I think it makes sense. You have an economy built on an economic model rather than an economic model based on an economy.
With the latter you're constantly guessing and tweaking the model and roughly every 10 years there's a crash and the economists say okay, NOW we have it perfect and we'll never get it wrong again.
Why do you need an unlimited money supply? The only thing causing these shocks is that the economy is doing whatever it wants and then the economic model collapses.
Economic growth is very heavily tied to increases in the money supply less inflation for developed countries. Without this debt, the cost of doing anything in our economy would be way too large and it would be very difficult for our society to operate. Additionally the need for economic solvency to protect the current social structure is what necessitates government involvement.
Exactly, any supply of money will do, no need to permanently increase the amount in circulation — this is why the market settled on gold (which has an inherently low inflation rate due to the difficulties of mining) and impossible to pass off counterfeit gold at scald.
You need inflation for proper incentives. It's like a tax on the entire network to keep it supported. Without proper incentives, the game theory collapses.
The difference here is that inflation is predetermined and set instead of printing money on demand like we do in the traditional financial system.
“You need inflation for proper incentives. It's like a tax on the entire network to keep it supported. Without proper incentives, the game theory collapses.”
What, specifically, do you think the consequences of a stable money supply are?
Deflation, which given a growing population would always be a given. In turn deflation makes the entire debt system collapse , which is the backbone of economic growth especially in the developed world.
Why should debt support an economy? Without such massive inflation people wouldn’t need to take on much debt to make large purchases such as cars/houses because the prices of cars/houses would be much, much lower.
It only makes sense to take on debt if you have a productive way to put that money to use (Eg a business) that has a higher rate of return than the interest rate.
Debt is the backbone of US GDP growth, money enters the economy as debt, is used to purchase something like a car or a house, subsequently it then reenters the banking system as the person who is being paid deposits their check, and then gets re-loaned out only to often immediately end back up in another domestic bank account that then loans out even more money.
This cycle can continue forever, and the faster this cycle occurs the higher our GDP.
No incentive to support the network if there's no block rewards. The transaction fees are not sufficient and just meant to prevent spam. It's also better to tax the network as a whole (through this set inflation) than to tax for each usage.
That’s an interesting speculation, but it remains to be seen what will happen when inflation is near zero.
If people value transacting on the network, then they will pay the necessary fees to keep it running. If they don’t then it will go down.
I suspect this isn’t the big issue people think it is, regardless there’s no way to “prove” that transaction fees won’t be enough — everyone from miners to speculators by owning mining equipment and Bitcoin are specifically betting that transaction fees will be enough.
There's an assumption here that the network will be used and valuable.
If the network is used more it will be more valuable, which means the reward value will increase as the inflation decreases. If nobody uses the network then it'll be worthless, which at that point it doesn't matter since nobody is using it.
This is categorically false. The gold standard (albeit a reduced version of it established under the Bretton-Woods monetary regime) was abolished in the United States as recently as 1971. In Switzerland this link was abolished in the early 2000's AFAIK.
That’s not a bug, it’s a feature — if it were easy to extract (like aluminum), it would have been much more inflationary and thus not a “good” choice for money.
I didn't claim it was a bug. I was trying to make the point that all the tree huggers that scream bloody murder because of Bitcoin mining costs never look at the actual environmental cost of existing systems.
Gold is a fringe commodity valued by a similar small subset of the population that values bitcion. And yeah, I'd say that those people are also causing similar problems to bitcoin because they incentivize significant environmental destruction. Even worse than bitcoin, they also increase the costs of real commercial use cases for gold.
With the latter you're constantly guessing and tweaking the model and roughly every 10 years there's a crash and the economists say okay, NOW we have it perfect and we'll never get it wrong again.
Why do you need an unlimited money supply? The only thing causing these shocks is that the economy is doing whatever it wants and then the economic model collapses.