Topic: Inequity in Dollar economy VS. potential inequity in Bitcoin Economy (Read 1088 times)

So, as a producer, you will inevitably come to a conclusion that inflation is better for you than deflation, i.e. an inflationary fiat currency is better for the economy than a deflationary Bitcoin, provided all other things being equal...

This is usually not a problem if inflation is low and at a consistent level, so you as a producer can make up for it. Inflation primarily affects those who hold a larger fraction of their income in cash and have fixed incomes such as wages or pensions, as they are much less likely to receive the newly printed money. This process of redistribution of wealth is called an inflation tax...

If you think this unfair then consider that you are not the only one creating value (goods and services)...

Of course. It's not different in it's characteristics concerning inflation. If you want something else, you have to enable mechanisms like Freicoin (FRC) is aiming at... But that's a different kind of story, with it's own problems...

Maybe this in an interesting read for ya:

A Minimalist Implementation of Electronic Money (Miles Kimball, Professor of Economics and Survey Research at the University of Michigan) thinks about ways to cure the illness USD and BTC are suffering:
http://blog.supplysideliberal.com/post/50888412664/a-minimalist-implementation-of-electronic-money

I will venture to show that both debt based Dollars and fixed pool Bitcoins are equally inequitable in their existing formulation.

Inequity in debt based Dollar economy:
In the present fiat system, when inflation eats away at the value of Dollars, that fraction of value which is 'eaten away' does not simply vanish; rather, it is silently redistributed and appropriated by the currency issuer, by virtue of the representative function of currency with respect to real goods and services. It may be said that the newly created units of currency 'absorb' certain proportion of value of goods and services. The total pool of currency is a mirror image of all real value, a double, which constitutes a monetary claim on the very value it represents. Consequently, whenever new goods or services are created they impart a deflationary pressure on currency, that is, they increase its purchasing power, and thus whenever we create something of real value we automatically give others a collective claim against that value. That is, we have simultaneously created value that we hold and an equal claim against that value being held cumulatively by all holders of currency. In that sense the rich, but especially the currency issuers, are always privileged beneficiaries of all value creation, silently appropriating our value without even lifting a finger.

EXAMPLE: when I create real value (goods and services) I have an equitable claim on the associated increase in the value of currency held by others, because my new value proportionally increases the purchasing power of all currency. For example: your neigbour is using your property as a security for his mortgage, but without your consent. You know that he benefits from your property and you want to be compensated for this, but he says that he owes you nothing because he is not 'physically' using your property but only 'referring' to it in a contract.

Inequity in fixed supply Bitcoin Economy:
Now this may come as a surprise, but Bitcoin does not solve the above problem. It is also a mirror image of real value and its purchasing power increases with the real growth of economy, that is, with the growing number of goods and services created by the people.
Effectively, those who have many Bitcoins (the Bitcoin-rich) automatically benefit from the creation of value by the Bitcoin-poor, by virtue of monetary representation/mirroring of value which lays a claim on half of all value produced.

Conclusion:
In both cases it can be said that the 'increase' in the purchasing power of currency due to creation of new goods and services is in fact the property of those who have created them, and so any system that does not compensate the productive workforce for some of their value being 'sucked up' by the currency is inherently inequitable. Assuming that the pool of currency is fixed (being the case of Bitcoin's future) it would be possible to regain equitability by  imposing a tax or demurrage on all currency which would be redistributed specifically to the productive workforce: the creators of real value. It seems that Freicoin is taking a step in this direction although the demurrage is at this stage absorbed by coin generation costs rather than used as reward for value creation at large, but I will be watching that one with some optimism.

The award of new coins to the producers (first sellers) of value would be very attractive to regular value producers and thus would encourage the use of the relevant currency, overriding any reservations about paying the demurrage.