Quote from: temp1029 on December 14, 2013, 08:55:27 PM

Maybe that is where my theory is wrong. I view the re-distributive power of monetary inflation as only occurring when it is not predictable (i.e. in the way the fed does it). If we were to know 100% for sure what the fed would do next week, there wouldn't be a problem being ready for it. In fact, we can see this type of preparation whenever the fed discusses tapering (or the converse, more "QE"). This type of knowledge would actually take the teeth out of monetary inflation, as prices would adjust before the new money could be spent. I could certainly have this wrong; any thoughts?

Inflation implies wealth redistribution in all cases. I agree that the system you propose lacks the teeth of "Quantitative Easing". I think it's the ability to print more "when more money is needed" that Keynesians argue can be used to "smooth out the bumps" in economic growth and thereby boost the efficiency of financial planning. I'll admit that I'm far from an expert on such matters.

Quote from: temp1029 on December 14, 2013, 08:55:27 PM

Unfortunately, even a basket of goods is subject to changes in supply. As examples, natural disasters can decrease supply and technological innovation can increase supply. On the other side, demand can also change; people want bananas instead of oranges this month, next month they decide apples are the hot fruit (my wife is eating an apple right now, hence the fruit example Grin

).

I completely agree (and I've just finished an apple myself). However, I believe we were concerning ourselves not with prices in the short term, but with the general price level in the long term. I don't believe that the price fluctuations brought on by supply and demand as you have illustrated are within the purview of monetary inflation.

Perhaps I can make my illustration more direct: Let us assume that approximately 2% of all bitcoins are truly lost each year. Let us define a "fixcoin" as (100% - 2%)^n BTC (where n is the number of years since Bitcoin's genesis). Thus:

in 2009, a fixcoin was equivalent to 1000 mBTC;
in 2010, a fixcoin was equivalent to 980 mBTC;
today (2013), a fixcoin is worth about 922 mBTC.

By pricing everything in fixcoin rather than bitcoin (including Bitcoin wallet balances) we bring the concept of a 2% per year monetary inflation to life. The only difference is that, instead of going to miners, the extra money appears in Bitcoin wallets as though it were 2% interest. As I remarked earlier, I don't see how an entity's financial plans can be undermined by receiving such interest.

Quote from: temp1029 on December 14, 2013, 08:55:27 PM

I believe it would help because static inflation would offset, at least partially, the dynamic deflationary effects of coin loss. Doing so would give people a certain offsetting amount that they could plan against. Basically, given uncertainty in one direction certainty in the other direction helps balance things out, although admittedly not entirely.

I agree that the inflation would partially compensate for the deflationary effect of coin loss. However, you've not convinced me that the balance achieved provides any economic or planning benefits whatsoever. If you can expand on and supply concrete justification for your intuition here then you'll receive more constructive feedback.

Quote from: temp1029 on December 14, 2013, 08:55:27 PM

There two other benefits I see as well and, although these are a bit off-topic for the purposes of this thread, I'll put them in here.
1) Miners would have further incentive to continue providing network security.
2) Fees could be kept low, as miners would will receive rewards from #1.

Certainly, such an inflationary scheme would be a boon to long-term network security. However, there are serious drawbacks to consider and, as you note, this is somewhat off-topic.