more valuable -- if it receives less units, and has to give less of those units to its employees.  So... in BTC-world, you take yearly pay-cuts.  I'm going to agree with another poster here -- the best currency is one that neither inflates nor deflates. 

Inflation encourages investment.  If on average you expect your holdings to be worth less in the future you will logically invest it to hedge against value loss.  Investment leads to economic stimulation in the real economy.  That is a positive cycle. 

"Encouraging investment" as you use it is trying to impose one's will over others.  Investment involves risk.  Risk-takers will invest regardless in order to make more money.  "Encourage investment" in this context is a euphemism for "steal value from savers so that saving becomes a net loss activity and investment becomes the lower-risk activity."  Note that you didn't decrease the risks of investment, you just increased the risk of saving.  The whole scheme is based on negative feedback.  A better system of "encouraging investment" would be to either lower the risk or increase the return.  A currency that doesn't inflate or deflate does just that.  It lowers the risk, because the company you're investing in won't be subject to the increasing costs of production, thus will have a better chance of surviving.  It increases return both due to the factor I just mentioned, and the fact that the money you receive from such an investment isn't devalued.  If you make 2% on an investment when there is no inflation, you actually made 2%.  If there was 2% inflation... you didn't make jack.  Good thing some a**hole decided for you that you should risk your hard-earned money just so you could break even...

[bitchess]

As somebody who has studied economics, can I just state that stable low inflation is the BEST course for any currency (whether virtual or fiat)?

Why else do the largest most established central banks try to achieve inflation rates of around 2%?

A:  Because they get the money first, while it is literally more valuable than by the time it reaches us plebes.

B:  Because they're not consumers and are largely unaffected by inflation, except through A, which benefits them.

The thing I question about a deflationary economy is... do people take pay cuts every year in such an economy?  It is customary in many businesses to give "cost of living" raises on a regular basis... but in a deflationary economy, the business will receive less and less money per unit sold, so it would have to give its employees less and less money to avoid going bankrupt.  It matters not that the money on a per-unit basis is more valuable -- if it receives less units, and has to give less of those units to its employees.  So... in BTC-world, you take yearly pay-cuts.  I'm going to agree with another poster here -- the best currency is one that neither inflates nor deflates.  

Inflation encourages investment.  If on average you expect your holdings to be worth less in the future you will logically invest it to hedge against value loss.  Investment leads to economic stimulation in the real economy.  That is a positive cycle.  

"Encouraging investment" as you use it is trying to impose one's will over others.  Investment involves risk.  Risk-takers will invest regardless in order to make more money.  "Encourage investment" in this context is a euphemism for "steal value from savers so that saving becomes a net loss activity and investment becomes the lower-risk activity."  Note that you didn't decrease the risks of investment, you just increased the risk of saving.  The whole scheme is based on negative feedback.  A better system of "encouraging investment" would be to either lower the risk or increase the return.  A currency that doesn't inflate or deflate does just that.  It lowers the risk, because the company you're investing in won't be subject to the increasing costs of production, thus will have a better chance of surviving.  It increases return both due to the factor I just mentioned, and the fact that the money you receive from such an investment isn't devalued.  If you make 2% on an investment when there is no inflation, you actually made 2%.  If there was 2% inflation... you didn't make jack.  Good thing some a**hole decided for you that you should risk your hard-earned money just so you could break even...

Absolutely, every price by definition (on average) goes down in a deflationary environment, even the price of labor.  This makes people hoard money and when you stuff it under your mattress it is like stopping the bloodflow in your veins.

You are right in saying that the optimal value of inflation is 0%.  I absolutely agree.  The problem is that if an economy somehow encounters .1% deflation, the effects are disastrous.  Any deflation breeds more deflation and it's like getting shot in the head immediately.

Central banks do everything in their possibility to avoid any risk of deflation by creation a buffer or margin of safety with inflation.  (in this case the buffer = 2%).

[bitchess]

As somebody who has studied economics, can I just state that stable low inflation is the BEST course for any currency (whether virtual or fiat)?

Why else do the largest most established central banks try to achieve inflation rates of around 2%?

To slightly go into detail but not too much because I don't want to be pedantic.

