Comment Re:For those, like me, reading this and saying wtf (Score 1) 351
We know what happens when a currency undergoes massive deflation - Germany in the 1930's or, more recently, Zimbabwe happens.
FWIW, my view is it's probably best viewed from a distance with an air of morbid curiosity.
Um... those are examples of massive inflation, not deflation. You have that backwards. Inflation/deflation relates to the ratio of the amount of currency to the amount of valuable goods in an economy. In Germany and Zimbabwe, the respective governments printed masses of extra money. With more money chasing the same amount of goods, the nominal price of goods increases. (This doesn't really change how functionally wealthy you are... unless you're not the one receiving all this extra cash. If you're not, then you're screwed.) People need more Marks or Z$ in order to buy stuff. Deflation is just the opposite: the money supply decreases with respect to the supply of valuable goods. This can happen when the money supply stays constant while the supply of good increases (via more productivity, trade, etc). In Bitcoin's case, the money supply is ultimately finite, unlike any fiat currency like the US Dollar. It's growing now because the miners haven't mined all the possible BitCoins, but eventually they will, and mining becomes gradually harder over time. (BitCoin was explicitly designed this way.) If Bitcoins become a more accepted currency (ie: demand for them rises as they are exchanged for more valuable goods, including other currencies), and they do this faster than their supply increases, then they will experience a deflationary effect. Things will will cost fewer BitCoins over time. What happens when we have massive deflation? We're not really sure, because it doesn't happen very often (most economies are inflationary, and most rapid changes in money supply happen to be inflationary). The general fear is that, if the currency is increasing in value all on its own, that people will horde them rather than circulate them. This defeats the purpose of a currency (they're exchange vehicles, not investment vehicles). Here's what Wikipedia says on the topic.