Ok, but are you saying that "hoarding" (saving without direct lending) provides NO value to society or only that it provides LESS value than saving + direct lending?
Consumption growth is the eventual result of non-consumption (investment) growth. It's all about time-preference (according to Austrians). And realize "consumption" doesn't necessarily mean destroying something or using something up, so I'd like to keep any negative connotation with it out of the discussion--which I don't think you've done, but other people have and I just want to clarify that.
What money, lending, and interest
should provide is a balance between consumption and investment, depending on what the free market desires. If, for example, in a perfect market, too many people are looking for non-consumption growth (their time preference is to the future), but the free market is not currently providing enough avenue for this growth (for whatever perfect market reason--likely
because too many people have a low time preference), interest rates and prices will fall
naturally. This is "good" deflation. This spurs people to consume, and in return restores a natural balance based on what the market needs.
By removing your currency from circulation, you are moving the force of money out of balance with lending and interest. With less money available to lend, the only thing interest rates can do is rise while almost paradoxically prices must still fall. While in the first scenario, lower interest rates means profit margins on lower prices are relatively unaffected. In the second scenario, borrowing money becomes much more difficult as banks get scared and a credit crisis will probably emerge. This is "bad" deflation. "Money" becomes more valuable than "capital". This can lead to the so-called deflationary spiral. While this is unlikely to ever happen in Bitcoin, the only reason is because it is a free market currency and the free market will switch to something else (inflation!!!), so the effect can't really spiral out of control.
So the question isn't about what provides more or less value to the economy. One scenario promotes a well-functioning free market while the other causes an imbalance in the economy. Money is the lubricant that allows economies to function. Remove some of that lubricant and things start to break down. This will be extremely exacerbated by the fact that bitcoin is attempting to bring existing value in from an exogenous economy.
But that's also the reason that sticking your money in a safe earns a smaller return than lending it out. Again, sticking money in a safe is a very low risk loan that gives you maximum flexibility. The price for those features is the opportunity cost of foregoing a nominal return on top of the increased purchasing power resulting from deflation.
But you are thinking in nominal terms which is not at all the whole story.
Real returns are what matter. A real return is interest + deflation. If you can cause extra deflation by not loaning money so that it creates a better real return than the real return you would have gotten by loaning, you have created a very dangerous imbalance in the economy. You are not letting the free market do its job.
This is compounded in bitcoin by the fact that 1) a perfect market doesn't really exist, mistakes are always made because all information can not be known; 2) bitcoin has an absolutely fixed supply unlike gold, where at least the rising value of gold would cause more effort in producing more gold--in bitcoin more effort goes into producing the same amount of bitcoins; 3) bitcoin has to expand into a huge world economy and the distribution of currency will provide countless opportunities to make hoarding provide a much better real return than lending. This would be the case even with the gaussian distribution that Adrian-x thinks will be better.
... When you later spend the money (following deflation due to economic growth), everyone who holds that currency gives you a 100+ units worth of purchasing power. Of course, the deflation and inflation caused by hoarding and then spending are occurring at the margins.
Again in an almost paradoxic way, lending may actually cost you value (at least in opportunity cost) because you are lubricating the economy and keeping deflation low. If everyone truly cared about their fellow man this system might work. But we know that isn't the case, and we know financial minds will find any avenue to abuse a monetary system to their advantage. And causing extra deflation only to return it via future inflation does nothing but upset the economy. It would likely come and go in cycles, just like the business cycles observed in fiat. You can't really be sure that your money will retain its value let alone increase in value over any period of time.
You're always going to have some people withdrawing money from circulation (to stick in the safe) and other people beginning to spend previously-saved money.
But you can't really predict what people are going to do. Mises is quite famous for basing his economic theory around that. Bitcoin is a free market currency as well as an alternative. The economics will be far different than fiat on that case alone. No one has to consume with bitcoins at all. And there is no real advantage to do so. Want to send money over the internet? Buy some bitcoins with fiat and let the other person cash out. This isn't economic growth. Nor is speculation.
How could the profit from hoarding be MORE than the profit from lending? If you stick 100 units of a deflating currency in the safe for a year, at the end of the year you'll have... 100 units. Sure they'll be worth more than they were previously, but you'd still have been better off if you'd lent them out at interest. As I pointed out in another thread, a deflationary "currency" already (sort of) exists. Isn't that basically what gold represents? But most people don't just horde gold because traditionally that wasn't a great investment. Of course, it's turned into a great investment in recent years but only because our fiat-based system has gotten so screwed up.
It's about the real interest you earn, not the nominal interest.
