I actually like the concept of alternative currencies. But bitcoin really does suck. It's not just an alternative currency. It's an alternative currency with a built-in retarded fiscal policy.
Bitcoin's fiscal policy is only one part of the whole bitcoin idea. It is possible to change the fiscal policy while keeping the rest of the crypto-based system.
The fiscal policy is controlled by two numbers which are chosen by 'consensus' among bitcoin users: The reward for mining a block, and the 'difficulty' of mining a block. You can always mine blocks in violation this consensus (eg reward yourself too much), it's just that no one will listen to you, and no one will accept the bitcoins you 'mined'. However, If everyone agreed to change how we choose these numbers, we could change the policy.
I'm pretty sure you could set up a 'bitcoin-2' network which would honor transactions from the original bitcoin network into the new network, yet have different algorithms for reward and difficulty. For now though, it doesn't matter since the current 'fiscal policy' is quite expansionary.
Moreover, there is a strong argument that deflationary currencies are morally wrong because of their effect on generational wealth inequality. In a society with a deflationary currency, nearly all wealth will be held by older people, simply because they got there first.
You don't even have to look very far to see what a society with deflationary currency would look like. There is a market that has many of the same properties as a deflationary currency, and that's real estate in places like SF and NYC. In Manhattan, there are a ton of older people who purchased real estate in say the UWS in the 1980's and 1990's. Property values have skyrocketed since then, to levels that these people never could have afforded at the time they bought their property. Their kids, now the same age/of the same relative financial standing as they were when they bought the property, are totally priced out of the market.
> Moreover, there is a strong argument that deflationary currencies are morally wrong because of their effect on generational wealth inequality. In a society with a deflationary currency, nearly all wealth will be held by older people, simply because they got there first.
Sorry for the stupid question, but isn't this morally equivalent to being old and had more time for your direct or indirect investments to grow (pension funds, ...). I mean in the current system old people which weren't stupid/unlucky to throw all the money away usually do have more money than their children (in fact in Italy where I lived, the young generation regularly needs help from parents for buying a house, a car etc).
I believe that you argue that since in a deflationary system "being old" per-se grants you wealth, this is unfair because you didn't earn it, it just happens. However you can still throw all your money in booze and games when you are young, not unlikely the current situation.
But probably I don't get the magnitude of the bitcoin deflation. Wonder what is the predicted deflation in 30 years (assuming an optimistic widespread usage, not the real case)
Doesn't your example of NYC real estate undermine the point you've made about inflationary monitory policy not rewarding those who got there first? That happened without deflationary currency -- surely it's impossible eradicate rewards for being first.
My point isn't that NY real estate is the result of deflationary currency. My point is that its an example of what happens when assets appreciate without investment, like currency does in a deflationary system. The old people just end up owning all the wealth, in a very dramatic way.
The problem with a fixed M0 is that broad money (credit and debt based on the money) can fluctuate, causing deflation. Deflation makes people delay on investments, which causes a recession, and more deflation. It's a vicious cycle. That's basically how the Great Depression happened.
The GFC was a similar crisis, but the Fed was able to quantitatively ease the US out of it. OK, things were still pretty dire, but given how much debt there was (as a result of the debt bubble which had kept the economy going gangbusters for so long) it wasn't as bad as it could have been.
Austrians (Ron Paul) say things like "that's bad - the Fed shouldn't be able to rescue the economy, because that will force the bankers to act like grown-ups". Unfortunately, it doesn't work that way. The bankers will still take massive risks, and crash the economy every now and then, and the Fed won't be able to help.
Of course, there's reasons to be concerned about the US economy. IIRC, real median wages haven't grown much since the 80s. Basically all the growth has been the rich getting richer. But I don't think that's because of inflation, so much as general policies which favor GPD growth over raising median wages. The US is not a country which cares about the poor, and outsourcing has weakened poor Americans' bargaining power. With the rise of China, that might change (Chinese wages are rising quite quickly, which will make US workers more competitive, which will allow them to demand higher wages). Whatever the case, I don't think it's all the fault of inflationary monetary policy.
And no, I don't blame robots. If robots were taking all the jobs, they wouldn't be going to China. Maybe they will take all the jobs one day, but currently more robots means cheaper products, which means more jobs. Also, before anyone says "the jobs will just go to Africa", they better consider the challenges in building infrastructure there, the fact that Africa is quite diverse (there won't be 200 million peasants all swarming to special economic zones within a decade), and the added demand from all the newly wealthy (or at least, not piss-poor) Chinese.
Even though the number of "real" bitcoins remains given, there is nothing stopping individuals or banks from trading them more frequently or issuing tradeable notes denominated in bitcoins, which would both raise the effective money supply.
Sure, but the (very important to me) difference is that there's no one to bail you out when people come redeem the claims for real bitcoins, allowing people who don't like such schemes to safely isolate themselves from them -- just hold and insist on real bitcoins.
