Quote from: temp1029 on December 10, 2013, 02:54:42 AM

To sum up, my basic argument is this

1) The best possible state for a currency is one of stability
2) Units of currency are lost or made inaccessible

Therefore;

Controlled and steady inflation is better than a static money supply.

1) Yes, a stable value in a currency and money is that the prices of products and wages and the numbers written in all kinds of contracts do not change with time. This allows everyone to easily estimate the value of things and make long term contracts. The best way according to the brightest thinkers of the 20th century is to track a basket of commodities. This is because commodities are the basic input to everything else society does. Problems arise in trying to decide how the government "print" and "unprint" the money to reflect changes in the supply of the basket of commodities. As the physical existence of the commodities on the world or national market increases or decreases, you increase or decrease the amount of money. This prevents macro bubbles in the economy. You basically strangle the economy when there are not enough commodities in the pipeline to support the amount of money that gets into the marketplace and starts demanding it. If it is a sustainable demand for over a year, the signal gets through and after about 5 years the commodity producers have increase supply to meet demand. If the currency starts getting adopted outside of your country, then its supply domestically is reduced which increases its value which would mean the written number for store prices and wages are too high compared to the reality. People who have stored wealth in terms of the currency would get wealthier. Those who have large incomes relative to what they spend also get wealthier. Those barely scraping by stay the same, still spending everything they make. Notice that the wealthier got wealthier without doing anything for it (unless they are part of the reason the currency was demanded more in the world). All the numbers in the market are now distorted, slowly adjusted to be correct. Your workforce is no longer competitive in the world market, if you have free trade. So the thing to do is increase the money supply in order to let the world use your currency. The government can just simply print it and spend it on something like a bloated military. If you don't print the extra money to make up for the increase in its use, you better enact trade blocks to protect your workforce, or do like China and enact blocks on the currency. Both methods force your people to work for what they get, and even more than that like in China. Making the people work harder enables wealth to build up in the system. For example, China is building up gold and not telling just how big it is, not reporting the results of a massive domestic mining effort. I expect China to announce a free-floating RMB back by gold when the dollar finishes collapsing. They should be mostly out of excess U.S. dollar holdings in 2 years. When this happens, they'll be able to buy up the world's commodities with a strong viable currency that was created by hard work. By 2020 they'll have 10 times more engineers than the U.S. to make good use of it and the rest of the world will have reduced workforce, so they don't even need to enact trade blocks to offset the increase in the value of the currency. It'll just rise to where it should be anyway, unless the world adopts it...which I hope not! What are we going to do if not bitcoin? End the Fed? That would be bitcoin's worst nightmare. Actually they already have 10 times as many real engineers working compared to so many U.S. engineers that simply have a degree and a non-productive job. The use of your currency also expands if your GDP expands. If your GDP expands, your commodity availability should have expanded, and therefore you have enough currency to meet the larger demands of its use in the market. However, if you have a fake GDP because you're measuring bank and insurance company incomes as GDP instead of restricting the GDP measurement to manufacturing and useful services, then the GDP expands without a concomitant increase in the commodities that support a real economy. So by inflating currency only with commodity increases, you will strangle non-useful economies before they get into a housing bubble that was being pushed by banks that flooded the market place with money. This is why commodities went up in price a 300% since 2000. Fair value for gold back then was about $400 even though actual price was biased low, about $250. So today's $1200 for gold is almost no increase at all compared to the average of all other commodities.

2) Yes, if you own bitcoin, you want as many people as possible to lose theirs so that your wealth increases without doing any work at all.

No, steady inflation is not the answer. Intelligent inflation and deflation by a useful central authority is needed. This seems impossible in the U.S. so the answer right now is bitcoin. Since we can't have an intelligent currency that responds to the needs of the marketplace, we need an unforgiving currency to destroy banks, government, and stupid people who voted them into office so that we can start over.