Well for a reserve currency, deflation is positive as a hedge for inflation. China have bought more gold than anyone else in the world for that reason, to mitigate holding foreign reserve currency (which they limited just last month) or debt priced in foreign currency that inflates beyond their control or liking. One would expect this is the role BitCoin would take, just like gold except a lot more convenient to move around.
It is a solution to the Triffin Dilemma, which in 2009 the Governor of The Bank of China wrote about. That same year Russia proposed a new international reserve currency backed by precious metals and a currency basket to solve the same problem. In South America there have been proposals for a petro dollar, backed by oil for the same reason.
Deflation is good for a reserve currency, in some ways it is fairer than gold because you don't have to rely on the geographical distribution of gold in the ground.
When the Wii was making record sales in the USA, Nintendo was reporting record losses. Why? Because the Yen to USD exchange hit 80 to 1, and all of a sudden Nintendo was making 20% less revenues on all US sales.
Deflation is BAD BAD BAD for companies who work with your currency.
It is bad for a national currency, but that is not what I was talking about. I was talking about a reserve currency, like gold represents in our world economy (which is also deflationary).
When a country wants to buy oil for its economy, the oil price is set in the worlds reserve currency, USD. So the fluctuations between the USD and some given country, or the inflation of the USD will either hurt or help that country (but is always good for the US as the demand is high for that currency, keeping the demand strong). This is why countries/companies buy oil with gold sometimes, this is why countries hold gold to hedge inflation in a foreign currency they must rely on.
So Nintendo was losing money why exactly? Because Japan was not printing money as fast as US? Maybe the problem is in printing money at all?
Do you see a symmetry of products vs. money? Both are assets that some people need and some other want to give. If one is in deflation, then another is in inflation to another. Why don't you buy MacBook 2 years from now, when it'll cost the same, but will be more awesome? Because you have non-infinite "time preference": you want certain things today vs. tomorrow.
Why people want to hold money? Because it gives them ability to spend it anytime on anything - it's most liquid, most desirable commodity. This is big value in having something in your wallet - freedom to make decisions in face of future uncertainty. If you can freely choose between money which loses in value and money which doesn't, which one every person would put their savings in? Then, everyone spends according to his own time preference - amount of desire to enjoy stuff today vs. tomorrow.
> So Nintendo was losing money why exactly? Because Japan was not printing money as fast as US? Maybe the problem is in printing money at all?
Because Japan's currency deflated, while the US currency inflated. Printing of money is simply a means to control deflation or inflation.
All of the "thought experiments" on deflationary spirals ignore the fact that one happened: the Great Depression of 1930s. And back then, the US Monetary system was pegged to the Gold Standard.
We fixed the problem by getting off the Gold Standard. It turns out, basing your country's economy on a deflating commodity was not a good idea.
Did someone propose that BitCoin serve as the peg for a national currency? I must have missed that part.
Deflation is bad, we know its bad and when its bad. So should you peg a national currency to a deflationary commodity like BitCoin or gold? No. Can I use gold right now as a means of exchange? Yes. Does it happen all the time in regular life? No, because that would be a pain in the ass but if it were more convenient, it might. Well that is what BitCoin is, its gold but convenient to transfer.
Stop thinking of BitCoin as a national currency or a replacement for a national currency. It is a commodity like gold which can serve as a supranational currency or store of value, your national economy can still be inflationary.
People want BTC to be a currency. You clearly don't have that goal.
But when you see websites saying "Pay for stuff here using BTC", it is clear that they are trying to make BTC into a currency.
Those who wish to use BTC as a currency are discouraged from doing so, as long as this stupid hyper-deflation is occurring. No one wants to spend BTC on anything anymore.
It is a currency. It satisfies the Coincidence of Wants, it is used as a means of exchange, that makes it a currency. Cigarettes have been used as a currency (in WW2 concentration camps, prison, times of famine or war etc.).
But nobody suggested cigarettes or tobacco be the thing we pegged our national currencies on, its just a thing that represented value that people traded for goods and services. That's a currency, not a national currency though (because as you mentioned earlier, that's probably a bad idea which we know from history with gold).
Money is valuable for "reservation demand". The more people want to hold it, the more useful it is to everyone. Only this way it can become a currency. You can't have currency without value and can't have value without holding and having many hands to hold.
You know deflationary = hold and never spend, right? Not much use as a currency if there's no flow or will to exchange for goods.