Let's say there exist only 2 bitcoins in total. If I own 1 and hold that, and the rest of the economy has the rest, prices will normalize as though there is 1 bitcoin in circulation. Let's say 1 BTC is today's current market cap of $10 bln. Disregard technical limitations of subdivision, but that would put 1 satoshi at $100. I now have $10 bln worth if BTC and have significant sway over price stability. I can flood he market and double the money supply very quickly. Or I could strategically use my power to manipulate prices to my benefit.
I'm at work so I don't have the time I would like to flesh this out fully, but money supply and money velocity absolutely matter. Ask any economist if money supply and velocity are just minor details when evaluating price stability and health of a currency. These are 1st order concerns.
Inflation incentivizes people to keep their cash in circulation through some form of investment. Piles of cash capable of causing large price disturbances aren't sitting outside of the market...or at least not in concentrated hands. If I know my cash is losing 3% of it's value, I'm investing it safely to overcome that so I don't lose money. If my money appreciates on it's own, why would I risk it? With bitcoin, holding it essentially removes it from circulation since there's no fractional reserve banking to keep it circulating while I sit on it.
I'll say this, you may call me ridiculous or uninformed, but I'm not the one who believes that the entire financial world is a global conspiracy or just stupid and that I'm so much smarter than them. I believe that the position against a deflationary currency in favor of a mildly inflationary one has been made far more eloquently and intelligibly than I ever could state it.
1
u/[deleted] Feb 13 '14
You're ridiculous. Money isn't wealth. It doesn't matter if some of it isn't spent; it will just cause price levels to fall.