The Problem is Reference Points: Understanding Inflationary and Deflationary Currencies and our Global Financial System

The metric system does not work because french chefs de cuisine are constantly cooking up new and delicious culinary creations which the rest of the world then follows imitatively. Rather, it works  because it is something invented on a scientific basis…
Our view is that if it is viewed scientifically and rationally (which is psychologically difficult!) that money should have the function of a standard of measurement and thus that it should become comparable to the watt or the hour or a degree of temperature.~All quotes are from Ideal Money

Bitcoin is often said to be a deflationary currency in regards to its’ finite-ness. On the other hand bitcoin does have an inflation schedule that asymptotically decreases over time.

We often hear, depending our respective nation, X% of positive inflation is a good thing. We hear deflation is bad from some economists and financial authorities, and inflation is bad from other economics and financial authorities.

What is the difficulty? The problem is understood in relation to “reference points”.

If a domestic economy is declining on its own with respect to its currency, it would be pretty clear that the government is stealing from the people one way or another. But what if the inflation of an economy truly is reported as optimal, yet the given country links their currency and prosperity with that of a larger or different reference point such as the USD or Gold.

We could see the truer measure of such an economy depends rather on the nature of the reference point being used.

Historically gold had served as a great reference point for the Breton woods system, but in various ways it seems the world has evolved beyond the utility of gold for such a basis.

Today the USD is quite a favored reference point for many countries, but there are reasons for both the US and all non US countries why such a reference is not favorable and hence we seem to be evolving beyond such a centralized solution.

Bitcoin however, includes all of the favorable properties of gold and more.

…this standard, as a basis for the standardization of the value of the international money unit, would remove the political roles of the “grand pardoners,”…
…although that scheme for arranging for a system of money with ideal qualities would work well…it would be politically difficult to arrive at the implementation of such a system.
…for the government of a state, acting on its own independently of other states, to rationally contemplate the evolution of the inflation rate for its currency towards zero there are clearly some very relevant considerations relating to tax revenue expectations.

I don’t hear or read any discussion on this at all. And although such a system might “politically difficult” to achieve, I think we might benefit from a community discussion on the possibility of using bitcoin as a decentralized reference point for each governments inflation targeting systems.

The suggestion here is that the block size debate, the euro crisis, and the the future of our global economy and society are very intertwined subjects that require the utmost sincerity and dialogue.

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