This question works better the other way round. Why should people that do all the work and take all the investment risks to make the riches get continually decreasing returns on their efforts whilst the people that sit and HODL get continually increasing returns on doing nothing?
Is that sarcasm? It discourages any type of economic activity.
Why would someone invest into or try to start a business when you can become richer by just sitting on your money pile with no risk.
Artificially constricting the supply of money in a non static economy is a bad idea. Like the gold standard just much worse.
One thing i’ve always wondered: If something like Bitcoin was the only currency, then it would be like a direct mapping of 21 Million Bitcoin <-> all global economic activity and goods and services. In that case, shouldn’t its price be relatively stable, and might actually even go down sometimes? Like in big natural disasters increasing the cost of certain goods?
I’m not a crypto zealot, but I’m not a big believer in the idea that the economy needs to be stimulated and I need to be forced to spend my money before it loses its value. I just want to buy what I need or really want.
And in the hypothetical case of having a mapping of “all economic activity” <-> “21M payment units”, then the relative stability of this money might still make investments more lucrative than just hoping for my money to be worth slightly more tomorrow. In this hypothetical scenario it would be more like “my money is worth 1000 eggs today, next month it might be 1001 (if others grow the economy) or 999 (if something unforeseen happens halfway across the globe). So if an investment looks like it might yield the value of 1100 eggs there would still be people to take the risk of investing, no?
It might. It would be significantly less likely. Basic economics. Unless you don’t think that most people are at least marginally rational..
> In that case, shouldn’t its price be relatively stable, and might actually even go down sometimes
That’s true only if there is no economic growth. Gold standard had a similar problem.
Why would someone invest into or try to start a business when you can become richer by just sitting on your _property_ pile with no risk.
Yeah, I guess.
Well that implies that you are more or less economically illiterate. I’m not talking about property and even renting residential/commercial property (as relatively safe as it is) does provide an actual service.
Anyway.. a very basic example, imagine you have $1000000, you can:
- keep it under your bed and lose 2% every year
- invest it into real estate etc. and make e.g. 4% every year.
- invest into the stock market and make 6%.
Now with a deflationary currency like bitcoin (or gold back in the mid to late 1800s) you can just hoard it and conservatively make 2-3% every year* invest into safe bonds and gain another 3-4%. Business would need to grow at an extremely fast pace to be able to attract much capital in such an environment.
* of course it’s only hypothetical. You’d need the economy to grow and productivity to increase YoY for this. That would be unlikely in any economy that used Bitcoin as its primary currency.
The rest left me puzzled, can you elaborate? Why should the money holder do anything productive? Why getting richer and richer becomes something bad when we go crypto?