Basic economics. You borrow 100 coins. Year later lender has to recieve some 105 (to profit and cover for risk). If the value of the coin increased by 20% due to fixed supply you are paying real interest rate of 25%. Unbearable.
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Replying to @Zdenek_Ros
Wouldn’t Bitcoin’s value at final equilibrium grow at 3-4% purhasing power per year?
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Replying to @MustStopMurad
Under some conditions it would grow at the pace of global real GDP, so yes. Conditions: that come to mind: 1) Stable velocity of money (BTC) (Unpredictable in long run IMHO). 2) Final equilibrium = Other forms of money/assets that are being replaced by BTC no longer exist.
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Replying to @Zdenek_Ros
so it wouldn’t jump by a “sudden 20%”, wouldn’t be a “roughly predictable 3%” which would be factored into the loans/credit?
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Replying to @MustStopMurad
3) So sudden 20% swings are very unlikely in cca 5 years (similarly to exchange rates of big stable currencies).
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Replying to @Zdenek_Ros
3% appreciation of currency’s value per year doesn’t prevent lending
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Replying to @MustStopMurad
If you have alternatives than it prevents landing. 3% appreciation compared to 2% inflation makes 5% difference on real interest rate.
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Replying to @Zdenek_Ros
People will still lend for things which they think can beat 3%/year riskless growth
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Replying to @MustStopMurad
I have spent a lot of time figuring how to have three kinds of money (I. BTC = best store of value + transaction money II. Fiat like inflationary money/crypto for cheap lending III. Hyperinflation money used by governments instead of taxes) working together. Not easy.
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Replying to @Zdenek_Ros @MustStopMurad
And yes, people can live and lend in 3% deflation, gold standard worked well with 1% deflation. But stable low inflation really is best for growth and lending and the question is if we can have money that work that way long term or is deflationary BTC our best bet.
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What do you think is single best reason why low stable inflation is better than fixed-supply?
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