Bitcoin is guaranteed to be deflationary as long as there’s a finite limit – if nothing else, lost keys would reduce the total over time.

More importantly, the people hawking it _really_ want it to be deflationary because that effectively makes them landed gentry getting richer without any effort on their part. After a decade of that being integral to the sales pitch I would be extremely surprised to see any major holder support breaking the deflationary model.

No currency is guaranteed to be deflationary. You may guarantee that the currency supply will behave in a certain way (although even that is debatable), buy you cannot guarantee that the price level in terms of such a currency will continuously fall.

The fixed currency supply guarantees it: unless the economy is shrinking at the same rate, each BTC becomes more valuable over time and that’d cause purchase prices for goods to trend lower.

This has been a key part of the sales pitch for a decade: buy now and it’ll be worth more later, guaranteed, but that’s not good for an economy since it heavily incentivizes holding onto anything you aren’t forced to spend. Since Bitcoin has no innate demand, that’s an especially dangerous cycle since almost everyone has alternatives.

> The fixed currency supply guarantees it

No, it doesn't. Bitcoin can lose 50% of its value in a matter of hours, as recent experience shows, despite being in a limited supply.

So the only way bitcoin isn't deflationary is if demand for it continually goes down over time until it's irrelevant. If demand either goes up or stays the same, it will behave deflationary (wallets getting lost). This doesn't seem to be a good performance pattern for a currency.

You're right a fixed supply isn't enough to guarantee it, you still need productivity growth and technological progress, something we've had for a long time. Given enough growth a 50% crash is nothing.

There isn't monetary deflation in bitcoin (expect for lost coins).

As a global reserve currency, bitcoin would act as an "index fund of everything". Economy is expected to grow, but it's not guaranteed. Which means that there's always a non-zero risk associated to it. There's more risk on short time scales, and less risk on long time scales.

There will be if it's successful - 90% of the bitcoins ever mined have already been mined, for bitcoin to be useful at a long term world wide level it needs to store enough value even as the size of the world economy grows - if it can't them it will become a limit on economic growth much as gold became in the last century.

So because the number of bitcoin is fixed to remain relevant bitcoin will need to continually deflate (ie increase in value) so that there's enough to represent the size of the economy

>More importantly, the people hawking it _really_ want it to be deflationary because that effectively makes them landed gentry getting richer without any effort on their part.

Yeah it is basically people getting screwed by increased wealth inequality and then as a response they don't think of a way to build a system without losers, instead they join a system where the old dynamic makes them the winners. The only difference is that you start from a clean slate from 2008 onwards.

> as a response they don't think of a way to build a system without losers

Which system is that?

Does making governments less stable really not make economies less stable?

It would seem so, yes. But I disagree with the GP’s premise: claiming economies rise and fall based on monetary policy alone is like claiming the Roman empire fell because they debased their currency. It’s a contributory factor, but certainly not the only one.

We’d need to assess the merit of anarcho-capitalism vs collectivist democracy to understand whether disempowering governments would in fact decrease economic stability.

Yes there is a hole in the article. He didn't mention that Germany lost WW1. Every other nation suffered the same problems but they could get away from them without hyperinflation, Germany couldn't because increasing the monetary supply does not repair an economy.

If one were to completely oversimplify everything the roman empire fell into the "war + debasement" bucket though but it also had a lot of other problems. They were actively fighting a war which meant they couldn't control the influx of barbarian refugees (huns drove them out) at their border. They then committed a grave mistake. They deported all barbarians and killed those who stayed. Some barbarians gathered near the border and formed a big army which then proceeded to plunder Rome. The problems didn't start with money, they got worse because of money.

Governments that overspend or misallocate capital are a burden to the economy. With sound money, a badly managed country can go bankrupt because they can't print more money. It isn't the fault of the money, while this is the usual argument. It's just the nature of honest money.

So, it results in destabilizing governments that are overspending, but stabilizing those that are not.

You don't see the side-effects of destabilizing a government as potentially disastrous for an economy? Governments and economies can have many different forms, but there are clear cases where destabilizing one will destabilize the other and ultimately lead to mass suffering for a period of time. Imagine what would happen if a government in a place like the Middle East or parts of Africa collapsed. History has shown that a new government often doesn't rise up from the ashes without lots of tears and bloodshed. What do you think happens to people's standards of living? How much of their time and money do you think it will take just to get back what they used to have?

Allowing corrupt governments continue to steal the wealth of their citizens through printing money isn't a great alternative. At the end of the day people will use the money that works best for them if they have a choice.

>Allowing corrupt governments continue to steal the wealth of their citizens through printing money isn't a great alternative.

How many times does this get repeated? No money is being printed right now. No MMT is happening. No helicopter money is happening. Barely any Keynesian fiscal stimulus is happening (the US has stimulus checks but the EU doesn't and it's suffering for it) and the fiscal stimulus that is happening is financed via debt. No money is being printed right now.

The majority of money that the Fed creates is primarily issued via debt. The part that isn't is used to buy assets that are being put on a balance sheet and the sale of the assets will often remove more money from the economy than it added. QE does nothing but fill bank reserves so that banks lend out more money.

Yeah, and that's the problem. All the debt is basically money that is stolen from people's savings in the form of inflation.

"Financed with debt" that is never going to be paid back. You have to think who is doing the actual financing here, and why they aren't getting interest on their financing.

The world is much bigger than the US and Eurozone, maybe try travelling a bit once covid dies down.

Citizens of Turkey, Lebanon, Nigeria, Ethiopia, Zimbabwe, Argentina, Venezuela, Iran, Belarus, for example, all have their savings being stolen through inflation to greater or lesser extents.

Of course, but adopting another currency doesn't make a dysfunctional government any more functional. It's like fixing a wobbly table while your house is on fire... probably not the most pressing problem under the circumstances.

> Imagine what would happen if a government in a place like the Middle East or parts of Africa collapsed.

The Zimbabweans that lost all of their savings to hyperinflation were literally counting the days until Mugabe's government collapsed.

Technically it collapsed the moment land was forcibly repossessed because from that day on Zimbabwe could no longer feed itself. The government merely managed to survive longer than it should.

Indeed. http://imgur.com/a/VdQdD