I am glad you raised this point for clarification. My prior logic was spread across several disjoint posts in the Peter Schiff thread in the Economics forum and the Mini-block chain thread debate with bitfreak!.
Perhaps you don't understand if you have not yet grasped fully the depth of my understanding of macro economic efficiency (or can point out a flaw in that understanding). Or if you take my declining price comment out-of-context of the prior stipulation of constant or declining M, then I would be incorrect. Or perhaps you understood already and wanted me to explain further for the benefit of us all.
If I took it out of context, I didn't mean to. I see now that there are a lot of other assumptions built into it. I was imagining a completely free market and am not terribly interested in, or capable of, predicting how it would interact with these other macro effects:
With a constant or declining M, then at-risk (not dumb, mayonnaise debt spread) investment and productivity of supply Q can't increase due to hoarding as explained in the following paragraph.
Refer to my prior post today and the explanation of how dividends and interest rates aggregate to those who can capture the public backstop of taxation, because otherwise without insurance and a government enforcement of debts, then default risk will cause these dumb (because they can't intelligently choose stocks or business ventures) investors to fail over time, especially relative to those at-risk in stocks and business ventures with higher potential gains relative to the actual risk of failure of investment. See dividends and interest rate "investing" is really socialism because all the capital will end up with those who capture the government (i.e. the smaller banks failure and are eaten by the larger ones with complicit government), and remember insurance can't invest at-risk and thus does the same thing.
And don't tell me that limiting the supply of base money will limit debt. We have private bank gold certificate notes for fractional reserve banking in the 1800s as an example (and many others). Much better that the base money supply be expanded so the rich can't use the debt expansions and contractions as way to get ahead of the "smaller things grow faster" middle class. Much better we have an altcoin with perpetual debasement of 5% than (not as decentralized) colored coins Mastercoin and back on the same hamster wheel again.
Think about the dynamics of the equilibrium: if people were better off hoarding their cash than investing it, there would be no investment and the economy would not grow, and they wouldn't be better off hoarding because there wouldn't be deflation.
Agreed the vicious cycle of failure that the global economy has entered since at least 2007. We have stagflation, i.e. increases in prices of things produced, and deflation of investment, relative wages, and demand for assets for which demand was pulled forward by 30 years with 30 year mortgages. If we don't break out of it, we could end up in a Madmax Dark Age.
You might have misunderstood me here. My original comment describes a negative feedback that suggests an equilibrium that allows for stability in a 'deflationary' (M constant) environment.
I don't see any reason why something as immaterial as the inflation/deflation rate should influence the real interest rate. In other words, why should inflation/deflation affect the relative amount of people producing things for consumption vs. investing in future production?
Do you refer to the monetary M rate or the price P rate?
At least M need to be increasing for the economy to be healthy as I explained above. P could decline even with M increasing as investment leads to increased productivity of produced goods. Even assets might decline in price P as increases in productivity can increase supply Q (of houses, commodities, etc). This would be healthy.
Please note I stipulated the statement you quoted with the requirement that M was constant or declining, then I said declining P would not be stable in that case.
I was talking about price inflation/deflation. Bitcoin isn't actually deflationary in the "shrinking money supply" sense (well, lost coins I guess..). I disagree with you if we are talking about a non-intervention market, but it doesn't seem like that's your context.
That is not my reason for my claim as detailed in this and the prior post. Rather I am saying we have to continually dilute the large capitalists which want to use dumb fixed and guaranteed returns on usury with captured power vacuum of government to parasite and enslave "smaller things grow faster" investment.
I am 100% in favor of highly expert capitalists who invest (their effort, expertise, and money) at-risk in the highest returning ventures, not in usury and government capture.
Ok now I see. I won't go edit what I just wrote to reflect this clarification. Seems to me that your preference for inflation is just expedience.
I would prefer to stop now posting, unless there is really some new argument isn't already dealt with in all of my archived posts.
I realize someone can quote from one of my posts then appear to have revealed an error, then it causes me to come back and reassimilate past posts with further explanation. But even though I enjoy it, I need to stop doing this because otherwise I will never get any real work done.
And my belief is we need for me to get real work done.
So hopefully this is goodbye and best wishes from AnonyMint.
I wasn't intentionally playing "gotcha". Perhaps this is another reason to record these essays in your blog. As others are saying, it's hard to understand and discuss when everything you've written is scattered in different threads. It'll also help people to understand the motivation behind your altcoin.
I'm very interested in alts that solve Bitcoin's ultimate tragedy of the transaction fee commons and worry that perpetual debasement is the only solution. Good luck.