Thank you for your article. I would like to ask a favor. Have a look at the first part of my article here:
Two issues to consider as bitcoin price goes parabolic
I am stuck at an airport and therefore bored, so this might just be the right time to note down a few issues I have with bitcoin and large…
You can ignore the part about energy or even scaling for now. What I am interested in is (after you read the first part above):
Why is a deflationary currency “virtuous”? I just cannot see that. I can see that bitcoin as digital gold/a store of value is brilliant for many of the reasons you mentioned. But what I don’t agree with is that all fiat is “evil” because of the “debt treadmill”.
The way I see it (leaving the issues we may all have with central banks etc aside) purely from a fairness point of view and to stir economic activity the medium of exchange we use needs to be inflationary and indeed over long time horizons needs to approach zero value. Deflationary currencies in fact are only virtuous for those who have it and by default terrible for those who do not. Why? Because in a bitcoin world, once the coins are divided up, wealth is distributed in a final manner. No more movements between classes as people just sit on their coins (forget for a moment that we already have that problem; I am not defending the current system, I am saying in a world with bitcoin as its currency that happens by design). Also note that the depressions of this world were often caused by the monetary stiffness of the respective system. I am not sure, societally speaking, a currency that earns you interest (in massive amounts) for holding it is preferable to one that prevents depressions (I for one believe the whole 2007–2016 period would have been much worse without quantitative easing). Anyways, that latter point is kind of speculative, but the first (on incentivation) is not. Also just imagine someone indebted in bitcoin. That person would be bust even if he just invented Facebook. Debt by the way is a tool to enable people to start businesses, it is not per se evil or even the problem.
The world needs a currency that is keeping enough value to be attractive to own, but loses enough value over time to incentivize investments. I don’t think that is bitcoin (especially if deflationary).
Interested in your thoughts. Note to take the emotional side out of it: I am pro cryptocurrencies in every way; I am just literally trying to think what makes most sense and I arrive at the conclusion that as a store of value bitcoin is great but as a medium of exchange widely used in the economy an inflationary fiat currency is better.