In
a thread in the general discussion forum bytemaster made what I think is an awesome post. Unfortunately the thread then wandered in a different direction, but I thought the post merited further discussion, and this was the best place for it.
In a highly deflationary environment lenders would lend money at negative interest rates and still make a real profit.
The real problem is that people like the idea of numbers getting bigger more than they like the idea of smaller numbers doing more. Who wants to take a nominal pay cut!
So to counter this mental handicap of society, it may make sense to simply debase the currency via a "stock split/rebasing" to keep a basket of goods a constant nominal BTC value. In effect this would make the "real return on investment" caused by deflation tangible to the thick headed public that thinks 4 pennies is better than 1 nickel because 4 > 1.
Assume the number of goods in the economy grows at 5% per year.
Normally Joe earns 100 BTC this year and a gallon of milk costs 100 BTC. The economy grows by 5% thus the price of milk would fall to 95 BTC; however, the nominal BTC value of Joes labor also fell and his boss gave him a 2% nominal pay cut and the average Joe gets ticked (too stupid to realize he really got a 3% raise).
Now if you "rebase the currency" then the price of milk will remain 100 BTC, Joe's boss gives him a 3% raise and the average joe is "happy" even though his employer really gave him a real pay cut! But because the price of milk stayed flat "joe" feels richer (and he IS richer because all of society has more goods), but not as relatively rich as he would have been under deflation.
Where as if we did not do any "stock splits" Joes salary would have fallen to 98 BTC but milk would now cost 95 BTC. Clearly hie is richer.
In my view it is a GREAT THING when someone loses their bit coins because the value (read purchasing power) of lost coins gets evenly distributed among all other coins. This is a WIN for all of society except the poor sap who lost his coins.
Discuss.
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