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Tuesday, 22 April 2014

Completely wrong Bitcoin statements

Completely wrong Bitcoin statements

It is completely wrong for The Economist to state that Chronic deflation may keep Bitcoin from displacing its fiat rivals.


Deflation is impossible in Bitcoin. It is impossible in a non-monetary item. A bitcoin is a variable real value non-monetary item. 


Deflation is a sustained decrease in the general price level over time.


Deflation means the real value of a monetary item increases while its nominal value stays the same over time as  a result of a fall in the general price level. 


A monetary item can only be affected by inflation when its real value decreases as a result of a sustained increase in the general price level over time. The nominal value of the monetary item (US Dollar, Euro, Yuan, Yen, etc.) stays the same over time.


All statements linking Bitcoin to inflation or deflation are completely wrong.


Nicolaas Smith Copyright (c) 2005-2014 Nicolaas J Smith. All rights reserved. No reproduction without permission.