Quote from: toknormal on June 15, 2016, 09:29:28 PM

Quote from: adamstgBit on June 15, 2016, 07:54:21 PM

all i'm saying is i dont buy the idea that we CANNOT have stable prices with a fixed monetary supply

Well I think it's time you bought it Wink

You run a fairground. At the entrance people buy tokens - 1 token counts for 2 rides. Inside the fairground, there is only 1 currency: token currency. (Call it Bitcoin if you like).

Each day, you have an average of 100 people inside the gates at any one time, each person buys on average 5 tokens. So you maintain a "money supply" of 500 tokens which are constantly being recycled, even though the ride capacity is not fully utilised.

Then one Saturday, due to excellent weather, you get a 50% surge in visitors. Now you have 3 choices:

1. inflate the prices so that 1 ride costs 1 token instead of half a token
2. turn people away
3. get more tokens (inflate the money supply) and keep prices the stable

Sure, you can have stable prices with a fixed monetary base, but only if demand for liquidity remains stable (which is cannot in a dynamic economy).

Demand WILL remain stable tho...

The idea is that speculators price bitcoin at say 1mill / bitcoin even tho raw-damad only accounts for a price of 0.4-0.5 million / bitcoin.
the raw demand can go up down and sideways yet the speculators still price bitcoin at 1 million / BTC.

they expect raw demand to go up and down, they dont care about that, they care about the longer term trend and price bitcoin accordingly.

so you end up with a stable 1mill/ BTC while raw demand can fluctuate significantly