Inflation encourages investment.  If on average you expect your holdings to be worth less in the future you will logically invest it to hedge against value loss.  Investment leads to economic stimulation in the real economy.  That is a positive cycle.  

Also, there is probably an optimal number for inflation that economies target to balance everything out.

I would include a link to a random article for support but I'm lazy.  Just google "optimal monetary policy".

You're looking at the "problem" wrong.  You're looking through the glasses that have been coloured by the current fiat monetary systems.  In our fiat systems, debt is money.  In these instances deflation causes the real value of debt to increase, reducing the willingness of people to lend, reducing the availability of debt, reducing the supply of money, and there you have your deflationary spiral.  

In a non-debt-based system, at lease one link in that chain (reduction in supply of money) is broken, so deflation doesn't need to lead to a deflationary spiral.

And as for your arguments in favour of fiat... you say "inflation encourages investment".... who says that a monetary system needs to either encourage or discourage investment?  One could argue that inflation encourages malinvestment, as it lowers the cost of debt, and lowers the return required for investment to be considered worthwhile.   Productive investment is good for all, malinvestment is not.

But you know what - your opinion, my opinion, all worthless.  We live in interesting times, and with some luck in my lifetime a significant number of people are going to be proven so incredibly, ridiculously wrong that future generations will look back upon that group as we currently look upon those who believe the earth is flat.  Which group that is remains to be seen, and in the meantime all else is hot air.

No I am not stating my opinion, I am reiterating economic theory.  In a monetary system of fixed supply (let's say 21 million units in 2140) which encounters rising demand for money velocity driven by REAL economic growth, by definition, increases the price of the monetary unit.

Once people observe or expect to observe this, a deflationary spiral takes hold and destroys the REAL economy which depends on this monetary unit of transaction.  

Please start here
http://en.wikipedia.org/wiki/Quantity_theory_of_money

Reading that won't bring you completely up to speed but it's a start.  Sorry, I can't help but be pedantic on this topic.

[Rodyland]

As somebody who has studied economics, can I just state that stable low inflation is the BEST course for any currency (whether virtual or fiat)?

Why else do the largest most established central banks try to achieve inflation rates of around 2%?

To slightly go into detail but not too much because I don't want to be pedantic.

Inflation encourages investment.  If on average you expect your holdings to be worth less in the future you will logically invest it to hedge against value loss.  Investment leads to economic stimulation in the real economy.  That is a positive cycle.  

Also, there is probably an optimal number for inflation that economies target to balance everything out.

I would include a link to a random article for support but I'm lazy.  Just google "optimal monetary policy".

You're looking at the "problem" wrong.  You're looking through the glasses that have been coloured by the current fiat monetary systems.  In our fiat systems, debt is money.  In these instances deflation causes the real value of debt to increase, reducing the willingness of people to lend, reducing the availability of debt, reducing the supply of money, and there you have your deflationary spiral.  

In a non-debt-based system, at lease one link in that chain (reduction in supply of money) is broken, so deflation doesn't need to lead to a deflationary spiral.

And as for your arguments in favour of fiat... you say "inflation encourages investment".... who says that a monetary system needs to either encourage or discourage investment?  One could argue that inflation encourages malinvestment, as it lowers the cost of debt, and lowers the return required for investment to be considered worthwhile.   Productive investment is good for all, malinvestment is not.

But you know what - your opinion, my opinion, all worthless.  We live in interesting times, and with some luck in my lifetime a significant number of people are going to be proven so incredibly, ridiculously wrong that future generations will look back upon that group as we currently look upon those who believe the earth is flat.  Which group that is remains to be seen, and in the meantime all else is hot air.

No I am not stating my opinion, I am reiterating economic theory.  In a monetary system of fixed supply (let's say 21 million units in 2140) which encounters rising demand for money velocity driven by REAL economic growth, by definition, increases the price of the monetary unit.

Once people observe or expect to observe this, a deflationary spiral takes hold and destroys the REAL economy which depends on this monetary unit of transaction.  

Please start here
http://en.wikipedia.org/wiki/Quantity_theory_of_money

Reading that won't bring you completely up to speed but it's a start.  Sorry, I can't help but be pedantic on this topic.

