Currency supply and demand

It would seem that currencies are subject to principles of supply and demand. If the euro becomes a world currency, that increases demand. If banks need bigger reserves, that increases demand of currency.

The only supplier of currencies should be central banks. Scarcity creates value.

When it comes to bitcoin, there is demand, but it is speculative demand. That means that people buy bitcoins with the intention of selling them later. They will be transferred to a regular currency. If bitcoin succeeds, why do we have central banks in the first place? In other words, can a currency function without a central bank? Probably not.

Edit 31-5-2018: Although adding money could solve a demand problem, currently there is too much outstanding debt. Once interest levels rise, people might want to repay their debts. That’s when money might need to be taken OUT of the economy.

© Koos Swart 2013