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Author Topic: Trade Deficits  (Read 1105 times)
breandan81 (OP)
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February 15, 2011, 10:06:11 AM
 #1

A thought occured to me today.  For the most part, actual goods have to be purchased somewhere along the line in some sort of national currency.  That is to say, even those who do business in bitcoins, at least have to buy raw materials in dollars/euros etc at the moment, and probably will for quite some time.  This automatically leads to a trade deficit between the bitcoin community, and the various national currencies.   For the time being, lots of people have been wanting to join, and have been buying bitcoins for national currency, this has more than equaled any deficit due to spending bitcoins on other things, as evidenced by the sharp increase in value.  Eventually this will level off.  In order for this not to become a problem in the long run, there would have to be goods/services that could only be (or at the very least are much better to be) purchased in bitcoins, forcing people to exchange fiat currency for bitcoins and closing the trade deficit.  Maybe this isn't a problem at all, once the bitcoin community becomes big enough a large enough number of people will prefer to store their wealth that way that when they are paid in FRN they will exchange that to bitcoin?
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breandan81 (OP)
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February 15, 2011, 10:09:48 AM
 #2

Actually, replying to my own post, the obvious answer occurs.  Bitcoin is better than any other medium of exchange for cheaply transferring money from anywhere to anywhere in the world.  People purchasing bitcoins in order to conduct business easily over the internet would be the reason there wouldn't be a net flux out of the bitcoin economy.  Yes?
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September 18, 2023, 07:43:51 AM
 #3

I think there already are plenty of goods you can buy only using Bitcoin, they just aren’t mainstream enough to make a big impact. If governments do start using crypto I don’t think we need to worry about the “trade deficit” as you put it. Clearly there will be plenty more demand than supply if adoption continues, and Bitcoin was designed that way.

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September 18, 2023, 07:54:59 AM
 #4

In order for this not to become a problem in the long run, there would have to be goods/services that could only be (or at the very least are much better to be) purchased in bitcoins, forcing people to exchange fiat currency for bitcoins and closing the trade deficit.
If you want to have stable source of income for a business or for your portfolio, you can choose fiat currency with assumption that fiat currency will be fine, not hyper inflation and no serious loss of its purchasing power after a while.

Even the US. dollar lost its purchasing power over time, so be careful even you pick fiat currency.

If you pick a volatile asset like Bitcoin, you have to accept risk as a business owner, a store operator or an investor, you can not have both stability of price and chance to get profit or low, zero risk factor.

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September 18, 2023, 11:28:26 AM
 #5

Bitcoin's current dependency on national currencies for goods and services does create an interesting dynamic. The shift you mentioned, where people prefer to store their wealth in Bitcoin and use it for everyday transactions, could be a natural evolution. It might take time, but as Bitcoin's adoption grows, we might see a shift towards a more balanced trade situation.
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September 18, 2023, 07:02:19 PM
 #6

In order for this not to become a problem in the long run, there would have to be goods/services that could only be (or at the very least are much better to be) purchased in bitcoins, forcing people to exchange fiat currency for bitcoins and closing the trade deficit.

You have the opportunity to use a unique decentralized currency, but you still want to introduce enforcement and regulation into it. What's wrong with you?

There is no need to force anyone to use Bitcoin. People already see its advantages and begin to use it, without any enforcement.
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September 18, 2023, 07:50:13 PM
 #7

In order for this not to become a problem in the long run, there would have to be goods/services that could only be (or at the very least are much better to be) purchased in bitcoins, forcing people to exchange fiat currency for bitcoins and closing the trade deficit.  Maybe this isn't a problem at all, once the bitcoin community becomes big enough a large enough number of people will prefer to store their wealth that way that when they are paid in FRN they will exchange that to bitcoin?

There is no easy solution for that trade deficit and I'm quite sure that in current times people still prefer fiat over Bitcoin for purchasing of goods at local stores or in online stores. There aren't any good online markets where users can get unique items only using Bitcoin and that's not going to change anytime soon. Bitcoin is getting accepted by many new people and it will continue to get accepted by even more people overtime, and there are chances that in future some websites or a local businesses might accept Bitcoin only payments for some specific items.

But, still I don't think that any reputed businesses would take a step like that because disqualifying fiat payments could reduce the number of customers for those businesses and that's why any business or site would probably take a route where they will have both Bitcoin and fiat as way of payment. They can instead have a strategy in which users that pay via Bitcoin get some extra perks, bonuses, and discounts, and a strategy like that might increase the trades with Bitcoin but still that approach will take a lot of time.

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September 19, 2023, 11:01:24 AM
 #8

That's what we expect to happen in the future. Though a lot of people are buying or storing Bitcoin only so that they can sell them later and get some profit from their investments, some of us are actually waiting for the time when Bitcoin will become more mainstream and there will be more widely available good and services that we can purchase directly with Bitcoins that we have so that we don't need to convert our Bitcoins to another currency for that.

However, this will take time to happen, and we will need a lot more adoption and belief for that. As long as governments and a very high percentage of the global population oppose the idea, the possibilities will be less, but if we see a change in that, we will most probably see this getting implemented.

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