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Comment by tfha | Hacker News Reader

I've never really accepted this argument. If your money is inflating, that's incentive to spend because you know it's losing value. That's a terrible reason to spend money.

If your money is deflating, you are still going to spend it because there are things that you want to accomplish. Whether it's eating food, sustaining a hobby, or making a difference in the world, people will continue to spend a deflationary currency.

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I think the point is more to do with savings: in a non-deflationary environment, you have the incentive to invest your savings in potentially productive use. In a deflationary environment the incentive is simply to hide your money under your mattress, which doesn't help anyone.

The trouble is, right now there seems to be a lot of savings sloshing around compared to the potentially productive uses they could be put to. So the price of every investment from houses to shares to made-up internet money is going through the roof as people look for somewhere, anywhere, they can put their money where it won't be eaten away by inflation.

This isn't true. If you are hoarding Bitcoin and not putting it into productive use, you are reducing the supply. Thereby with constant demand the price should increase. In doing this, you have increased to wealth of others in the economy (of the currency) who can then put that into productive use where they believe they can generate gains above the rate of return of the expected deflation.

Yes, but you'll still want those things in a month, or six months, or a year. Given the expectation that your real purchasing power will grow, and you'll be even to afford even more of that hobby if you wait, you'll decide not to transact now for many discretionary expenses. Unfortunately, this puts the store or vendor you would have transacted from in dire straits--and then they decide to consume less.

Summed over an entire economy, this sort of behavior will reduce aggregate demand and the velocity of money enough to damage productivity and growth: it's called a "deflationary spiral."

Summed over an entire economy, inflationary behavior will result in stealing from the poor and middle class to fund the wealthy and overconsumption and ecologic destruction.

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