I agree w you.  Equalization/ stability will happen when the Bitcoin economy matches the mining rate.  Which is never since the rate is an arbitrary set rate and not determined by market demand

You are asking why some business is in more demand than others? Or some why people have more skill than others?  It doesn't matter how it happens.  I'm making an example to demonstrate a simple economic principle.

I can't show an example from real life because I can't think of when a money supply was capped finitely.

But examples where an closed island economy tend towards class stratification is feudal Japan & England.  And lots of example of monopoly and inequality due to consolidation effects.

As the islands population increase more economic activity is required to sustain the inhabitants.  You get to a stage where there is exponential growth followed by specialization.  So money is required for trade.  Whoever has more money has more purchasing power.  How is this mercantilistic?  They are stuck on an island.  If anything I'm describing Capitalism. 

Also it's not my story.  Some other poster made up this story and said its better to cap the money supply.  I only introduced the idea of a growing population and argued how this leads to monopoly.  Because I think he erroreously only thinking of a static population

Basically I'm arguing for an inflating money supply to meet demands of growing economy.  Basically what we've witnessed in history.  If you wanna argue the opposite it's your burden to find examples

Not quite.  First of all, the Fed is not a banking cartel.  Second, of course banks should make profit when they act as dealers.  Nothing onerous about this.  Third, the purpose for buying securities is to increase reserves of bank so the money gets injected into economy through lending.  (Although IMO, I think this mechanism is not effective).  How this occurs is the securities move off the banks balance onto the Feds balance sheet.  There's no other way for the Fed to get money into the private sector.  

The other way for money to get into private sector is deficit spending which is another topic.  That has to do with Congress not the Fed.  But the Fed can facilitate budget by monetizing the debt using FOMC.  However, St Louis Fed disagrees that this is their intention behind QE.  The Fed is targeting inflation and unemployment rates.  When they hit their targets they start selling the securities and interest rates go back up

If you know that and you buy then you lose money.  LOL

It's probably a selling point to the investors more than Bitcoin.

Bitcoin is 9% inflation and USD is 1.5%.  Inflation has to do with exchange rate.  New bitcoins coming into existence means equals amount of dollars must come into Bitcoin to support the price.

Long bear market is a sign that new dollars isn't coming in

Write a code that pegs it to USD, then have everyone hard fork.

If you want to know why major currencies are stable compared to minor ones.  It's because the corresponding economies/ govts are stable.

People will convince themselves of anything when they are losing money.  Reality is difficult to face

Not if they can get their USD wallet out there.  Their business model takes fees on transactions.  They only lose money if they hold Bitcoin while the price drops.  Whether they can get user traction is another story

They are trying to do a USD wallet app to compete w PayPal, Google wallet, apple pay.  Their business model doesn't rely on solely Bitcoins price

Umm that's besides the point

Scroll and read what he wrote, then my response.  In the case the money doesn't get redistributed with new members entering the population.  E.g. If the fisherman made more money than everyone else, and then his kids created a fishing empire.  After many generations, they will monopolize the wealth of the island.  (If wealth is measured in money) If the island is a closed ecosystem and no trade comes from the outside eventually you will have class division and ruling clans. Aka monopoly

The exchange rate would be the relation between total amount of goods and services (GDP) divided by money supply.  You are correct that the inhabitants should see deflating prices over time.  But that is not good.  In fact it's terrible for the kids born into poor families as their wages will reflect deflationary prices and eventually you'd have extreme class stratification. 

It's zero sum if the point is to make money in a fixed money supply system. 

My opinion on Euro is that it was mainly formed formed for political motives between France & Germany.

But for the Euro members like Greece had to default because they had no money printing mechanism to deal that crisis because their debt is not denominated in their own currency.

But I think the Euro was mainly a benefit to German economy.  It's raised the buying power of the periphery countries and lowered prices of German goods.  For example, people in Greece, Sapin, etc.  took on debt to buy German cars

But I don't follow forex so I don't know much about it.

I think the trouble has more to do with rise of shadow banking and derivatives.  A central bank like Fed has power to do is raise or lower the overnight interest rates or Fed Funds rate.  And now they can do QE, but not much else.

What happens in modern banking is that created new money is created when banks create loans. The whole fractional reserve thing is incorrect.  The Bank of England already put out a paper saying this.  Banks create loans THEN they look for reserves after.  They borrow the reserves from other banks.  If they can't get it by end of day they borrow it from the Central Bank. 

But as we know there's plenty of reserves.  So it's not for lack of reserves it's lack of good borrowers.

Where does shadow banking come in?  Well, not so good borrowers, like people who lack collateral or credit rating.  They don't go to commercial banks they go to shadow banks because there's less regulation there.  In the shadow bank sector the banks can't go to the Fed and borrow reserves so they go to the repo market.  Shadow banking ( which can also occur inside a traditional commercial bank like JPM or Citi) uses tools like securitization, (CDOs, ABS, ABCP), and derivatives (CDS).  In this system all the assets are highly leveraged and that's why an external shock can topple a bank.

Shadow banking is a recent phenomenon, With dramatic growth from 2000 fueling the housing bubble.  In 2008, prior to the GFC more than 50% of money was created from within shadow banking.  The St. Louis Fed has a paper about shadow banks if you want to read more.

But essentially, regardless of the Fed, money gets created either in commercial banks or shadow banks.  But the Fed only has minimal with commercial banks by adjusting the Fed Funds rate.  The systemic comes from the interconnectedness of commercial banks to shadow banks

It's unfair to blame central banks for everything that's happens in banking because regulations come from legislature/ Congress.  The difficulty in regulating shadow banking is that by definition it's off balance sheet.  So Dodd Frank, Vockker Rule, ring fencing, etc..  All those regulations only affect commercial banks.

The whole Bitcoin 1:1 reserve ratio, blah, blah is a non sequitur because it's so left field from how the entire financial industry operates.  In a thought experiment: if Bitcoin replaced the Central Bank, and people need money they would still go borrow it somewhere.  But without a Central Bank there's no lender of last resort.  Thats the big difference.  The system would still be fragile except you don't have this entity to print money and inject liquidity in recessionary times and raise interest to suck the money out of the system in times of inflation.

I think it's because coin base just released some USD web wallet.  Even if Bitcoin meltsdown their business can survive

You are correct elasticity just means the money supply can expand contract.  Most money these days come from commercial banks making loans. 

The problem is though it's easier for banks to create money than destroy it.  They can't close out the loans unless the borrower pays it back.  What they do is " deleverage". The reason for QE is mainly to inject liquidity in the reserves can continue to make loans.  However, it didn't do that at all.  That's why earlier I said QE was a failure.  If you are interested in this topic I suggest Richard Koo and his theory of balance sheet recession

What QE probably did was make bonds expensive so the funds rebalanced their portfolios towards equities, hence the bull market

No shit, but that's not what I'm pointing out.  In a closed system all exchanges are zero sum.  So over time there will be only one winner.  Its like the game Monopoly. 

The prosperous families accumulate more money leaving the rest with less.  Thats every capitalist system.  But its worse when no new money is introduced.  The kids born into the lower class families start from disadvantaged position

That leads to hoarding

Then you have problems of monopoly

NO what happens to the fixed money supply.  Because if its not redistributed then the families that have more kids gets diluted.  This creates disincentive to have kids, and therefore danger of endangerment.  If the money gets redistributed then people have incentive to have more kids to get more money but less per person.