Perhaps I should make my argument more clear. The implied assumption is that the evolution will go:
Bitcoins -> paper Bitcoins -> central bank
I'm saying it's much more likely to be:
Bitcoins -> paper Bitcoins -> Bitcoins
Actually, what you say should be written as following:
Bitcoins -> paper Bitcoins by all banks (causes inflation and bank-runs) -> paper Bitcoins by Central Bank (establishment of
gold Bitcoin standard)
And after that we begin running into ever deepening economic crises which finally bring about dismantling of the Bitcoin standard (see the Great Depression), so the last step will be:
paper Bitcoins by Central Bank (causes deflation and incessant economic crises) -> fiat by Central Bank (Bitcoin standard dismantled)
This argument is wrong for these reasons. Let's use the wikipedia article on the gold standard.
The unequal distribution of gold deposits makes the gold standard more advantageous for those countries that produce gold.[61] In 2010 the largest producers of gold, in order, were China, Australia, US, South Africa and Russia.[62] The country with the largest reserves is Australia.[63]
Not a problem with Bitcoin, especially when 100% has been generated.
The gold standard acts as a limit on economic growth. "As an economy's productive capacity grows, then so should its money supply. Because a gold standard requires that money be backed in the metal, then the scarcity of the metal constrains the ability of the economy to produce more capital and grow."[64]
This statement is itself not true. Bitcoin itself simply becomes more valuable, and everyone moves on with their day.
Mainstream economists believe that economic recessions can be largely mitigated by increasing the money supply during economic downturns.[65] A gold standard means that the money supply would be determined by the gold supply and hence monetary policy could no longer be used to stabilize the economy.[66] The gold standard is often blamed for prolonging the Great Depression, as under the gold standard, central banks could not expand credit at a fast enough rate to offset deflationary forces.[67]
Mainstream economists are mostly just wrong on this issue; quoting Greenspan: "Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard."
Although the gold standard brings long-run price stability, it is historically associated with high short-run price volatility.[51][68] It has been argued by Schwartz, among others, that instability in short-term price levels can lead to financial instability as lenders and borrowers become uncertain about the value of debt.[68]
Adjustments in price affecting debtors/creditors can be mitigated by contracting against the value of more stable commodities like wheat, not against Bitcoin itself. You need to build price increases due to deflation into the contract itself, which for some reason seems to baffle economists as a possibility.
Example: Jimmy borrows 50,000 0.0001 BTC bank notes from the bank to help buy a house, which is worth 5 BTC. The price of BTC in wheat bushel equivalents (or whatever consumer price equivalents) increases two-fold in a year, and now Jimmy owes the bank twice as much. But wait! What if Jimmy instead borrowed against the value of wheat? Jimmy owes 200,000 wheat bushel equivalents in this year and next, and the "price" of wheat bushels has more or less stayed the same even though BTC value has fluctuated a lot -- so Jimmy is okay.
You just need to make the commodity backing an aggregate average of a lot of materials with stable prices... eg wheat, soybean, steel, rice, gold, and a million other things.
Deflation punishes debtors.[69][70] Real debt burdens therefore rise, causing borrowers to cut spending to service their debts or to default. Lenders become wealthier, but may choose to save some of the additional wealth, reducing GDP.[71]
See above.
The money supply would essentially be determined by the rate of gold production. When gold stocks increase more rapidly than the economy, there is inflation and the reverse is also true.[51][72] The consensus view is that the gold standard contributed to the severity and length of the Great Depression.[73][74]
Because economists can't figure out appropriate ways to control inflation by pricing against essential commodities, they assume the above statement is true.
Hamilton contended that the gold standard is susceptible to speculative attacks when a government's financial position appears weak. Conversely, this threat discourages governments from engaging in risky policy (see moral hazard). For example, the US was forced to contract the money supply and raise interest rates in September 1931 to defend the dollar after speculators forced the UK off the gold standard.[74][75][76][77]
I don't really consider this a problem.
Devaluing a currency under a gold standard would generally produce sharper changes than the smooth declines seen in fiat currencies, depending on the method of devaluation.[78]
This is an issue the banks need to solve.
Most economists favor a low, positive rate of inflation of around 2%. This reflects fear of deflationary shocks and the belief that active monetary policy can dampen fluctuations in output and unemployment. Inflation gives them room to tighten policy without inducing deflation.[79]
There is no deflation once all Bitcoin has been issued.
A gold standard provides practical constraints against the measures that central banks might otherwise use to respond to economic crises.[80] Creation of new money reduces interest rates and thereby increases demand for new lower cost debt, raising the demand for money.[81]
I don't think the second sentence is true.
The anonymity issue is fixed simply by the usage of paper derivatives and having a bank that doesn't issue more paper derivatives than they have. ZeroCoin and forks will probably also fix this, and Bitcoin itself can fix this by adopting ZeroCoin protocol.
If you're wondering about investment, people will can invest versus commodity contracts as well, eg, lend on the commodity index, and ask for 1.05% of the commodity index in Bitcoin in return. You're investing in a service that you believe will be more valuable to the population than other services in the years to come, and hence, will sequester more Bitcoins.
The problem isn't with Bitcoin backing things, it's with banks not being able to appropriately determine what "price" is and with central banks/governments deciding that they need more money rather than seeking resolutions to their problems that don't involve the magic generation of more money. I have a feeling that the progressive manipulation of fiat inflation at low single digits will eventually lead to a catastrophic crisis that is more severe than the ones we've seen previously. And it's clear from the negative inflation rates of German bonds in the past few years that even making paper derivatives and increasing their inflation to try to manipulate the economy can not prevent deflation in some cases.
