There used to be a cryptocurrency called Freicoin, which charged its holders X% per annum, deducting the proceeds directly from user savings and funneling the proceeds into charity “for the greater good”.
Freicoin failed to gain any appreciable adoption on the open market. Despite what people claim — e.g. “currency is supposed to be inflationary, cuz greater good” — when it’s their money on the line, they never choose inflationary money if they can easily opt out of it.
The failure of Freicoin underscores the reality that inflation is an anti-feature of money. No one actually wants inflation — if they have better options, they avoid it every time.
When the US government went off the gold standard, they doomed themselves to a Bitcoin future, because suddenly everyone could see the government’s money was backed by nothing. And if US dollars are backed by nothing, what stops a software developer from launching a competing money which is also backed by nothing? They removed all barriers to entry.
Now that everyone knows government money is backed by nothing, every available currency in this world has become an embarassingly hollow confidence racket. It’s merely a matter of whether you believe private sector confidence games made by competent engineers deliver superior technical/economic qualities compared to government confidence games.
Really, why would you want to hold a money in which a tiny group of people fully control the extent to which your money is debased year after year, when you could instead rely on an apolitical computer algorithm not controlled by anyone with a supply schedule known fully in advance which is auditable in real time using freely available open source software? Doesn’t that sound like a better form of money to you?
Visit “WTF Happened in 1971” [1] for another look at the impact of inflationary economics and currency debasement on middle and lower class people.
I would prefer to phrase that dynamic as, no one would knowingly opt into a money that can do that to them, so these kinds of schemes require first lulling/locking a population into that currency on a different promise, and only then debasing it, which is argued to solve certain public goods problems related to economies.
That is, people only accepted dollars in the understanding that convertibility wouldn't be suspended, just like they accepted the historical money that Freicoin was modeled after before knowing they'd do the Silvio Gesell scheme. It's an open question whether we've accurately modeled the full knock-on effects of reneging on the promise that got the currency off the ground (though personally I agree with you).
> No one actually wants inflation — if they have better options, they avoid it every time.
I don't like taxes either, but I also like living in a developed country. Inflation is a kind of tax, so nobody likes it, but at the same time pretty much everyone likes having what this tax provides (in the case of growing money supply, it's the ability to have money at all in circulation in the economy for the layperson).
For the past 50 years the lower and middle class person where robbed, not by inflation (which was way higher before 71 than between 1981 and today) but by neoliberal policies (Thanks Raegan, thank you Bill Clinton, and all the others, really).
Interestingly enough those policies where grounded in the same ideological background as today's crypto enthusiasm: Austrian economics.
In the 70's, Keynesian's political influence died (because of inflation haters), and so died the golden age of America, and the lower-income families spiralled to straight poverty. Now, after the 2008 crisis, Keynesianism is in charge again, and some people are really bullish with crypto for ideological reasons (because they've drank too much of the 80-90's propaganda comparing Keynesianism with Communism, really). But using lower and middle class persons as an argument reveals either poor historical knowledge or bad faith. It's pretty ironic anyway.
You talked about bank account, but people usually have much less money in their bank account than what they earn in salary. And with a deflationary currency, the value of your work declines year after year in that currency, meaning that your employer will be willing to pay you less and less every year!
As long as inflation is low enough, people don't really care about it in general because there salary increases as much (and given than the average American has much more debt than saving, the inflation is actually a gift to them).
So I talked about workers, but how about investors and entrepreneurs? Say I have $10 million today sitting in a bank account. I can either let it sit idle, losing value to inflation every year, or invest it somewhere where it can create value. Now if the value of my $10 million increases in real terms (meaning that my purchasing power will naturally increase when time passes) the most rational thing to do is not to invest that money. It's actually unlikely that my investment will pay off anyway, because the amount of money spent by people will decrease year after year (because that's what deflation means).
The idea that deflation is better than inflation (or, more broadly, that inflation is undesirable for the consumer) is libertarian ideology that I reject.
Freicoin failed to gain any appreciable adoption on the open market. Despite what people claim — e.g. “currency is supposed to be inflationary, cuz greater good” — when it’s their money on the line, they never choose inflationary money if they can easily opt out of it.
The failure of Freicoin underscores the reality that inflation is an anti-feature of money. No one actually wants inflation — if they have better options, they avoid it every time.
When the US government went off the gold standard, they doomed themselves to a Bitcoin future, because suddenly everyone could see the government’s money was backed by nothing. And if US dollars are backed by nothing, what stops a software developer from launching a competing money which is also backed by nothing? They removed all barriers to entry.
Now that everyone knows government money is backed by nothing, every available currency in this world has become an embarassingly hollow confidence racket. It’s merely a matter of whether you believe private sector confidence games made by competent engineers deliver superior technical/economic qualities compared to government confidence games.
Really, why would you want to hold a money in which a tiny group of people fully control the extent to which your money is debased year after year, when you could instead rely on an apolitical computer algorithm not controlled by anyone with a supply schedule known fully in advance which is auditable in real time using freely available open source software? Doesn’t that sound like a better form of money to you?
Visit “WTF Happened in 1971” [1] for another look at the impact of inflationary economics and currency debasement on middle and lower class people.
[1]: https://wtfhappenedin1971.com/