> Some fiat currencies lose their value slowly, others do so quickly. That loss of value is precisely what makes them useful. Without the fear of inflation, holders of currency tend to hoard rather than spend it. Hoarding currency depresses economic growth and creates financial instability.<p>Economist here. That relationship is not clear. A currency skyrocketing in value induces suboptimal willingness to delay spending, yes, but one plummeting in value induces a similarly suboptimal willingness to spend too early.<p>Moreover, a depressed economy can cause deflation, rather than the reverse: Sluggish economic activity implies weak aggregate demand (people not buying a lot of stuff), which can lead prices to fall.