OK, time to be pedantic here.  Your use of the word "theory" is that of the common usage (ie. an idea, more scientifically a hypothesis).

My "theory" is that the deflationary spiral is only an almost-guaranteed outcome in a system where debt and money are one-and-the-same.

The argument that all deflation is bad is rubbish.  In the economy right now, there are items deflating greatly in value.  My phone, two years old, is worth new today half what I paid for it.  I bought it knowing it would be half price in two years, because I needed a phone. 

Yet somehow, if the "average" level of inflation (by whatever particular weighting and adjustments that men paid more than I am are paid to make) is below zero, the economy will collapse.

But like I said - so much hot air, but only time will tell for sure.  And in the long run we are all dead.

[bitchess]

As somebody who has studied economics, can I just state that stable low inflation is the BEST course for any currency (whether virtual or fiat)?

Why else do the largest most established central banks try to achieve inflation rates of around 2%?

To slightly go into detail but not too much because I don't want to be pedantic.

Inflation encourages investment.  If on average you expect your holdings to be worth less in the future you will logically invest it to hedge against value loss.  Investment leads to economic stimulation in the real economy.  That is a positive cycle.  

Also, there is probably an optimal number for inflation that economies target to balance everything out.

I would include a link to a random article for support but I'm lazy.  Just google "optimal monetary policy".

You're looking at the "problem" wrong.  You're looking through the glasses that have been coloured by the current fiat monetary systems.  In our fiat systems, debt is money.  In these instances deflation causes the real value of debt to increase, reducing the willingness of people to lend, reducing the availability of debt, reducing the supply of money, and there you have your deflationary spiral.  

In a non-debt-based system, at lease one link in that chain (reduction in supply of money) is broken, so deflation doesn't need to lead to a deflationary spiral.

And as for your arguments in favour of fiat... you say "inflation encourages investment".... who says that a monetary system needs to either encourage or discourage investment?  One could argue that inflation encourages malinvestment, as it lowers the cost of debt, and lowers the return required for investment to be considered worthwhile.   Productive investment is good for all, malinvestment is not.

But you know what - your opinion, my opinion, all worthless.  We live in interesting times, and with some luck in my lifetime a significant number of people are going to be proven so incredibly, ridiculously wrong that future generations will look back upon that group as we currently look upon those who believe the earth is flat.  Which group that is remains to be seen, and in the meantime all else is hot air.

No I am not stating my opinion, I am reiterating economic theory.  In a monetary system of fixed supply (let's say 21 million units in 2140) which encounters rising demand for money velocity driven by REAL economic growth, by definition, increases the price of the monetary unit.

Once people observe or expect to observe this, a deflationary spiral takes hold and destroys the REAL economy which depends on this monetary unit of transaction.  

Please start here
http://en.wikipedia.org/wiki/Quantity_theory_of_money

Reading that won't bring you completely up to speed but it's a start.  Sorry, I can't help but be pedantic on this topic.

OK, time to be pedantic here.  Your use of the word "theory" is that of the common usage (ie. an idea, more scientifically a hypothesis).

My "theory" is that the deflationary spiral is only an almost-guaranteed outcome in a system where debt and money are one-and-the-same.

The argument that all deflation is bad is rubbish.  In the economy right now, there are items deflating greatly in value.  My phone, two years old, is worth new today half what I paid for it.  I bought it knowing it would be half price in two years, because I needed a phone. 

Yet somehow, if the "average" level of inflation (by whatever particular weighting and adjustments that men paid more than I am are paid to make) is below zero, the economy will collapse.

But like I said - so much hot air, but only time will tell for sure.  And in the long run we are all dead.

can we look at the past periods of deflation? 

http://en.wikipedia.org/wiki/Deflation#Effects

"Deflation was present during most economic depressions in US history[22] Deflation is generally regarded negatively, as it causes a transfer of wealth from borrowers and holders of illiquid assets, to the benefit of savers and of holders of liquid assets and currency, and because confused pricing signals[citation needed] cause malinvestment, in the form of under-investment."

