How can a deflationary currency work in a modern economy?
The modern world is accustomed to inflationary currencies, along with their continual issuance and the rising prices that they bring. Many people are under the mistaken belief that economic growth requires inflationary currencies and thus do not believe that the modern world economy can function with a deflationary currency like Bitcoin Cash as a de facto global currency. The common fear is that, if prices continually fall in BCH terms, nobody would ever spend their BCH, thus the economy would be ruined. This line of thinking is erroneous for several reasons, including the following:
Deflationary currency offers a compelling incentive for savings, a crucial driver of capital accumulation, which, in turn, fuels the creation of innovative and advanced products in our modern world. Increased savings enable lower interest rates, encouraging entrepreneurs to undertake substantial projects like infrastructure, factories, and capital goods. These long-term investments contribute significantly to the improvement of our standard of living and overall societal wealth.
The Federal Reserve's attempts to simultaneously drive investment and consumption disrupt this delicate balance, resulting in resource shortages and contributing to the boom and bust cycle. Embracing a peer-to-peer cash like Bitcoin Cash could potentially break society free from this disruptive cycle, steering us towards a more sustainable and prosperous future.
In a deflationary currency scenario, it's reasonable to assume that basic needs like food, shelter, healthcare, and other essential items would remain a priority. Spending on such things would certainly continue. The underlying incentive structure with a deflationary currency like Bitcoin Cash prompts individuals to carefully consider their spending, emphasizing significant necessity over impulse. This dynamic likely encourages more savings, facilitating robust loaning and infrastructure investments for wealth-building.
The result is a shift in consumer demand towards durable, high-quality products that can be maintained and repaired, fostering a sustainable and responsible approach to consumption. This promising future, anchored in a deflationary Bitcoin Cash, promises an exciting landscape where financial decisions are entirely voluntary, reflecting personal preferences and genuine needs.
For the last several decades, a microcosm of the economy has simulated what a deflationary currency would be like. The computer industry has continually and vastly improved the quality of tech products since the invention of the microprocessor. This increase in quality, combined with continually lower price points, means that, viz-a-viz computer products, our traditional currencies have been deflationary. In almost every sector in consumer electronics, a more improved product will arrive in 6-12 months. And yet, consumers are not content to wait forever to spend. Tech products regularly sell quite well, even in the face of near-guaranteed lower prices in the future. The exponential growth of the tech sector over the last several decades is a testament to the functionality of a deflationary currency in our modern economy.