Central banks have (without evidence) claimed that deflation is a universally “bad thing” in order to justify inflating the currency every single year (AKA stealing from savers, and transferring wealth to the people who are the earliest recipients of the inflated currency).

Gold would have become the standard around the world if governments had not used coercion to prevent it from becoming so, and instead replacing it with fiat currency (which they can control and benefit from).

If Bitcoin, or another cryptocurrency, replaces fiat, it’s value will be worth several orders of magnitude of what it’s worth today, which is why many people are holding it instead of spending it at the moment.

However, people will not simply “horde” Bitcoin forever in anticipation of its price going up any more than people currently spend every single fiat dollar/euro/yen they have for fear of it going down in value due to inflation.

You may ask, “but why WOULDN’T they hold it instead of spend it if they anticipate the value increasing each year?” The answer is because people HAVE to live in the here and now, they have to pay for things like food, rent, entertainment, cars, fuel, etc. So they can’t get around having to spend some amount of money to live.

But sound money (money with low to no inflation) does cause people to spend LESS money than fiat currency because there’s a much larger opportunity cost.

> Central banks have (without evidence) claimed that deflation is a universally “bad thing” in order to justify inflating the currency every single year (AKA stealing from savers, and transferring wealth to the people who are the earliest recipients of the inflated currency).

TIPS. JGBis. Linkers. Come on man, this makes you sound like a crank.

Gold was the standard. It didn't work out very well.

TIPS and JGBIs are nothing but derivatives of un-sound money (fiat currency controlled by a small group of people, enforced by coercion), not examples of sound money people can choose as an alternative to fiat currency.

The gold standard you’re talking about was far from a market gold standard, banks and governments colluded so banks could print more paper money than there was gold in storage.

What specifically do you think “didn’t work out very well”?

Inflation encourages spending and investing while deflation encourages saving and hoarding. It isn't a surprise that people who want to see the economic activity want inflation over deflation. It also isn't a surprise why the general population would prefer deflation over inflation. I can understand how someone can make an ethical or moral argument for deflation, but I don't know how you make a economic argument that deflation is better for the future of the country than inflation.

There are certain people who benefit from inflation (banks who loan money, governments who have their debt denominated in fiat currency) and there are people who lose from inflation (anyone who saves their money in fiat, the value of which goes down the more money that’s printed). There is no such thing as something that’s “good/bad” for a “country” — countries don’t exist, only people do.

Also, Bitcoin IS inflationary, there will continue to be more Bitcoin creates until sometime around year 2140 when the 21 Million supply cap is reached. It’s just not nearly as inflationary as fiat currencies, which have no cap and no one knows how much more will be created from year to year.

Let me simplify things. Deflation is good for the individual. Inflation is good for the whole. It is basically the tragedy of the commons. What is good for a single person is not sustainable when scaled up to the whole of society. With deflation spending and investing are discouraged. That is bad for economic growth.

Also you are wrong about Bitcoin being inflationary. An expanding money supply is not enough to make a currency inflationary. The rate of the increase in the money supply needs to outpace growth in the economy. That isn't happening with Bitcoin. The obvious proof of this fact is the increase in the value of Bitcoin.

You’re using a different definition of inflation.

There are two phenomena we’re talking about here — an increase in the supply of money and the decrease in the purchasing power of money. The term inflation is broadly used to apply to both of these but they’re different which is where part of the hang up is.

In any case, the supply of Bitcoin will continue to increase until it hits 21m coins in approximately 2140, but if it becomes the world’s dominant currency, its purchasing power will continue to increase.

Why should spending and investing be encouraged, can you think of any downsides to encouraging this?

You are the one who described inflation as "stealing from savers, and transferring wealth to the people who are the earliest recipients of the inflated currency". That is talking about purchasing power and not money supply.

There are certainly some situations when you want to encourage saving over spending and investing. However I would argue it is not an ideal stable state. It is more difficult for an economy to grow when people don't circulate money through spending and don't increase future productivity through investing.

