It's called opportunity cost. And yes, the threat of opportunity cost DOES cause people to not spend money. This is why I do not believe an inherently deflationary currency will ever work.
People keep saying that a deflationary currency cannot work... I still don't get it.. WHY? what am I missing???
I'm glad SgtSpike called BS on the claims that lost gains are not losses
. I happen to disagree with the comments about deflationary currency.
Bitcoins are undeniably inflating monetarily (about 30% annually). The deflation is based on current demand. Despite rapid monetary inflation, demand is high and prices are relatively stable or declining. Bitcoin is strong. Too strong?
The majority of people who are currently buying bitcoins do so because they believe in a its future value
, otherwise the prices would fall. (I admit its more complicated than this as miners do not nec. sell and exchange markets represent only a fraction of the total economy).
But within a few years, the inflation rate will be lower than any national central bank's current targets. Because the population of the Earth is finite, the popularity growth will necessarily slow down as well. So, I don't see any deflation at all, except that produced by real demand, which is not a bad thing and will slow down eventually.