One of Rothbard's disciple's YouTube videos popped up on my feed the other day talking about how 0% inflation would cause all kinds of problems and that this is considered to be an area where he thinks Satoshi really messed up. A good discussion in the comments section ensued...

Short version of my initial thoughts

I've thought about the 0% inflation thing too. But came to a different conclusion. In my opinion it's PERFECT. The global rate of economic growth in wealth would indeed == the rise in purchasing power of bitcoin just by holding it... Let's say it's 3%... If you're an entrepreneur, and you take out a loan and make LESS than 3% ROI, then your shares will sell off until your ROI is in line with expectations.
Full Response by RD (Good points)
Ok, let's look at your example. If someone makes a real ROI of 2% in a Bitcoin money world where the economic growth rate is 3% then they experience a 1% loss. By definition a real ROI is the actual amount of value you create, and in this case it is 2% positive growth. Yet, somehow you think doing absolutely nothing (a real ROI of 0%) is better than a real ROI of 2%. See the problem? Yes Bitcoin skews the money profits, but real profits never lie (this is by definition of the term). This means everyone under 3% (and many slightly over 3%) will quit producing. Say's Law says that production is equal to consumption, so if you have lower real production, then real consumption is lowered as well. So your argument makes no sense whatsoever. To drive the point home, if it's good to make people experience monetary losses even if the experience real ROI gains, then it would make sense not to have 0% inflation, but negative inflation (destroy money). If you destroy half of the money supply every year then basically every business experiences money losses. As you put it, this is good, it's how it's done, let the real professional entrepreneurs show you how it's done. Except now you have no entrepreneurs. There are two reasons it's usury. We know that doing nothing is a 0% real ROI activity (this is an identity statement so it's unarguable). Yet in your example of 3% economic growth, doing nothing nets you 3% gains. Therefore it is usury paid to people who are lazy. Secondly, even Craig has told me personally you can't do loans on a 0% inflation money, you need bonds. Now how exactly these bonds work, I'm not sure, but the people who create them need large amounts of Bitcoin they aren't using. So large holders will be paid usury in terms of the rising value of the currency for which they did not work but simply gained value by being lazy, and in payments for bonds that they create out of thin air and are only needed due to 0% inflation. What confuses me is that if these bonds are necessary for a loanable funds market, as Craig has told me, it would seem to follow that the real money would be the bonds, not Bitcoin. But you'll have to ask Craig how the bonds market works.

My Response



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The other point that was discussed was the reversal of constant wage increases... to constant wage decreases (in terms of bitcoin)... I made the point that with 0% inflation (but e.g. 3% increase in real purchasing power annually), the need for wage adjustments would be minimized as best as anybody could hope for but can never be entirely eliminated regardless of what inflation rate you choose. There is no golden inflation rate... but 0% is going to mean that wages go up at about the average rate of global economic growth (so sometimes a little under shooting or over shooting depending on if your productivity increased more or less than global average)... You cannot do any better than this. It's not an issue. If you factor in population growth, then I guess that would skew things in favour of a tendency to overpay people... but better to deal with a minor inconvenience of readjusting employment contracts every so often than having purchasing power sucked away at some arbitrary rate of inflation to favour the mining sector of the economy over all other sectors of the economy. How does one decide what % of economic growth money issuers / miners should take relative to all of the other global industries like healthcare, tech, education, infrastructure, construction etc. etc. nobody can do this... the market needs to decide by paying fee for service... not through infinite block subsidies.
   6mo ago