How would a deflationary economy work?

English Education
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There will only be 45,000,000,000 ADA coins in the Cardano ecosystem. New ADA coins will gradually be released from the reserve and eventually, we will get to the point of having almost all coins in circulation. People believe that cryptocurrencies could serve as money that could hold value in the long term. Do you know how such an economy would work? Very differently than you know it today, and you might not like it. The price of goods could gradually decrease. Wages would gradually fall in nominal terms. It would be more difficult to repay debt. It might be impossible for governments to solve sudden serious problems economically. It is inconceivable for the present indebted governments to transform an inflationary economy into a deflationary one. Moreover, how can we create a new economy that is fair for all who want to join it? Algorithmic stablecoins may be the only possible way to create better money. ADA, like BTC and other similar coins, can be an amazing reserve currency, but it will probably never be a good medium of exchange.

TLDR

  • It was necessary to abandon the gold standard in order to stimulate the economy.
  • Are you ready to live debt-free? You may be, but governments are not.
  • It would be difficult for people to change their thinking if we switched to deflationary money.
  • Users can use DJED as a medium of exchange while holding ADA as a store of value. The Cardano ecosystem will provide both functions.
  • All assets in the world are volatile, including gold. There is no reason to think that ADA or BTC will be more stable than existing assets.
  • Cryptocurrencies can be a good store of value if we use their value for something useful. One of the most useful tools in the world is currency.

This article was prepared by Cardanians with support from Cexplorer.

Read the article: https://cexplorer.io/article/how-would-a-deflationary-economy-work

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This is a good argument and something that I have been thinking about as well. Without the ability for governments to ‘print money’, also known as generate debt from thin air, we would struggle to come out of difficult economic times.

The other side of the coin is that when governments do this too much it leads to inflation and that is also a catastrophe. When we come out of difficult economic times and the boom starts again governments, who should be paying back debt, instead take the opportunity to implement neo-liberal philosophy and cut taxes which leaves the debt effectively where it is. Tough times come again and now they start from an already huge debt.

Governments are not conservative enough with fiscal policy and the poor pays for it with high inflation. The rich convinces the poor that cutting taxes is a huge benefit and so they go along with it. But now I’m ranting and digressing. To get back to the argument of whether a currency with a finite supply can survive will depend on how it implements a debt policy on the blockchain. This can be solved but would required great effort and discipline. Cardano does not yet have one (as far as i can see).

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