As many of my regular readers know, I’ve already written a few articles on Bitcoin that explain why it is money. In those articles I have addressed why the inherent properties of Bitcoin give it value as a medium of exchange. One of those properties that I mentioned, but did not go into very deeply, is the deflationary aspect of the currency system.
Bitcoins are inherently deflationary as a currency because they will eventually top out in the number that can be produced. Eventually total Bitcoin circulation will reach about 21 million coins, and after that, no new coins can be created. Thus, if no new money can be created, yet if the productive capacity of the economy increases, prices will fall since there will be more goods chasing the same amount of coins.
Most people remember hearing that deflation is just as bad (or worse) than inflation from their high school or college economics teachers. In this article I will explain why those assumptions are wrong. Deflation is when a currency gains value over time (i.e. you need less and less of it to buy the same amount of goods in the future).
Continue to article here: https://www.libertariannews.org/2011/06/11/the-economics-of-bitcoin-why-mainstream-economist-lie-about-deflation/
