The fee with each transaction punish the spend and therefore reduces the velocity of circulation. On the other hand, the demurrage stimulates the spend and trade with the currency, because the longer you hold the money the more you lose.
Their are equal pros and cons in each case. but..
I guess time here can be measured with the block counter.
Here we got the formula we're supposed to be talking about if we want to reach stable prices(
http://en.wikipedia.org/wiki/Money_supply#Monetary_exchange_equation):
MV = PQ
M is the total dollars in the nations money supply
V is the number of times per year each dollar is spent
P is the average price of all the goods and services sold during the year
Q is the quantity of assets, goods and services sold during the year
Demurrage increases V and make it more predictable.
...I hate that equation. Money doesn't have 'velocity' contrary to popular imagination. Most of the time a money token just sits in one location. Very occasionally it moves. At the moment, each dollar of base money moves about every 8 months. Thats not like velocity, like water thru a pipe, its more like electrons tunneling. So more of a stochastic, quantum type event than a flow.
I don't think that equation is that useful in the real world.
If the average dollar moves every 8 months, in 12 months the avarage velocity of the dollar is 1.5
With demurrage, that number would be considerably greater. Anyway, even if you don't believe in the effects of velocity and you think it all depends on the supply, demurrage can destroy money like your fee does.
The main pro is that it encourages transactions instead of punish them. The removal of the interest is a pro for me too.
The main contra is that the currency loses partially the function of storage of wealth.
Secondly, you say you don't like interest but demurrage per year is not only interest, but it is imposed artifically.
Whereas what I propose, the fee charged when spent is a transaction fee , which I promise you will make more sense to everyday people than a negative nominal interest rate will do.
I said per year for simplification. It would be per block in the block chain when you spend the money since you received it.
Is imposed artificially but the users should accept that rule. The creation and the spending fee are artificial too.
You're probably right about the sense it can make to everyday people.
For me the most important thing for me is suppressing interest, which is the reason I became interested in Ripple in the first place.
Its a shame you feel that way. You cannot load political or ideological views on a money system and expect it to succeed. Ripple is a pure system of bilateral agreements and as such there is no business for you or I to impose a particular form on these voluntary bilateral contracts. If two consenting adults would like to charge one another interest, so be it.
I'm not saying that I would remove the ability to charge interest in Ripple, but I believe it would be zero in most cases. The scarcity of money is the source of interest, I think. And Ripple doesn't have that scarcity.
OTOH, the transaction fee is perfectly understandable as a fee payable to the community who enable, via the donation of their MIPS, trade to take place.
Most people won't never get the Ripplecoins. They will be just trading with IOUs. All they need to know is that (in exchange of their services) the Nodes are creating money that they will have to accept for settling debts. Since they won't usually produce that money, they won't have a problem if that money expires gradually.
The problem is with miners. They will prefer the usage fee.