Re:Nassim Taleb: Bitcoin failed as a currency and became a s...
by _heimdall on Saturday April 17, 2021 @04:46PM
(#26847315)
> Currencies have to be less valuable over time, otherwise no one would ever spend the currency
The purchasing power of a currency doesn't have to change, the government manipulators could target 0% inflations just as easily as they target 2-3%.
Most modern economies are driven by debt, thats what "creates" new wealth out of thin air. The main reason we target a low, steady level of inflation is to best incentivize lending and investing in debt. If currency value is allowed to swing wildly you can't put a predictable price on future money. If currency is allowed to lose value (deflation) you are incentivized to hold onto it rather than buy up debt. Noone buying debt means noone creating money out of nothing, meaning no GDP growth unless velocity increases.
The purchasing power of a currency doesn't have to change, the government manipulators could target 0% inflations just as easily as they target 2-3%.
Most modern economies are driven by debt, thats what "creates" new wealth out of thin air. The main reason we target a low, steady level of inflation is to best incentivize lending and investing in debt. If currency value is allowed to swing wildly you can't put a predictable price on future money. If currency is allowed to lose value (deflation) you are incentivized to hold onto it rather than buy up debt. Noone buying debt means noone creating money out of nothing, meaning no GDP growth unless velocity increases.