> Basically; at the moment the system is designed to penalise anyone who tries to preserve wealth in actual cash and as collateral damage prices keep eternally climbing.
That is a feature of the current monetary system. Excessive inflation is bad, but reasonable inflation is a design goal. Cash isn't meant to be hoarded, its meant to be spent and invested. How would you encourage investment in a non-inflationary currency? Thats the problem with bitcoin, people want to hodl but not spend.
> How would you encourage investment in a non-inflationary currency?
Returns on actually profitable investments would be the motivation. Turn the question around for a minute. Do we want an economy that forces people to make unprofitable investments simply to hedge against inflation? Do we want people to have to gamble or lose their assets?
There’s a tradeoff between risk and return. It’s not a binary tradeoff where you either have no risk but no return, or good return but unreasonable risk. It’s a gradient.
I would say it's heterogeneous, not a gradient, but I understand your point. However, my point is that inflationary monetary policy precludes cash savings forcing currency owners to take on additional risk to mitigate inflationary losses. Like the parent post points out, it incentivizes investment. If your currency is inflating at 5% per year, it becomes rational to buy an asset which depreciates at 4% per year. More generally, individuals and Society have to perpetually Gamble on growth in order to stay ahead of inflation.
That's a fair point, things are relatively stable in the US compared to a lot of places. However, it does preclude labor and savings as a path to Financial Security. Your options become Gamble or die poor. If you want to start a family and own a home in midlife, you have to participate in a national pump and dump cycle and come out on top.
> However, it does preclude labor and savings as a path to Financial Security.
Correct. This is an unfortunate fact that most try to sweep under the rug, but when it comes to weighing capital vs labor - the system is exactly what it says on the tin: "Capitalism."
Capitalism is a broad category with multiple variations. I would argue that Central Bank manipulation of inflation, and the related phenomenon of debt financed government are not Central requirements of capitalism.
In some ways, they are even in conflict with many of the more Market driven philosophies.
The problem with bitcoin is that transaction fees completely disqualify it for everyday life (i don't know right now, but probably around $5 for a transaction). I think that problem dwarfs deflationary nature of the currency.
That is a feature of the current monetary system. Excessive inflation is bad, but reasonable inflation is a design goal. Cash isn't meant to be hoarded, its meant to be spent and invested. How would you encourage investment in a non-inflationary currency? Thats the problem with bitcoin, people want to hodl but not spend.