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Bitcoin fanboys believe that Bitcoin is deflationary because they don’t understand what “money supply” means.
They think “money supply” is the same as “hard money outstanding”, and think that a limited number of Bitcoins means that “Bitcoin supply” is foreseeable and limited.
They think “money supply” is the same as “hard money outstanding”, and think that a limited number of Bitcoins means that “Bitcoin supply” is foreseeable and limited.
This is wrong. Anyone can increase the Bitcoin supply beyond 21 million by lending their Bitcoins against IOUs. Just as with fiat, where hard fiat outstanding is worth a few trillion USD, yet total debt is >$300T, Bitcoin credit can make Bitcoin supply unlimited and unforseeable.
This “limited Bitcoin supply” meme has its roots in a childish interpretation of money. Most of modern finance isn’t done with hard money, but with credit.
We could have fractional reserve banking with Bitcoin, just as we did with gold 100 years ago.
We could have fractional reserve banking with Bitcoin, just as we did with gold 100 years ago.
This means that even if the world switches to Bitcoin, it doesn’t need to go to $1,000,000 or “there wouldn’t be enough of it”. Bitcoins could be multiplied through credit.
Neither does it mean that governments could “no longer print money”. No one prints money, they borrow it.
Neither does it mean that governments could “no longer print money”. No one prints money, they borrow it.
