Quote:
Originally Posted by AmeliaG
Like most economic levers, it is a teeter totter system. When a currency grows too strong, exports drop. The drop in exports decreases demand for the currency. Decreased demands weakens the currency. As the value of the currency drops, exports increase.
It is generally a cyclical system, not something which always goes in one direction.
I assume, when you talk about deflation, you mean the limit on the number of Bitcoin which will be mined, is that correct? What economic problems do you see stemming from Bitcoin gaining in value over time?
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First of all, currencies are not just some thing that fluctuates as it wills, it is more or less controlled and central banks are the keyplayers in this. It's fucking bad for economy if things fluctuate, thus preventive actions are used. Also about that cyclical thing, there are so much more things than pure demand those affects to currencies values. Just like with stock prices it is not just about pure demand, as price can change significantly with new information, even when demand is the same. Of course the demand for certain price range is not same, but demand for certain amount of stocks is.
But you are right, it's not some thing that just goes to some direction, as the goal is to keep it more or less stable at some level.
Yes, the main problem in Bitcoin is that its number doesn't increase with economy growth or demand. And it's not just about bitcoin, it's bad for any currency for being deflatory. You read about the quote from ECB? The simplified problem in deflation is that people don't use the money to pay things (what is money's main function), instead they wait it to grow value, just like huge number of Bitcoin owners do.