Can Money Be Deflationary?
Inflation is when prices go up because the money we use decreases in value over time. But can our money be deflationary? If so, things we buy would get cheaper over time, not more expensive.
Imagine instead of housing prices going up every decade, they went down because the money you are using increased in value. Imagine every decade, it took less of your money to buy a house, but the amount of money you had didn’t change. This is possible with deflationary money because the houses never actually go up and down in value; the value of your money goes up and down. All we need to do is switch to money that goes up in value instead of down (deflationary assets).
However, this situation is nearly impossible for fiat because the government prints too much of it too fast. The chart below shows how much money was printed recently. Look at the difference between how much the Fed printed for the 2008 crisis vs. the recent Covid one:
M2 Money Supply (Billions of Dollars):
The opposite is true for Bitcoin. Every four years, the amount of Bitcoin distributed per year gets chopped in half, and there is nothing anyone can do about it (not even the government). Bitcoin is the best deflationary asset. It's better than gold and oil because we have to trust the supply counts for those assets, and the government can alter the supply/demand artificially. It's better than Ethereum because no one even knows how much Ethereum is in circulation (seriously, not even Vitalik knows this). Ethereum, gold and oil might go up in value over time, but they can't be as deflationary as Bitcoin because of these reasons. And because of this, if you are looking for a life raft amongst this shit show the Fed has caused us to be in, Bitcoin is your safest bet. Your children and grandchildren will thank you for storing a deflationary asset for them.
If you are worried about the price of Bitcoin in the short term, read the Bitcoin Standard. Here is a free version.
For an interactive version of the chart above, see here.