With current schemes you are only "penalized" for capital gains when you actually have them. If you buy an item for $100, and sell it ten years later for $110 then you pay taxes on the difference. With your scheme you would have spent $40 in taxes in the mean time.

Additionally with current schemes you can balance losses against gains (rules vary by country) and you aren't penalized for investing: eg money put into a factory doesn't incur taxes until it starts producing returns.

Interesting.

Would you also not have suffered massive real loss from inflation over ten years eroding your return?

Depends on the item. For example a car or a house also provides utility which is value extracted and not a loss. Most items should appreciate in line with inflation, all else being equal - after all inflation doesn't change real values, just the digits used to express that value.

And in this example if I sold it for $100 then no tax would be due at all under current schemes. In your case I still have paid $40 in taxes in addition to the losses from inflation.