A gradual rate of deflation didn't stop world markets when they used an international gold standard.
Very few people forgo buying something they need because they could get 2% one year later if they hold on to the currency.
I think deflation IS economically inefficient, but the negative effect of slight deflation has been exaggerated in the popular economic literature.
For a peer-to-peer currency network, a fixed money supply could even be beneficial by creating an incentive for bitcoin holders to invest in the technology.
Bitcoin is working, has created the most powerful distributed supercomputer in the world, and is processing an increasing number of instant global transactions every month.
It works in practice, as a medium of exchange, and that is a better argument for it working as a currency than theories about how deflation affects economies.
The problem is that the time period of the world that had a gold standard had several instances where the world markets did stop. Both the Great Depression and the Long Depression happened in the period in question, and that that is more depression than either before or after the gold standard.
The Great Depression was not during the international gold standard period. By the time it rolled around, central banks controlled the money supply of every advanced economy, and in the midst of the Depression, the U.S. government further left gold-redeemable currency by enacting Executive Order 6102, which ordered all private citizens to turn in their gold, criminalized private gold possession, and made dollars irredeemable in gold.
But let's grant that the Great Depression, along with the Long Depression, was during the gold standard's reign. That's two serious economic contractions interspersing mostly long periods of expansion. Compared to the last several decades, which has been marked by several 'lost decades' for the Middle Class, the gold standard era doesn't look bad.
Comments
A gradual rate of deflation didn't stop world markets when they used an international gold standard.
Very few people forgo buying something they need because they could get 2% one year later if they hold on to the currency.
I think deflation IS economically inefficient, but the negative effect of slight deflation has been exaggerated in the popular economic literature.
For a peer-to-peer currency network, a fixed money supply could even be beneficial by creating an incentive for bitcoin holders to invest in the technology.
Bitcoin is working, has created the most powerful distributed supercomputer in the world, and is processing an increasing number of instant global transactions every month.
It works in practice, as a medium of exchange, and that is a better argument for it working as a currency than theories about how deflation affects economies.
The problem is that the time period of the world that had a gold standard had several instances where the world markets did stop. Both the Great Depression and the Long Depression happened in the period in question, and that that is more depression than either before or after the gold standard.
The Great Depression was not during the international gold standard period. By the time it rolled around, central banks controlled the money supply of every advanced economy, and in the midst of the Depression, the U.S. government further left gold-redeemable currency by enacting Executive Order 6102, which ordered all private citizens to turn in their gold, criminalized private gold possession, and made dollars irredeemable in gold.
But let's grant that the Great Depression, along with the Long Depression, was during the gold standard's reign. That's two serious economic contractions interspersing mostly long periods of expansion. Compared to the last several decades, which has been marked by several 'lost decades' for the Middle Class, the gold standard era doesn't look bad.