Economist Robert Murphy Explains Why Deflation is Not a Problem for Bitcoin / Kyle Torpey / Aug 13, 2015 8:00 AM EDT

In his latest appearance at the Texas Bitcoin Conference in Austin, Texas, Economist Robert Murphy attempted to debunk a few arguments that are generally made against bitcoin by various economists. Murphy comes from the Austrian school of economic thought, so it should be no surprise to find that he is at least somewhat interested in what Bitcoin has to offer the world. In his talk, which was titled “Mises Theory of Money, Bitcoin, and Saving the Economy Explained in 10 Minutes,” Murphy was able to illustrate the reasons why some Austrian economists are fascinated by bitcoin.

Falling Prices Don’t Cause a Bad Economy, It’s the Opposite

The first myth that Murphy wanted to hit was deflation. As many know, bitcoin is inherently deflationary as a currency due to its hard cap at 21 million — or at least it will be deflationary when that cap is finally hit (the current inflation rate is roughly 9%). Most economists, such as Paul Krugman, find deflation to be a horrible thing, which is why they do not think bitcoin could work well as a currency. Murphy made the point that economists who think this way may have it all backwards: