If you were to choose between a little bit of inflation and a little bit of deflation, you should choose a little bit of inflation. Deflation means people have a greater incentive not to spend, so dissuades investment and thus innovation and progress. It leads to wealth hoarding and feudalism.
Not at all, but it's a dominant view for a variety of reasons. A base concept is to keep money moving into other investments and discourage saving. I suspect the ongoing inflation rates will make this view less attractive in the future.
Not required, but a deflationary asset used as currency discourages borrowing, and companies and governments love borrowing.
If you knew that inflation was going to rapidly increase, the smartest thing you could do would be to take out as many loans as you can and buy usable assets, like a car and a warehouse full of canned beans.
Imagine you take out a loan to buy a car. Tomorrow, hyperinflation happens and the currency has lost 99% of its value. You can now pay off your car with a can of beans.
Inflation is also an avenue for a government to steal the excess value produced by an economy over time. Probably just a coincidence though.
> Inflation is also an avenue for a government to steal the excess value produced by an economy over time
What's the incentive here? "The government" (unless we're talking monarchies or dictatorships?) usually isn't some monolithic, self-interested entity capable of benefiting from things like "stealing" via inflation. Who's the evil mustache-twister behind all this?
The way this is usually trotted out makes it sound like Nancy Pelosi—because there's almost always a Nancy Pelosi hot take—is siphoning $20's out of IRS revenue streams, and laughing her way to the bank.
It lets you increase taxes without actually increasing taxes. People get upset when you increase taxes (sometimes upset enough to create their own country), but less so when you increase the money supply a little bit.
By moving the goal posts of how CPI is calculated, the government can take in more, or pay out less.
Social security, Medicare, etc are indexed to inflation.
Tax brackets are indexed to inflation.
So when the government needs more money, it can create it by paying less to elderly, poor, and sick people, or taking more taxes without the population aware.
There are better ways of calculating inflation. But they allow less shenanigans.
You know what would really make it hard to siphon money off to a black budget project, or to the business of a politician’s brother-in-law that gets the contract? A deflationary asset where there’s a cryptographically secure immutable ledger of all transactions.
> You know what would really make it hard to siphon money off to a black budget project, or to the business of a politician’s brother-in-law that gets the contract? A deflationary asset where there’s a cryptographically secure immutable ledger of all transactions.
I’m not sure how Bitcoin is simultaneously completely transparent, bringing daylight to big bad government fraud and also a privacy-protecting, regulatory circumvention tool. These things seem at odds.
If scam artists and criminals can obfuscate their transactions sufficiently to avoid being tracked down, I’m confident any half-competent government could do the same for its black budget spending.
That's not the point either of us are trying to make, though. Can Bitcoin be used to mask the source or destination of money? I think the answer is an obvious: "yes" considering one of its most prominent use-cases is exactly that.
And if the answer is an obvious "yes", then the whole thing about "immutable ledgers stop governments from spending money sketchily!" is obviously incorrect.