[Rodyland]

can we look at the past periods of deflation? 

http://en.wikipedia.org/wiki/Deflation#Effects

"Deflation was present during most economic depressions in US history[22] Deflation is generally regarded negatively, as it causes a transfer of wealth from borrowers and holders of illiquid assets, to the benefit of savers and of holders of liquid assets and currency, and because confused pricing signals[citation needed] cause malinvestment, in the form of under-investment."

I'm not saying deflation doesn't benefit savers at the expense of borrowers.  It does, just like inflation benefits borrowers at the expense of savers.  And just like deflation causes malinvestment, so does inflation.  Your arguments here hold no water.
 
What I'm saying is that the deflation => deflationary spiral => the end of the world is not a given in a monetary system that isn't debt backed.  In a debt-backed monetary system that is totally the case, and we all know why.

I guess the disconnect here is the cause of deflation.  In a static monetary system, the level of deflation would be relatively close to the level of growth.  More goods and services chasing the same amount of money.  However in a debt-backed system, deflation causes a contraction in the money supply, so you've got more goods and services chasing a shrinking money supply - a double whammy, if you will.

I find it curious that you have never once addressed my assertion that the money system not being debt backed means that its fundamental behaviour, especially in the face of deflation, at least _could_ be different.  Despite my constant assertions that this difference is the reason for my differing opinions.  Which makes me think you're not really interested in an argument or a discussion, merely in spouting the same old Keynesian/fiat lines that we keep hearing from the likes of Krugman.

[bitchess]

can we look at the past periods of deflation? 

http://en.wikipedia.org/wiki/Deflation#Effects

"Deflation was present during most economic depressions in US history[22] Deflation is generally regarded negatively, as it causes a transfer of wealth from borrowers and holders of illiquid assets, to the benefit of savers and of holders of liquid assets and currency, and because confused pricing signals[citation needed] cause malinvestment, in the form of under-investment."

I'm not saying deflation doesn't benefit savers at the expense of borrowers.  It does, just like inflation benefits borrowers at the expense of savers.  And just like deflation causes malinvestment, so does inflation.  Your arguments here hold no water.
 
What I'm saying is that the deflation => deflationary spiral => the end of the world is not a given in a monetary system that isn't debt backed.  In a debt-backed monetary system that is totally the case, and we all know why.

I guess the disconnect here is the cause of deflation.  In a static monetary system, the level of deflation would be relatively close to the level of growth.  More goods and services chasing the same amount of money.  However in a debt-backed system, deflation causes a contraction in the money supply, so you've got more goods and services chasing a shrinking money supply - a double whammy, if you will.

I find it curious that you have never once addressed my assertion that the money system not being debt backed means that its fundamental behaviour, especially in the face of deflation, at least _could_ be different.  Despite my constant assertions that this difference is the reason for my differing opinions.  Which makes me think you're not really interested in an argument or a discussion, merely in spouting the same old Keynesian/fiat lines that we keep hearing from the likes of Krugman.

Yes, I ignored that point my bad.  Let's talk through.  Can you explain your definition of debt-backed system?  Do you mean fractional reserve system?  Why does the double whammy in a debt backed system negate the single whammy of deflation in a non-debt back environment?

Also stable low inflation rates promotes growth.  I'll be more likely to buy something today than save to buy it tomorrow.  Or I'll invest my cash in goog stock.

I actually think creating a lending system for BTC will adress the deflationary spiral issue

[TiagoTiago]

In a consistently deflationary economy, wouldn't anyone that got enough money start to be less careful with how they spend their money, since what they have saved continues to sustain them just by sitting still?

[pyra-proxy]

Bitcoin is not Deflationary currency. Current yearly inflation of Bitcoin is higher than fiat. In your whole life Bitcoin will be inflation currency, though the inflation rate decreases every year.

How can it be inflated when the supply of Bitcoins cannot be changed? People like you need to look up the dictionary definition of inflation, this is to do with money supply, not speculation, which are both entirely different things.

ehm, 144*25 BTCs are created daily, thats why inflation

This does not necessarily mean its inflationary.....  inflation also takes into account demand as well as supply, for instance if everyone in the world started using bit coin tomorrow even with all those shiny new coins you would see massive levels of deflation and this IMHO is why btc price is generally on the rise and will continue upward again soon, simply put the bit coin community is growing and very likely faster than new coins can accommodate right now.

