I’ve seen this discussion pop up more often recently, so let’s dive in. In short, the argument goes that currencies need to be inflationary so that people are incentivised to spend. A way to see it is to think of inflationary currency as a hot potato – if you don’t do anything with it and keep it in cash, it’s going to decline in value. Therefore, you might as well spend it or invest it. If you know your food is going to be (ever so slightly) more expensive tomorrow, you might as well buy it today.
Largely agree, a challenge I do see is debt denominated in a cryptocurrency before that (presumably limited supply) crypto is at least somewhat close to having achieved maximum adoption. Ie I’d be terrified to have debt denominated in XNO (nano) - today my Ӿ300 debt might be a week’s worth of sales, in a year it might be a year’s worth of sales (due to the relative value increase of Ӿ). Mortgages / long term debt being impacted the most. This is obviously a concern that’s a ways off, but making that transition could prove difficult.
As far as spending goes I’d have to agree most of what the average person spends is either mandatory or desired enough that the change of a few points of inflation / deflation likely wouldn’t change spending habits.
This is all well and good, but when happens in a recession, or even a depression? People will start hoarding money.
Largely agree, a challenge I do see is debt denominated in a cryptocurrency before that (presumably limited supply) crypto is at least somewhat close to having achieved maximum adoption. Ie I’d be terrified to have debt denominated in XNO (nano) - today my Ӿ300 debt might be a week’s worth of sales, in a year it might be a year’s worth of sales (due to the relative value increase of Ӿ). Mortgages / long term debt being impacted the most. This is obviously a concern that’s a ways off, but making that transition could prove difficult.
As far as spending goes I’d have to agree most of what the average person spends is either mandatory or desired enough that the change of a few points of inflation / deflation likely wouldn’t change spending habits.
Edit: typo