This report is a three part piece on Bitcoin economics. In the first piece the report looks at common misconceptions with respect to how banks make loans and the implications this has on the ability of banks to expand the level of credit in the economy. The report then analyses the inherent properties of money which ensure that this is the case and evaluate the impact this could have on the business cycle. In part two the report looks at why Bitcoin might have some unique combinations of characteristics, compared to traditional forms of money. Then they explain the implications this could have on the ability of banks to engage in credit expansion. In part three the report looks at the deflationary nature of Bitcoin and considers why this deflation may be necessary due to some of Bitcoin’s weaknesses. The report also looks at how Bitcoin could be more resilient to some of the traditional economic disadvantages of deflation than some of Bitcoin’s critics may think.
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