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It really seems to me you haven't studied economics at all. Zero inflation/deflation would be great, but it's simply not achievable in practice, the economy is not fixed in size. To maintain zero inflation/deflation would require the money supply to fluctuate at exactly the same rate as the wealth in the economy it represents, can't be done. Inflation is not a measure of just the money supply, it's a measure of the size of the money supply to the size of wealth in the market, fixing the size of the money does not fix the size of the wealth it represents. Wealth expands and contracts constantly and if the supply of money doesn't change accordingly you get either inflation or deflation. Well it turns out that doesn't work so well, the economy reacts much better and quicker to inflation than to deflation because prices rise easier than they fall. While on the gold standard the swings in the market were wild and depressions happened often. Fiat money fixed that by allowing the supply of money to be managed to match the need for money in the economy. Money is just a tool after all, it is not wealth, just a means of trading wealth. By continually slightly inflating the money supply, the natural swing from inflation to deflation was pushed over to the inflation side avoiding deflation and all its ills. Since fiat money took over the economy became much more stable and those cyclical depressions under gold became cyclical recessions. Inflationary policy with fiat money simply works better. Inflation does not discourage saving, it discourages saving cash, big difference that you keep ignoring. Bitcoin is doomed as a currency for the same reason gold died, it's vulnerable to continual and inevitable deflationary pressure. Every sudden jump in real wealth in the market will force bit coin into a deflationary period; this is very bad. It dries up the money supply and encourages hoarding of the tool meant for exchanging. Money is not wealth, it is not meant for saving, it's meant for spending. Treating it like wealth, and hoarding it, reduces the supply that's necessary to keep liquidity in the market and forces traders to trade with lesser amounts forcing suppliers to reduce prices, aka deflation. Those who ignore history are doomed to repeat it. If the money supply cannot be rapidly expanded to meet the needs of increased wealth being created in the market, then the currency will suffer deflation and fail as a currency. There a reason the nations of the world have moved to fiat currencies, they simply make better more functional currencies. |