= 27d567bc2d48d9f40e9ccc20ea370b15)
Wei_Dai comments on Bitcoins are not digital greenbacks - Less Wrong
You are viewing a comment permalink. View the original post to see all comments and the full post content.
= 783df68a0f980790206b9ea87794c5b6)
Loading…= b715d02e85f7b3b4ae65ca3d3e450868)
Subscribe to RSS Feed
Powered by Reddit
= f037147d6e6c911a85753b9abdedda8d)
You are viewing a comment permalink. View the original post to see all comments and the full post content.
Comments (159)
According to Wikipedia, "velocity of money" is not a constant but tends to fluctuate. The article lacks citations, but I think this is the current mainstream view among monetary theorists. My understanding of the implication of this is that if you have a fixed supply of money then either prices or GDP would have to be unstable. In other words either you end up with an economy with very flexible prices that change constantly, or you end up with an economy that goes through constant boom and bust cycles (or some combination of each), and both of these outcomes are costly.
I feel like this isn't nearly the issue it is made out to be when you separate real growth from nominal growth. Say you have real growth but prices fluctuate a lot, why should you care? Frictional costs should decrease over time as people figure out how to hedge properly in this environment.
So is the solution just to use Bitcoin as a medium of exchange and a store of value, but not as a unit of account? Then prices are free to fluctuate in BTC terms, while they can remain relatively stable in fiat terms, and GDP will be unaffected.