 is inflation necessary for the economy to work? Bitcoin is a deflationary asset, meaning it has a hard cap. There can never be more than 21 million. In modern economics theory, Toltec University, they swear by the fact that inflation is necessary to incentivize people to spend their cash into the economy, whether that's regular consumer spending or investing into the stock market. Can an economy work with a deflationary currency? Will people still have the incentives to spend their cash? All right, first of all, I think one of the things you're seeing there is what is mainstream in economics in Western developed nations, which is not necessarily what is the same in other countries, especially, for example, Eastern nations. So in Western nations, the savings rate is very, very low. Meaning that, on average, people save very little money and spend the vast majority of their money. This is very, very different than the way economies operate in places like China and Japan. For example, also Korea, Taiwan, many other Asian countries, where people don't have debt instruments like mortgages. They don't buy things on credit cards. And if you want to buy a house, you save up for 20 years. And that's done on a generational basis. So the savings rate in Asia is much, much higher. Now, in developed countries, we call that hoarding of wealth instead of saving to give it a negative connotation. But certainly economies that have more deflationary characteristics tend to encourage saving. Now, the big thing to realize here is that I see no circumstance or scenario in which Bitcoin is the only currency available and as a deflationary currency is the basis of the entire global economy. I honestly don't see a scenario like that. I see a scenario where there are thousands of currencies available and of those many don't have value and of those many are inflationary and play money, such as the US dollar. But at the same time, there will also be hard currencies and hard assets like Bitcoin and gold and other things like that. So from that perspective, the fact that Bitcoin is deflationary doesn't affect the entire economy. If the theory of the necessity of inflation is correct, people will have plenty of choices of inflationary currencies that they can use or in fact borrow at extremely low interest rates, zero or negative interest rates so that they can spend to their heart's desire in a massively inflationary economy. Now, right now when you have a supply, a supply glut and a demand crush, inflation keeps down. So over the past 10 years, we've seen most inflation go into asset bubbles and right now we're seeing all of these deflationary pressures because of the economic recession. But who knows how these things are gonna play out? I'm not worried about whether an inflationary or a deflationary currency is better or whether an economy can work on only one or the other primarily because I don't see any scenario in which people don't have a choice. And if people have a choice, they will choose the mechanism that works for them. And I think a lot of people may end up choosing Bitcoin and other stable and sound assets as a savings mechanism and as a long-term store value. That's just one theory of course of how Bitcoin may work in the broader economy. But I don't see it displacing everything else to the point where people don't also have a silly inflationary currency to play with that gives them infinite debts with infinite issuance and zero interest rates. If you enjoyed this video, please subscribe, like and share. All my work is shared for free. So if you wanna support it, join me on Patreon.