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> The ideal currency has a constant, predictable 2-4% inflation to promote the velocity of money and prevent stagnation. This fundamentally misunderstands the
by abernard1 2y ago
> The ideal currency has a constant, predictable 2-4% inflation to promote the velocity of money and prevent stagnation.
This fundamentally misunderstands the point of Bitcoin's creation (and currency). The ideal currency does not inflate at all, which makes it inimical to government spending and debt. As modern fiat is inherently based upon debt, this makes it non-ideal from the perspective of governments, but ideal for everyone else.
Inflation to drive monetary velocity is a ridiculous concept, as is inflation. Inflation is scarcity of goods purchased in the present relative to money supply: fewer goods and services at the expense of more currency. People want goods and services, not currency.
During multiple periods of US history—including much of the 1789-1913 era—the US paid out no interest on US bonds, as the value was in its safety, and the value of the dollar was worth more at its redemption. More goods and services relative to the comparatively smaller increase in currency made savers wealthy without investment. Outside of wars, pre-modern US had a deflationary currency in its run up to becoming the pre-eminent power on the planet.
- wmf 2y agoThe ideal currency does not inflate at all Let me stop you right there. You may want that, but that's just, like, your opinion man. Most people, like 99% of people, do not want hard money and the tradeoffs it entails.
- abernard1 2y agoIt has nothing to do with "hard money" if you mean physical currency. People want wealth, period. The problem with the idea of inflation (read: "scarcity") to drive monetary velocity is it messes with investment. There is no shortage of people wanting to invest capital for increased returns in the future. But if you force consumption without a plan, you're consuming in the present for the sake of it. A farmer can plant seeds and return an investment on that, or you can eat your seed crop. Forced inflation is forced returns in the present for lower returns in the future. Due to prices functioning as a regression between the exchange of goods and services, this one-to-one mapping is not as obvious, but it is definitively what happens. You cannot consume what you do not produce. And investment requires deferred consumption. Forced monetary velocity is forced consumption at the expense of investment.
- jdenning 2y agoTo be fair - most people, like 99% of people, do not understand monetary policy or any of the potential tradeoffs.
- Terr_ 2y agoAssuming the parent poster means neither inflation or deflation (read: platonic, theoretical, likely impossible) then that's good, it means the economy is getting distributed in an seamless and unbiased manner. That means it doesn't matter if you happened to have most of your economic assets in cash, or in potatoes, or in uranium ore, or in a house, etc. It means that there's no weird externality which is tipping the scales or "choosing" winners and losers. Slight inflation isn't better than perfect balance, it's just a reluctant compromise, since it's the safer direction in which to fall when dealing with an unstable equilibrium.