Economist Robert Murphy: Bitcoin deflation is not a problem

Economist罗伯特•墨菲recently attended the Texas Bitcoin Conference in Austria, where he debunked some of the claims that economists often make against Bitcoin. Murphy belongs to the Austrian school, so it makes sense that he would be interested in Bitcoin. He gave a speech titled "Mises's Theory of the Evolution of Money, Bitcoin, and the Economy of Savings in 10 Minutes." In his speech, Murphy explained why Austrian economists are interested in Bitcoin.

Falling prices won’t cause a recession

The first myth Murphy wants to debunk is deflation. As we all know, Bitcoin is essentially a deflationary currency, with a cap of 21 million and a current inflation rate of about 9%, but when it reaches the cap it will become deflationary. Most economists, such as Paul Krugman, find deflation to be a terrible thing, which is why they do not recognize Bitcoin as a currency. To this, Murphy retorted:

"Historically, this fear of deflation comes partly from people's fear of bad things that have happened in history. For example, during the Great Depression in the 1930s, the price of money fell. There have been other times when the economy is bad, and the price of money will fall. But I don't think the causal relationship is that. In fact, part of it comes from people's fear. When you are afraid, what do you do? You definitely don't want to invest in companies or things, but you rush to hold on to liquidity and hold on to money. This is why you often see people holding on to their money in times of panic, so you see the prices of all other things linked to money fall. But this cannot be said to be a bad economy caused by falling prices."

Price falls can coexist with prosperity

Murphy goes on to point out that there have been periods in history when consumer prices have fallen and the economy has still been booming. At this point, Murphy cites the example most often cited by the Austrian School, which is the period of history known as the "Long Depression." During the "Long Depression," although prices fell, other aspects of economic activity seemed to be moving in the right direction. AE Musson described this phenomenon in his book, The Great Depression in Britain, 1873-1896: Rethinking:

"Prices are undoubtedly falling, but other indices of economic activity, such as coal and pig iron exports, shipbuilding tonnage, raw wool and cotton consumption, import and export figures, shipping entries and declarations, railway freight declarations, joint-stock company formations, trading profits, and consumption of wheat, meat, tea, beer, and tobacco, etc., are all on the rise."

Of course, whether or not deflation is a net benefit to the economy as a whole is immaterial when considering Bitcoin as a currency. If one currency is deflationary and the other is inflationary, which one will prevail among the general public? Obviously, people will choose the currency that increases in value over time. Even if many economists are right that the deflationary nature of Bitcoin is bad, this will not completely stop people from choosing Bitcoin.