Inflation is also the main cause of quality decline seen in absolutely everything. When you can not raise prices as fast as your costs are increasing, the only viable option is to lower quality. This inevitably happens every where and is pretty much an accepted fact of life. It's not that companies want to give you a crappier product or service, it's that they have to.
I'm a huge skeptic of all crypto currencies in their current forms, but the deflationary part was one of the ideas that I really liked (not that any government would ever go for a deflationary policy)
If you can't raise prices as fast as your costs are rising, it's a signal the market prefers reduced quality to higher prices for your product.
Deflation certainly isn't going to help you there, especially since it means consumers will expect you to actually drop your prices, with some even deferring purchases whilst waiting, and you'll struggle to borrow money when lenders reason that [i] you'll make less revenue next year and [ii] they don't need to risk lending money for it to be worth more than last year; they can just bury it in the ground...
Optimization is the main cause of quality decline. Inflation has nothing to do with this. Inflation is neutral as it raises all prices equally.
This is not true if the inflation is a result of currency creation, as in that case the inflation first affects the things purchased by those receiving the newly created money.
This seems to be what happens in restaurants or groceries or other things where we go "wow, you used to get a coke for fifty cents!"
A business that can't pass that cost on seems to have more fundamental "loss of relative demand compared to the past" issues that would squeeze it dry even without inflation. In that world, your costs would be static but customers would be willing to pay less over time, so you'd die.
The cost to produce goods rises much more rapidly than what you can actually sell your product for. People would simply stop buying if you increased prices 12-13% every year (which is what is typical for me in the restaurant industry in Mexico)
New entries usually start with a lower quality product by default, so you usually have to keep prices and drop quality if you don't want to be priced out (or move into a far more upscale and finicky market).
If you are not a business running on fixed agreements, you have the right to increase your prices whenever to accommodate your costs. If your idea is that consumers will just go somewhere cheaper, then it works upstream too - you have the option to source your products / goods from somewhere cheaper as well.
If there is no cheaper alternative for you, then there must be no cheaper alternative for your consumers, unless you aren't operating your business in an efficient manner. In which case the market will either force you to, or you will lose your business.
This assumes you agree with the government on what constitutes a terrorist, a rogue state, or an oppressive government. Currently peaceful protesters in the US are being labeled terrorists because they are protesting the government.
The assumption behind your premise is ultimately that you trust the government to "do the right thing" and I do not, so why would I want to give them more power over me?
My assumption is that if the government is untrustworthy I have much bigger problems, like the fact they can jail and torture and kill me arbitrarily and without recourse. There's no amount of math that'll help me in prison, or when I'm dead. If you can't trust the government, the only thing that'll help is replacing that government. And when you do, you won't need crypto.
Let's take right now in the US for instance. I don't trust the US government, but I'm not so scared that I'm regularly fearing for my life. I guess it's possible I could wake up in Guantanamo tomorrow but that seems unlikely. That said, I am not interested in giving them any more power over me, and in fact interested in them having less.
So as much as I would love for a real "fix" to the US government, which you describe as replacing it, that seems slightly extreme and unlikely at the moment. So the most realistic course of action is fighting them on their unnecessary grabs for power and surveillance over the populace while I still feel safe to do so.
Just because there are bigger problems doesn't mean you should ignore the smaller problems, especially when those are much easier to address.
Disagree, due to the fact that the government being able to censor transactions of the government's choosing means that the government is able to censor transactions of the government's choosing. That's not a good thing.
> I want my currency to be subject to "government coercion" when the courts say so.
I would agree with this if and only if the protections of the law were equally applied, and all people had equal access to due process. Presently, both of those things are entirely untrue in most large, developed countries, despite being aspirational/stated goals.
The legal system can and does entirely fail people on a regular basis, and should not have the ultimate veto power over every type of private property, as has been the case historically.
> I for one do want the government to be able too regulate, control and trace transactions.
Many of us feel that freedom of association and freedom of trade with those associations are inherent natural rights, and such regulation or control over them is an illegitimate infringement upon them, regardless of however many democratically-elected representatives say they're not.
Ultimately the state's authority to do such things ("regulate, control") is based on the application of violence, or the threat of same. Violence cannot solve math problems, ergo, cryptocurrencies are a fundamental threat to the authority and existence of the state.
Honestly, I'm completely surprised that they've allowed them to get as big as they have without banning them outright.
This is the biggest, most obvious misconception about cryptocurrencies.
Violence can solve any math problem. With a rubber hose, your coins are theirs. In prison, crypto won't help you. [1]
[1] https://www.independent.co.uk/life-style/gadgets-and-tech/ne...
Seriously, you're underestimating a motivated government's ability to use violence to either prevent transactions (by taking some of the multisig parties out) or to coerce a transaction (by applying multiple hoses to multiple people).
Say they capture your family. Would you not make a transaction to save your family? If you didn't they'd just take you out. Heck, a motivated government might just take you out after anyways! See how your "coins" are no longer your biggest problem under an authoritarian regime?
In the face of the KGB, you wouldn't be saying "but your violence can't solve this math problem" for very long. Not without that tongue. How many fingernails does a man need anyways? Trust me, that math problem's getting solved. With hoses. Real fast.
This is one of those conceptual exercises that falls right over.
Hardware security systems also permit such things, in more limited circumstances.
The state's capacity for violence is finite, and is scoped by their legal and physical jurisdictions. There is no state, as yet, that can wield unlimited violence throughout the same scope as the uncensored internet.
One man, can tell the KGB, to extract fingernails until the money moves or is no longer capable of moving.
> There is no state, as yet, that can wield unlimited violence throughout the same scope as the uncensored internet.
