If Bitcoin were a country, it’d make Weimar Germany look functional

If Bitcoin were a country, it’d make Weimar Germany look functional

Bitcoiners think they’ve found the currency of the future, so let’s act like they have for a second. If you treat Bitcoin like a regular currency, you find a deflationary spiral, in which the price of goods in terms of Bitcoins fell by about 98.5 percent. It’s the kind of pattern that would doom a regular, state-issued currency, as people would just wait for the currency to gain even more value before spending any of it. That’s what happened when German Chancellor Heinrich Brüning imposed a policy of deflation as the Great Depression hit in 1930, and at risk of violating Godwin’s law, the consequences of that were…suboptimal, to use the understatement of the century.

Luckily, we don’t live in a Bitcoin economy, so this doesn’t actually reduce spending by consumers and businesses, but in any case, this isn’t a pattern you’d want a unit of account, a store of value, or a medium of exchange to have. Bitcoin has plenty of time to grow up into a real currency, but it’s not there yet.

Click “Know More” to read Peter Coy on the Bitcoin deflation “crisis.”

Read more: http://knowmore.washingtonpost.com/2013/12/13/if-bitcoin-were-a-country-itd-make-weimar-germany-look-functional/