BITCOIN: A flawed currency blueprint with a potentially useful application for the Eurozone

Yanis Varoufakis

The responses of many to my post on Bitcoin reveal a powerful tendency to underestimate the ill-effects of deflation on a social economy. This tendency to underestimate deflation’s deleterious impact matters beyond debates on Bitcoin per se. For example, in Europe the incapacity of the European Central Bank (ECB) to act in the face of deflationary forces has revealed the same type of misunderstanding, as many commentators fail to recognise that deflation is a very serious threat and that the ECB’s lack of weapons against it constitutes a major weakness. In this post I return to the problem of deflation in a Gold Standard-like monetary system (e.g. Bitcoin or, indeed, the Eurozone itself) but conclude that, almost paradoxically, the technology of Bitcoin, if suitably adapted, can be employed profitably in the Eurozone as a weapon against deflation and a means of providing much needed leeway to fiscally stressed Eurozone…

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