Demurrage would seem to discourage Merchants joining on freicoin/bitcoin. With fees, you get what you charged for. With demurrage I see destroying money that people own, have earned, and have every right to spend, and give it to whoever they want. (This is an idea of bitcoin representing value owned. A very attractive idea to me.) For what? To avoid an honest Supply/Demand economy in bitmining?
The concept of people leaving the bitmining pool and joining thus creating a raise and drop in prices is really simple supply and demand economy. This is free market at it's finest and simplest.
The market for mining would act the same way with this system. The only difference is that miners will be rewarded by the system (as they are today) perpetually. Some people claims that the transaction fees market would be a tragedy of the commons and the security of the network in proportion of the market cap will severely drop when the reward halves.
I oppose the idea that inflation or demurrage prevents savers from saving. There are many ways of saving, the most productive for the society is investing. Savers are just discouraged to hoarding the currency. They can hoard other goods if that's their passion.
Inflation punishes savers and creates bubbles today just because it is created through cheap loans to privileged borrowers (the state and commercial banks). InflataCoin lenders would just add the corresponding inflation premium to the real interest of their loans: lenders don't suffer from inflation if it is totally predictable.
Apart from the "obvious"
accounting inconvenience, inflation has another disadvantage over demurrage. "With demurrage the debasement happens instantaneously, and evenly across currency owners. With inflation, prices gradually get bid up as the new money works its way through the economy" (that's from d'aniel).
That contribute to the bubbles formation but also has another implication:
Pure inflation creating (without debt, like the greenbacks advocates want) does not lower interest rates. Demurrage does.
When negotiating, the lender doesn't have to necessarily take the losses of inflation if instead of lending buys the market that is going to be inflated. So liquidity yields in itself because it can take advantage of the unexpected changes of the near future.
With demurrage the lender has an unavoidable incentive to lend the money or invest it.
It is a transfer of wealth from lenders to investors that would enable capital yields to drop to zero by competition just like ordinary sustained profits do. But the lenders privilege came from
the fact that money is scarce, everlasting and necessary for all sectors. Their privilege is what has stopped investors to compete until capital yields and thus interest rates go to zero. The total revenue of a given capital (until the time destroys it) could equal its production costs (zero profits). Now capital goods need to be at least as profitable as lending money. If we suppress the bottom limit for interests, we also suppress the artificial upper limit that is set on investments. There will be always unemployment if there's interest, because there will always be more workers than factories in order for them to be as profitable as money and not just solvent.
I feel strongly about the apple scenario. Somebody answered the question 'Why buy an apple today when tomorrow you can buy two?' with 'Because your hungry.' Which is exactly the point of it! With the deflating dollar I need to buy a dozen apples today to retain my dozen apple value that I received in pay for my hard work, even though I won't be able to trade those apples for a car I may need in the future. So I have to stop purchasing so many apples and save money at a rate that exceeds the rate of inflation, when in fact if I had saved my money and only bought apples when I was hungry I could have purchased the car sooner and replaced the vehicle more often, and all parties involved would benefit. The apple seller would be getting an increasingly valuable currency for his apple, the car dealer as well for his cars.
I won't the argument that "deflation prevents trade" anymore as I recognaise that it could be just a myth.
But the logic tells me that
deflation discourages real capital accumulation.
Anyway, the main points of freicoin are to lower interest rates and keep on rewarding miners after the maximum monetary base has been issued. Encouraging trade is not a bad thing though.
