That would take them out of my "take a look at these guys" column, and put them squarely in the trash-bin.

Why a payment company would spend time on a currency with built in deflation is beyond me. You might as well go do a payment-in-gold startup.

Bitcoin is squarely at the bottom of the dip in the Gartner Hype Curve right now. It's a little bit of a gamble, but it could pay off. The risk to Dwolla of facilitating Bitcoin transfers is pretty minimal.

> Bitcoin is squarely at the bottom of the dip in the Gartner Hype Curve right now.

Similarly, the Gartner hype curve is at the peak of the Gartner hype curve.

Gartner doesn't change the fact that bitcoin is deflationary and will die as a currency for the same reason that precious metals died: They are deflationary.

> bitcoin is deflationary and will die as a currency for the same reason that precious metals died: They are deflationary.

Precious metals are no longer used as money because of deflation? Care to justify that?

Are you sure it wasn't due to the numerous benefits of fiat money? (Not to say that fiat is perfect.)

I assume he means paper money backed by precious metals.

And yes, being deflationary is why that is no longer done.

The amount of paper money in the world should equal the amount of resources. If it doesn't you have deflation and all sort of trouble.

This is highly inaccurate.

You guys are referring to Gresham's Law which is only applicable due to legal tender laws. Without legal tender laws, the "good money" wouldn't be driven out by the "bad money" (i.e. US currency).

Also, the reason the US government went completely off the gold standard in 71 was to increase deficit spending without having to pay our debts in gold or something of real value. The Fed has a policy of steady inflation, only through debt liquidation can we ever expect to pay off the huge amounts we owe. That is, we borrow 10 trillion and inflate 50% over a certain time, now we only owe 5 trillion.

End the legal tender laws, allow alternative commodity-based currencies and end the central planning of interest rates. This is the solution. It has nothing to do with gold (or Bitcoins) being a deflationary currency. It has everything to do with big corrupt government.

edit- I don't want that last sentence to color my whole statement. I'm an Austrian, not a Republican. I worked for Obama last time and will vote for him again. For a better perspective on this, check out (future Fed Chairman!) James Grant's Interest Rate Observer http://www.grantspub.com.

But Bitcoins are digital, which means you can trivially replenish your spending wallet using USDs or whatever other currency you choose to use. Incidentally, using Dwolla to transfer funds to a Bitcoin exchange is often the easiest and quickest method available today!

If you want to convince people who don't already agree with you, you might consider explaining why you consider "deflationary" a bad thing. Personally, I think it falls squarely in the "we could do worse, and we do" category.

Deflation creates an incentive to not spend money, because it will be worth more tomorrow. This kills the economy.

It doesn't create an incentive to not spend money; it creates an incentive to not spend money wastefully, on things that provide insufficient value. That doesn't stop people from spending money for things they want or need. For most things people want or need, having them now provides more value than having them later.

After all, by exactly the same argument, why buy a computer today when you could wait and get a more powerful computer tomorrow? You could apply that logic indefinitely, except that the sooner you get a computer, the sooner you start getting value from it. At some point the balance changes, and you decide to buy one anyway.

Deflation hasn't "killed" the computer industry.

I don't know enough about economics to say whether or not deflation is bad, but your argument doesn't hold up.