So a sufficiently motivated state censors the internet. EZPZ. Half the world's already doing it.
Your problem isn't the money, your problem is a tyrannical government. It can and will do whatever it takes, and by virtue of being a large group of people vs. you and your, well, fingernails, no amount of math is going to resolve this situation in your favor. The only thing you can actually do to improve your situation is topple the government. And once you do that, you don't need crypto, do you?
The analogy you should be looking at is the printing press, because it broadened the scope of such markets; what a person of higher literacy communicates is illegible to the lower. And such is true of a system of account that renders a larger scope of transactions illegible. The possession of great wealth itself is a concept that assumes a top-down vision of value; the phenomenon of being robbed for cryptocurrency is mostly reflective of the new being imitative of the old. But if they're all tokens, and anyone can make them - well, then, that means we increasingly don't have a man at the top. If the scrip you pay your police doesn't buy them anything at the market, they aren't going to be very motivated to take out fingernails for you.
Or maybe you only meant a single benevolent government to have this power? In that case I propose the Polish government to censor world transactions (simply because I am a Pole and a patriot). I trust you don't mind!
We can call it: "exactly what we do right now"
The only reason the US is able to sanction other countries is the scale of their economy. They influenced Europe to cut trading relationships with Iran, not through the US dollar, but through exerting political influence. The Europeans would rather trade with America than Iran, and America said they got to pick only one, so they complied.
None of that changes under Bitcoin or any other currency, crypto or otherwise, in no small part because reporting requirements don't go away. Laws don't go away. Political influence doesn't go away. International relations don't go away.
Do you really think that with cryptocurrency America would be unable to materially sanction Iran? Are you sure? The US Army is a pretty good army.
It's just that individuals within the countries wouldn't care much because Bitcoin or Monero transactions always go through and are never reversed.
The government already has total control over the domestic economy, and can coerce you through violence. What have you gained other than a dramatically less energy efficient economy?
This would be true with deflation, assuming returns from investing outpace the returns from doing nothing. Inflation incentivises investing for returns that do better than the loss from inflation. It would incentivise investments that have a negative return, so long as that return is greater than the inflation rate.
> Why would you spend money today when it would be worth more tomorrow
Because owning a good today is worth more to you than having the same good in the future. Eg it’s better to have the iPhone 11 today than it is tomorrow, as you have it for an extra day. Additionally there’s many things you can’t put off into the future like paying for food, water etc.
[edit for typos, sorry, phone posting]
> The ability for the government to censor transactions to terrorists, rogue states and oppressive governments is a good thing.
While that statement is true, I think it's important to keep in mind the context of how current "terrorists, rogue states and oppressive governments" are using fiat currencies. Governments do currently have the ability to censor those transactions, yet they are still operating.
> Inflation doesn't affect people who own assets, including real estate and equities, so long as wages keep pace with inflation. They have.
I don't know how valid the statement of "they have" is here. At least in the United States, real wages have not [0]. Besides, to my knowledge there is no rule in cryptocurrencies that says inflation does not or can not exist, so I don't think this is a counterpoint to the benefits of cryptocurrencies.
> I want my currency to be subject to "government coercion" when the courts say so.
This is a personal desire of yours.
> I for one do want the government to be able too regulate, control and trace transactions.
While this is also a personal desire of yours, I think I will also reference my first point of how governments are not doing a very good job of this today with fiat currencies.
Overall I think its obvious there are downsides to the current use and implementations of cryptocurrencies, but I think the value of them not being tied to any central agency is the key ideal and make them worthwhile.
[0] - https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us...
Some have constant emission, like 1 per second forever.
(1) The ability for the government to censor transactions to terrorists, rogue states and oppressive governments is a good thing. Evidenced not least by the fact Bitcoin was likely created by an international narcotics and arms trafficking racist bond villain who at one point tried to keep Rhodesian farmland in the hands of the whites and nearly started a cocaine plantation in Somalia [0, 3]
(2a) Inflation isn't some magical evil conspiracy, money is an intentionally lossy store of value. Inflation incentivizes investment and allocation of capital towards the most productive enterprises. This is intentional. Inflation doesn't affect people who own assets, including real estate and equities, so long as wages keep pace with inflation. They have.
(2b) Deflation is bad, as it decreases the velocity of money and economic productivity. Why would you spend money today when it would be worth more tomorrow? Hundreds of BTC are lost every few days due to the user-hostile nature of cryptocurrencies.
(2c) Deflation also concentrates wealth with existing holders, hurting the next generation of market participants, and entrenching the current BTC wealth distribution. This is worse than any banana republic. Unless you're one of the whales, you're a peasant fighting scraps, and your kids will practically be serfs.
(3) I want my currency to be subject to "government coercion" when the courts say so. If you don't trust your government or the courts, the "coercion" of the government is literally the least of your problems.
(4) I for one do want the government to be able too regulate, control and trace transactions. Which is something they can easily and explicitly do with a shared public ledger.
(5a) Massive waste, each proof-of-waste BTC transaction produces 100g of e-waste and consumes as much electricity as it takes to drive a Tesla from SF to NY. [1] All to operate a network that you could replace with a single DynamoDB table and likely one man on a stationary bike powering it.
(5b) At market rates for electricity alone a crypto transaction costs about $80, which is socialized across the block reward. When this stops, people will have to pay the whole cost of a transaction, which in turn they will not do, which will shut down miners, which will kill the security aspects of the network.
[0] https://www.wired.com/story/was-bitcoin-created-by-this-inte...
[1] https://digiconomist.net/bitcoin-energy-consumption
[3] https://en.wikipedia.org/wiki/Paul_Le_Roux