[Rodyland]

can we look at the past periods of deflation? 

http://en.wikipedia.org/wiki/Deflation#Effects

"Deflation was present during most economic depressions in US history[22] Deflation is generally regarded negatively, as it causes a transfer of wealth from borrowers and holders of illiquid assets, to the benefit of savers and of holders of liquid assets and currency, and because confused pricing signals[citation needed] cause malinvestment, in the form of under-investment."

I'm not saying deflation doesn't benefit savers at the expense of borrowers.  It does, just like inflation benefits borrowers at the expense of savers.  And just like deflation causes malinvestment, so does inflation.  Your arguments here hold no water.
 
What I'm saying is that the deflation => deflationary spiral => the end of the world is not a given in a monetary system that isn't debt backed.  In a debt-backed monetary system that is totally the case, and we all know why.

I guess the disconnect here is the cause of deflation.  In a static monetary system, the level of deflation would be relatively close to the level of growth.  More goods and services chasing the same amount of money.  However in a debt-backed system, deflation causes a contraction in the money supply, so you've got more goods and services chasing a shrinking money supply - a double whammy, if you will.

I find it curious that you have never once addressed my assertion that the money system not being debt backed means that its fundamental behaviour, especially in the face of deflation, at least _could_ be different.  Despite my constant assertions that this difference is the reason for my differing opinions.  Which makes me think you're not really interested in an argument or a discussion, merely in spouting the same old Keynesian/fiat lines that we keep hearing from the likes of Krugman.

Yes, I ignored that point my bad.  Let's talk through.  Can you explain your definition of debt-backed system?  Do you mean fractional reserve system?  Why does the double whammy in a debt backed system negate the single whammy of deflation in a non-debt back environment?

Also stable low inflation rates promotes growth.  I'll be more likely to buy something today than save to buy it tomorrow.  Or I'll invest my cash in goog stock.

I actually think creating a lending system for BTC will adress the deflationary spiral issue

I don't mean fractional reserve.   I have no problem with fractional reserve, as long as the fractional nature, and the risks behind it, are made plain and clear to all depositors.

Do a quick google for "debt backed money" and you'll see what I'm saying.  Try to weed out the nutters and look for the facts behind it.  The vast majority of money in our currency systems are borne from debt - You go to the bank and ask for a loan, and the promise from you to repay that money is all that is needed for the bank to effectively conjure that money into existence.

Even in a monetary system that isn't backed by debt, severe deflation can still cause problems.  And what we're seeing in Bitcoin right now is probably some of the most severe deflation (and volatility) that you can imagine in a currency.  (And yet people are still doing their level best to make a go of it - interpret that as stupidity or optimism as you prefer).

The reason deflation causes disaster in a debt-backed system is that deflation causes the money supply to shrink, because loans dry up, leading to the deflationary death spiral.  In a system where money isn't backed by debt, the drying up of credit doesn't affect the actual supply of money, so you don't have that vicious feedback cycle.

That is the reason central banks try very, very hard to avoid deflation and actually target mild inflation - they know that their monetary system would verge on collapse in the presence of persistent deflation.  However they don't publicise the reasons behind, merely trotting out the "deflation is bad" line so often that it's become accepted truth.  Problem is, it's become accepted as a universal truth, rather than what it really is - the truth for the current system which they are charged with maintaining.

[TimJBenham]

What difference does it make to the deflation argument whether BTC is a circulating currency or a store of value used alongside fiat etc? If BTC is continually appreciating against fiat faster than normal investments then the same argument applies: you'd be stupid to invest in real assets, stocks and bonds etc with your fiat when you can buy BTC.

[Rodyland]

What difference does it make to the deflation argument whether BTC is a circulating currency or a store of value used alongside fiat etc? If BTC is continually appreciating against fiat faster than normal investments then the same argument applies: you'd be stupid to invest in real assets, stocks and bonds etc with your fiat when you can buy BTC.