The benefit of a central bank that can control the money supply is that you can adjust these things on the fly depending on what is happening in the economy. Bitcoin cannot adjust the money supply in reaction to the economy.

Well, the Austrian Business Cycle Theory [0] has shown that the continuous, never ending increase in the money supply is actually responsible for greatly exacerbating the boom and bust cycle, so there are in fact many losers of this (people who invested money thinking it was safe when in reality it was a highly speculative market, eg real estate in 2007, internet stocks in 2001, etc).

Increasing the money supply ultimately leads to a decrease in purchasing power, which is stealing from savers.

If the market (individuals cooperating with one another voluntarily) valued a continuously inflated currency, then fiat currency will win and crypto will fail. I suspect the market values a fixed or slow-increase-in-the-money-supply version of money like gold as they demonstrated with their money preferences before governments used coercion to stop it, one of the biggest reasons crypto is so popular is because people can’t use gold as money, but governments can’t effectively stop people from using crypto.

[0] https://en.m.wikipedia.org/wiki/Austrian_business_cycle_theo...

Simplify? "Obvious proof is the increase?" One Bitcoin is still worth 1BTC in my books, inflationary dollars' drop in value notwithstanding.

10,000 Bitcoin used to be enough to purchase a couple of pizzas. Now it has enough value to purchase an entire office building in San Francisco. Either the value of Bitcoin increased or the value of everything else on Earth decreased.

> It also isn't a surprise why the general population would prefer deflation over inflation.

Nonesense. The general population is cash-poor, and is largely in debt. Inflation makes their debts easier to pay off.

Most of the wealth the general population owns is not in their bank account, but in their partially-owned house, their car, and their education. Deflation does not increase the relative value of any of them.

Part of the reason why people purchase or invest in these long term assets is because of expected future inflation. For example a 30 year mortgage with a fixed monthly cost would be a horrible investment in an economy with expected long term deflation. You would be much better off with paying the ever decreasing costs of renting rather than locking in a price that steadily costs more. This is why economist like small and steady inflation.

> If this keeps happening won't this actually crowd out the currency application and lead to Bitcoin becoming nothing more than a speculative bubble?

I think it'd be reasonable to say that this has largely already happened. Beyond the volatility, it's terribly impractical to use as an actual currency due to the transaction fees these days.

Great point, luckily unlike fiat currency, developers can fork the code and create a new currency if they don’t agree with the way things are being run. This happened when Bitcoin forked into Bitcoin Cash (which has a blocksize that’s roughly 8x larger than Bitcoin, and has very very low transaction fees) and its likely going to happen again around mid-November when Bitcoin forks again. Unlikely that all these forks will survive, only time will tell what the market actually values!

Yep, it's also terribly unforgiving to use.

Lose your wallet password and your money is gone.

Fat finger an address sending it to the wrong account and its gone.

Bug in someone's code and the coins get stolen in a hack: gone.

Addresses have a checksum so unless the wallet ignores that, a fat finger causing funds loss in that scenario is unlikely. [0] With the newly designed address format there is also error detection. [1]

[0] https://bitcoin.stackexchange.com/questions/32353/how-do-i-c...

[1] https://github.com/bitcoin/bips/blob/master/bip-0173.mediawi...

Definitely, the user experience is going to have to improve A LOT. It took a solid 20 years before email was used by grandmothers though, in another 11 years it’s likely to see grandmothers using cryptocurrencies!

You’re thinking about this wrong; bitcoin is meant to be used more as a store of value rather than as a currency for transactions. You should think about it more as hold than dollars.

Also, new assets and specially new asset classes are predictably going to have high volatility at first, until the market knows what to make out of it and finds the right value for it. In relative terms, bitcoin is still a pretty new asset, specially since new people are coming into the market every month.

Being a “currency,” for any definition of that term, doesn’t have to be and isn’t the only criterion for success for Bitcoin.

This isn't deflation, but convergence to a stable value. It's an S-curve.

To be useful money needs some reasonable market cap - because it could not store or move too much value without that.