- 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.
Here's a little hint for you to consider your error in logic.
If the money power would love to have a gold standard, we would have a gold standard. [/list]