Quote from: temp1029 on December 13, 2013, 06:38:39 PM

Quote from: teukon on December 12, 2013, 10:11:03 AM

But that's just it. The deflationary effect of lost Bitcoins is already offset by the risk involved with holding them. There's already balance.

I think I am starting to see what you are saying here. Is it something along the lines of "people know about the risk of losing Bitcoins and account for it accordingly"? Sorry, I'm probably being dense on this one...

Don't worry, I was oversimplifying my point and I guess that led you astray. Some people have claimed that general coin loss causes people to hoard bitcoins but they fail to account the risk of personal coin loss faced by the hoarders.

Your latest post has given me a much better understanding of what you're thinking about and it seems I was slightly off-topic; my apologies.

Quote from: temp1029 on December 13, 2013, 06:38:39 PM

Quote from: teukon on December 12, 2013, 10:11:03 AM

I feel that we are aiming for the stability of subtly different things.

I am looking to make economic calculation as easy as possible. The more stable prices are (i.e. the degree to which they are likely to change over time) the more easily someone can plan for the future.

I'm certainly with you here. Planning should be made as fruitful as possible and this implies eliminating all unnecessary uncertainty in the currency itself. However, I don't see how predictable monetary inflation (which is essentially predictable wealth redistribution) can fundamentally assist planning. In particular, how would having more money that expected impact negatively on a person's plans?

Coming at this from another angle: if price stability is the goal then why not price everything, including bitcoins, in terms of a more stable commodity (perhaps a basket of goods and services). Instead of having a fixed balance and falling prices, people will see their balances rise (like receiving interest) and enjoy stable prices.

Quote from: temp1029 on December 13, 2013, 06:38:39 PM

Quote from: teukon on December 12, 2013, 10:11:03 AM

Please tell me what you think about the following scenario (you may assume no variation in the size of the underlying economy, no coin loss, no block rewards, and no divisibility limit):

I design an altcoin called Deflatacoin. This is identical to Bitcoin but where on each day, the balance of each wallet is reduced by 0.1% (0.1% of all deflatacoins are destroyed). This causes serious price deflation (about 44% per year).

Is this price deflation economically problematic? Should it be countered by an equal amount of monetary inflation? Is this currency more stable with or without the extra inflation?

I would say it is not problematic as it is a static amount each day, which is something people can account for. If the amount were variable, as in the case of lost Bitcoins, there is no way people could account for such loses. Giving them a know offsetting amount allows them to plan better, although still not perfectly.

Thanks, I see. But if the unpredictability of coin loss is the problem, how would predictable monetary inflation help? Surely the sum of these two effects will be practically as unpredictable as the former.