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Author Topic: Deflation, an accounting problem?  (Read 857 times)
freeman
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February 26, 2011, 02:04:55 AM
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Sorry if I'm beating a dead horse here.  I did read a lot of the old forum postings regarding the risks of deflation (i.e. appreciation of bitcoin vs other commodities).   I'm not scared of the "deflation spiral" bogyman.  In fact, I find it assuming how vehemently some people will argue the "deflation is bad" side without providing any real arguments (except perhaps appeal to authority).

However, it seems to me that too much deflation (or inflation) is quite inconvenient if you want to use BTC as an accounting currency.  An example of the problem is prices of goods in stores (virtual or otherwise).  If the value of BTC changes too fast then people will be forced to constantly adjust prices to match.  Keeping a set of accounts would seem to pose similar difficulties.

I'm curious what other people think.  One thing that makes me somewhat optimistic is that after the initial growth period the deflation rate should slow down and end up matching the growth rate of the economy trading in bitcoin.  Is this going to be a serious problem during the initial growth of bitcoin as a currency?
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February 26, 2011, 02:40:54 AM
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Is this going to be a serious problem during the initial growth of bitcoin as a currency?

Initial growth? I don't think so.

Maybe later, once the generation rate has leveled off, someone accidentally deleting a few million bitcoins might cause a bump in the value which would necessitate a book-keeping nightmare, but any small losses would pretty much get absorbed by the market. And right now, all losses are small, compared to the generation rate.

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