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Author Topic: negative interest rates  (Read 612 times)
stevendobbs
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August 23, 2011, 10:00:37 AM
 #1

would negative interest rates be a good thing? a constantly devaluing currency triggers a desire to spend it rather than hoard it. Looking at bitcoin markets. It would seem there is a gap driven by speculation, between bid and ask prices. To get bitcoin more widely adopted, perhaps it should be devalued? decrease the puzzle complexity or slowly scale up the quantity of bitcoins held in wallets to encourage spending on goods rather than hoarding and speculation.
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antares
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August 23, 2011, 12:04:42 PM
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with most people directly selling their coins, decreasing difficulty or increasing the amount of bitcoins would hyperinflate the coins and end the project to soon!
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August 23, 2011, 12:13:57 PM
 #3

You've not followed through far enough.

Negative interest rates would also encourage more borrowing.  That wouldn't be a good thing.  Most (if not all) of the world's current financial troubles can be traced to one error: "borrowing too much".  More borrowing would be bad.

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stevendobbs
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August 23, 2011, 12:45:01 PM
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In the long run, it would seem a rising value of bitcoins vs currencies is inevitable as mining activity slows down. So at some point, there has to a way of devaluing bitcoins otherwise bitcoins will become as useless as gold with respect to the world economy: a speculative drain.

One of the reasons why I suggest negative interest rates is the example of local currency experiment in Wörgl, Austria which had great success and rapid take up. They also used negative interest rates in its introduction. Perhaps the effect of discouraging hoarding and speculation makes into a currency that must be used.

GDP = Velocity of Money x money supply.  negative interest rates should boost both parts of the equation.

And right now, surely we want bitcoins to be rapidly adopted?

--

or is the reason for negative interest rate success in context of a local economy because it effectively devalues the currency and improves trade balance of a local economy? Which is why it worked in Wörgl? Wheras Bitcoin aims to be global.

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