You touch upon an important point: the entire foundation of our current economic system is built on high velocity of money. You are incentivized to spend rather than hold because without it, there's no mindless conspicuous consumption. A deflationary currency will grind this system to a halt
But the question you need to ask is: has all this mindless consumption really done us any real good? For the handful of genuinely useful things to come out of excessive consumption, there are a gazillion pieces of wasteful crap that clogs homes first, then landfills
A deflationary currency is bad for the current economic system. But that doesn't mean it's bad by itself.
Lol. All you have to do is think about five seconds without going into rants about over consumption.
Let's take Bitcoin. It has a predefined limited supply. That is, it already has an artificial deficit built-in. On top of that, obtaining bitcoin becomes exponentially more expensive over time (until it becomes impossible once all the bitcoin has been "mined"). Now you have to spend many magnitudes more resources to obtain even a tiny fraction of a bitcoin.
So even in the absence of any external world to compare to (e.g. without denominating Bitcoin in USD) why would anyone spend a limited resource they obtained? Especially considering that even today getting even a single bitcoin through traditional mining is nearly impossible except for the filthy rich miners running industrial-scale data centers.
So you are saying there would be a limited resource becoming exponentialy more expensive over time? I guess there might occur a demand for such a resource? And mayhaps in that case the holders might decide to exchange it for some other assets they desire?
(ofc thats not the 100% correct description of bitcoin which depreciated against most other assets ytd but the idea still stands)
> So you are saying there would be a limited resource becoming exponentialy more expensive over time?
I'm not saying it. It is literally what Bitcoin is, and other deflationary "currencies".
> And mayhaps in that case the holders might decide to exchange it for some other assets they desire?
Keyword is "some".
In 2010 when bitcoin was novelty and had no value at all, someone paid 10 000 (yes, that's ten thousand) bitcoins for two pizzas. Now imagine bitcoin becomes a currency, as some cryptobros still prophesize. You have a constant pool of money for all "assets", and no way to get more money.
You touch upon an important point: the entire foundation of our current economic system is built on high velocity of money. You are incentivized to spend rather than hold because without it, there's no mindless conspicuous consumption. A deflationary currency will grind this system to a halt
But the question you need to ask is: has all this mindless consumption really done us any real good? For the handful of genuinely useful things to come out of excessive consumption, there are a gazillion pieces of wasteful crap that clogs homes first, then landfills
A deflationary currency is bad for the current economic system. But that doesn't mean it's bad by itself.