No, you wouldn't be stupid to invest in real assets - deflation merely raises the bar.  If you can get a risk-free 10% p.a. in a cold wallet, any investment must beat this benchmark to even be considered.  In my personal case, I've invested my bitcoins in bitcoin-producing investments, so the deflation vs fiat is not a concern.

Current bitcoin deflation is only a problem when compared to fiat.  WHich is unfortunately the world we live in right now.  In a bitcoin-only world, once we reach some semblance of steady-state, the deflation vs fiat would matter less if at all (for example, how much do you personally care that your country's currency moves by 1% or 2% a day against, say, the JPY or the Euro?)

Or maybe I misread what you posted. 

[Anon136]

Disinflation has been covered to some extent. What would an economy look like if the only currency was one with built in deflation.

Would people live in smaller homes since their currency would generally appreciate relative to their home? Would companies need to outperform the general level of productivity increases and population growth in order to get their first dollar of investment capital? I believe that if the entire word used only a deflationary currency then deflation would be a function of productivity increases, population increases and the shrinking of the supply of currency (e.g. lost passwords); is this a correct view?

What other implications/problems or benefits are there with a potential worldwide adoption of Bitcoins and a ubiquitous rejection of fiat currency?

As compared to a stable purchasing power money, it wouldnt as accurately reflect the will of consumers in their relative preference for savings vs consumption. It would skew it in favor of a higher savings rate than they would have otherwise practiced. In my opinion its better than the opposite but not as good as a stable currency.

also it would incent people to invest in money, which is a non productive asset. It would be much better if people invested in capital instead.

[whatnow]

The masses run hot and cold. Bitcoins will act just like gold. Up for years then down for years. It was below $200 in the mid 70s now it is above $1450 but was several hundred dollars higher at the start of the year.  You have already seen one spike in Bitcoins just a few weeks ago. If it had stayed at that level for a few months and then dropped by 50% a lot of people that think it is so cool would be saying it is junk. The one thing I remember from public school is the Tulip Bulb Bubble. Everybody thought it was cool until the day it was not.
I am not putting Bitcoin down I am just saying when something is hot it goes up in price, when it not it drops in price. Merchants may have a problem if the price is volatile or rises too fast. The time delay between buying and selling could take all their profit just like the dollar in the currency market.  Only time will tell with Bitcoins. In some ways they are just like Apple stock it was the richest company in the world until the big boys took their profits. Who knows the Federal Government may come close to a balanced budget in a few years.
I agree that people should live within their means. Some debt can be good like buying a house to live in but not to flip. Or a car loan for 2 or 3 years but most credit card debt is bad if you are just buying stuff. If you are just buying stuff than you need to pay in cash or use your credit card like cash and pay it off at the end of the month.

[effect]

In a deflationary currency producers can still profit by selling their goods for bitcoins. All you need to do is hold your bitcoins for a few days after receiving them before either cashing them out for fiat or using bitcoins to pay for the business expenses etc. Investors/producers still make more money than savers.

Also, a currency will only deflate if people are using the currency. Bitcoins won't hit $1000 if nobody is accepting bitcoins.

[Elwar]

As somebody who has studied economics, can I just state that stable low inflation is the BEST course for any currency (whether virtual or fiat)?

but with my economics background, I am just echoing what major economists have communicated about the drawbacks of deflation.

I am reiterating economic theory.

You failed to mention that all of your economics teachers likely have memorized Keynes' books and worship his every word. Which is ironic because Keynes is no longer stating theories because he is dead, and thus there is no more supply of his theories and thus no inflation of further theories. So Keynes should be ignored by anyone who supports inflation.

Come back when you understand Hayek, Mises and Friedman.

[Rodyland]

As somebody who has studied economics, can I just state that stable low inflation is the BEST course for any currency (whether virtual or fiat)?

but with my economics background, I am just echoing what major economists have communicated about the drawbacks of deflation.

I am reiterating economic theory.

You failed to mention that all of your economics teachers likely have memorized Keynes' books and worship his every word. Which is ironic because Keynes is no longer stating theories because he is dead, and thus there is no more supply of his theories and thus no inflation of further theories. So Keynes should be ignored by anyone who supports inflation.

Come back when you understand Hayek, Mises and Friedman.

If nothing else, you made me smile today, and for that I thank you.