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Comment by ogogmad | Hacker News Reader

> As currency nobody would want to spend it as they gain value over time

The problem with this argument is that you have to spend money. You have to spend it on food, lodging, entertainment, and so forth. Even if a currency is deflationary, people still have needs.

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Yes, but one would prefer spending money using an inflationary currency since holding on to it devalues over time. As long as inflationary currencies exist, people will prefer to spending those first before deflationary currencies.

Let's say you store all your wealth in a deflationary currency, for the obvious reason that it gains value over time. Then converting it to an inflationary currency would simply add overhead. So you would spend the deflationary currency.

Your opening hypothetical leaves the impression that the words which follow it were either an alternate rehearsal for a more blunt observation: "if all your wealth is deflationary, to spend is to lose deflationary currency" or an earnest counterargument-by-analogy which contradicts something very near the bedrock of my own common sense about money; why would anyone with savings in a deflationary currency and the opportunity to spend inflationary currency decide to have & hold that which would decrease in value in favor of (equivalently denominated) spending which won't?

I suggest you look into modern economic theories and why inflation is crucial to economic development. There are two problematic assumptions in your statement:

1. Nobody would store all their wealth in a deflationary currency - other forms of assets, stocks etc will still exist. They will need a high liquidity vehicle to trade a.k.a inflationary currency.

2. Deflationary currency doesn't necessarily mean it will gain value overtime. Unless it contains growing intrinsic value, the overall market cap will drop/plateau.

Think of inflation vs deflation as lubricant vs sandpaper, one encourages economic activities while the other discourages.

1. bitcoin is high liquidity (even higher liquidity than currencies in that you can trivially transfer $1B), unlike all of the other assets like stocks and houses....

2. Exactly which is why people would be fine spending a "deflationary" currency

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