“Hard assets like gold, silver and bitcoin are deflationary.”
“People hoard gold and bitcoin due to its deflationary properties.”
“No one wants a deflationary spiral.”
Definition(s) from the Web
- Deflationary spiral is an economic argument that proposes that runaway deflation can eventually lead to the collapse of the currency given certain conditions and constraints. It is a common criticism made against the viability of Bitcoin. The ‘deflationary spiral’ is a real condition that affects the popular fractional reserve backing system. Bitcoin is not affected by this because it is fundamentally different from popular currency. Source
- A deflationary spiral occurs when the price of a traded article increases at some given rate, which causes people to hoard it. As people hoard the commodity, less and less of it is available thus causing the price to go up even more. In turn, even more people hoard the commodity. Thus a feedback loop or spiral of deflation occurs. Source
- In economics, deflation is a decrease in the general price level of goods and services. Deflation occurs when the inflation rate falls below 0% (a negative inflation rate). Inflation reduces the value of currency over time, but sudden deflation increases it. This allows more goods and services to be bought than before with the same amount of currency.
Deflation is distinct from disinflation, a slow-down in the inflation rate, i.e. when inflation declines to a lower rate but is still positive. Economists generally believe that a sudden deflationary shock is a problem in a modern economy because it increases the real value of debt, especially if the deflation is unexpected. Deflation may also aggravate recessions and lead to a deflationary spiral. Source