Deflationary spiral

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Revision as of 01:22, 17 December 2010 by Kiba (talk | contribs) (Counterargument)
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Deflationary spiral is an economic argument that propose that price falling below cost in a runaway deflation would eventually lead to the collapse of the currency. It is a common criticism made against the viability of Bitcoin.

Economic history

The first deflationary economic growth is a phrase of economic growth caused by the slashdot effect. From there, we see the the price of bitcoin rose to 0.06 USD. This price level remain stable until early October, when a rally cause the price to touch .50 USD before settling at the .20-30 USD equilibrium.


Opponents counter that the deflationary spiral is not possible because of the Time Preference theory and the necessary end goal of money; to purchase goods and services.

Opponents had argued that humans will prefer something now rather than latter, all things being equal. Thus, something that happen sooner is more valuable than what happens further down the road.

Furthermore, there is a natural limit to human's time preference. A human being cannot wait indefinitely to not spend money on food, milks, and other goods without suffering some kind of hit to a human being's health.