Quote from: dacoinminster on August 05, 2011, 02:58:14 PM

If you want widespread adoption, there's a huge marketing advantage to getting rid of demurrage. I think morpheus' transfer fee idea has all the advantages of demurrage without the drawbacks. When the price of coins is at or above the target, there would be no fees or penalties of any kind.

Demurrage has many advantages for its users than just providing a means of money destruction.
It lowers interest rates, drives transaction fee prices down (or improves security) and recovers lost coins.
Merchants should accept a currency that his customers are willing to spend. But let's discuss these other advantages in the freicoin thread if you don't agree or don't see them as advantages.

If you want to influence prices by changing the monetary base, changes will have more effect if there's demurrage, because demurrage increases the velocity of circulation, and having a high V multiplies the effects of increasing/decreasing M.

M * V = P * Q

You can change both, the amount of newly created coins NCC and the demurrage fee rate.
When you have stable prices, you have NCC = (coins destroyed by demurrage) CDD to keep M constant.
When you have inflation you want NCC < CDD to decrease M
When you have deflation you want NCC > CDD to increase M
When you have inflation you want to decrease CDD to decrease V
When you have deflation you want to increase CDD to increase V
So finally,

With deflation you increase both NCC and CDD, but NCC more than CDD
With inflation you decrease both, but you decrease NCC more than CDD

If you destroy the money through transaction fees, you don't have direct control over coins destroyed by transaction fees CDT, you just can change the mandatory transaction fee rate MTR.
Even worse, when you increase MTR to fight ~~deflation~~ inflation, V goes down, reducing CDT, making you increase MTR even more...a positive feedback that takes fees to the sky and stops transactions completely. It is better to have ~~deflation~~ inflation than no trade at all.
I don't think that morpheus's proposal can work as it is.

Edited