Re: Hyperdeflation, own half the world by headstart - don't you care at all?
- But putting such theoretical plutocrats aside, here is the argument that convinced me to not be so concerned about the Bitcoin's deflationary properties: on this Earth, there has never been a deflationary currency. There has never been a currency whose supply increases predictably and significantly more slowly than the supply of the goods it represents. We do not actually know how such a currency will behave in the wild, and while we may speculate, we are speculating. Bitcoin is, in some ways, still an experiment.
Gold?
Well, if you talk about extremely long periods of time, decades, generations, ...., then you can't really have a net-deflationary currency forever; it's like the energy or mass preservation law in physics. But for sure, whenever a currency is fully tied (not partial reserve or other monetary instruments) to the value of a scarce commodity (such as gold) then you will get a deflationary currency. And we already know how that works: Value of the currency rises (other goods drop) to the point where the economy cannot sustain it any longer, then a depression follows as correction, and then it starts again. In the process, more and more assets are transferred to the money power.
I already mentioned an example of a failed forced re-introduction of the gold-standard by Winston Churchill, and the result was massive deflation and a depression that followed.
I understand there are always other factors at work, and Austrian Economists will ignore most of the evidence that's there and tell you "human nature cannot be predicted".
But the statement "we do not actually know how such a currency will behave" is simply untrue; we have a really good idea how it behaves, that's why the money power would love to have it.
Good points that should be seriously considered.
Let's think about "money power" from another angle. Any free market economy is biased towards "money power." The 75% are obligated to spend almost all that they earn. The 25%, 15% more realistically, have the luxury of resources, thus time, in making calculated decisions in attempt to better their position in the economy.
If this weren't true Warren Buffet wouldn't be warning us of a dangerous rise in 'dynastic wealth.'
A deflationary (mild) currency would benefit both the have's and have-not's. Though, the bias towards "money power" would be magnified, thus causing increased potential for instability over time. So, there we have the problem. An increasing bias towards "money power," over time that exists in any free market, but is magnified in a deflationary economy.
This should make the thoughtful person wonder whether the root cause of instability in an economy should be attributed to currency properties or the bias towards "money power."
How to reliably solve a problem of this magnitude? I have no clue. I know the problem will not be solved until we have an accurate understanding of the actual problem. Intellectual inertia of the status quo will not likely be leading us to this state of enlightenment.
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