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Comment by wickawic | Hacker News Reader

For better or worse, inflation is a primary tool the government and banks use to influence their citizens' behavior. Without inflation there is no incentive to spend your money and recycle it back into the system. It can also be used to soften currency fluctuations.

That being said, if governments used cryptocurrency it opens a lot of interesting avenues for them. Tax fraud might be a thing of the past, people could be forced to register their wallets publicly, better protections for lost wallets. Inflation could be exchanged for variably adding/removing coins from the market.

Overall governments need to be able to manipulate currency, or all their citizens are totally exposed to the global market. Imagine if you had to check your savings account multiple times per day to watch it fluctuate thousands of "dollars" in value.

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"Without inflation there is no incentive to spend your money"

That is quite the exaggeration.

Exactly. People don't really want money. They want the stuff / services that the money buys.

Even the deflationary markets, such as electronics, don't see any problems selling their products.

I think what they meant is "Without inflation there is no incentive to invest your money, rather than stuffing it in your mattress"

investments in a Bitcoin world would just have to give much higher rates of return.. I don't see how it fundamentally can't work. Also people don't realize but mathematically if Bitcoin was the size of a fiat currency its volatility would be more like a fist currency.

I honestly have no idea what you're talking about. All I'm trying to say is that economists generally agree that a small amount of inflation (around 2%) is good because people will rather have their wealth in stocks/bonds/etc rather than the fiat currency itself. We want money to move around, rather than sit in someone's safe

>We want money to move around, rather than sit in someone's safe

It's just paper. What's wrong with it sitting in someone's safe? We certainly don't want actual productive capital assets to be idle, but dollar bills don't produce anything. If they're sitting in a safe, the value of the ones that aren't in the safe goes up slightly.

I'm not sure quite what they meant, but that doesn't sound quite right to me either.

If the currency is stagnant or close to stagnant, the incentive to invest is that you end up with more wealth overall.

I'm not sure it's possible for deflation to be both predictable and higher than the market rate of return, because people today would immediately speculate and bid up the price of the currency to reflect its future expected value.

Of course inflation is an added incentive to invest money, or at least to store your wealth in assets other than money.

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