A deflationary, demurrage-based concept is going to suffer from a whole lot of the same ills as bitcoin, imo. A wild, swingy ride all depending on who farted which way that day.
You mean a fixed monetary base currency. Freicoin is not monetary deflationary.
Demurrage will also discourage speculating with the currency.
1) Monetary inflation makes prices grow exponentially.
This is simply not true. If inflation was kept in strict agreement with population and GDP increases, the prices of goods would remain level. Of course, fractional reserve lending basically means there is never any hope of that happening.
This is true if monetary inflation is faster than growth. But anyway, the more important claim is the one about the different effects on interest.
2) Monetary inflation rises nominal interests while demurrage reduces real interests.
Since when are inflation and demurrage exclusive concepts? You can have (monetary) inflation with demurrage, and you can have (monetary) deflation with demurrage.
I'm not saying inflation and demurrage are incompatible, I'm just comparing them.
As said, freicoin would have a fixed supply instead of monetary deflation. You can say bitcoin will have monetary deflation because of lost coins but I think you mean price delfation.
Your proposal for demurrage is merely a hackjob for fixing some of the problems with a deflationary currency. Invest instead of hoard, let other people pay the price for your money. Woot, so earth-shattering.
And expocoin would also be a "hackjob". I just want to make money holders pay for the liquidity they enjoy (a positive externality
for them if they don't pay) in nominal terms and not only in real terms like monetary inflation would do. The rest of society pays indirectly for this.
Now that you mention the earth, suppressing the basic interest would also makes us think more long-term: https://bitcointalk.org/index.php?topic=5373.msg314987#msg314987
I don't see how this fixes fractional reserve.
The problem with fractional reserve is that by law we have to accept a 10% fractional reserve and banks don't have to compete between them with greater reserves. This is an unfair privilege for them.
With bitcoin, there's no such privilege and people don't really need banks for storing money or make transfers. I don't see any bitcoin bank with fractional reserve.
But other forms of credit also compete with money as medium of exchange. Do you have any problem with IOUs between partners?
Anyway, this is a completely different topic.
I assume we're talking about a bitcoin-like currency. Using your example starting with 1 million coins in year 1, we have 286 million in year 50, in which 11 new million coins get released. 14 million would have to be released for a 5% inflation of the monetary supply. The inflation rate is ever-reducing instead of the amount of money ever-reducing.
With your numbers, the inflation rate is constant (5%) and the inflation amount is increasing (1...11, 14...). I don't really know what are we discussing here.
Would actually give the world time to adapt to the currency rather than forcing millions on those innocent early adopters.
The effect for early adopters of expocoin and freicoin would be equivalent. The only difference is that demurrage reduces their hoarded wealth nominally and inflation only in real terms.
Yes, expocoin would be far more fair than the usd. But still the process by which monetary inflation turns into price inflation is not automatic nor instant. Demurrage can be applied each block.
The most important thing is that the fact that a real capital will rise its price through inflation and a loan contract will actually lose real value is what causes the inflation premium component of the gross interest.
Inflation causes it but demurrage doesn't.
gross (or nominal) interest = real interest + inflation premium = basic interest (or liquidity premium) + risk premium + inflation premium
Demurrage decreases the basic interest while inflation just increases the inflation premium.
Inflation is not exclusive of demurrage.
They're compatible, agreed. So what? Can't we compare them?
So these equations are all fine and dandy, but they don't mean anything.
They're more like definitions. Feel free whatever concept you need to define to explain me why I'm wrong.
You are arguing for deflation, not demurrage.
I had repeatedly argued about the dangers of price deflation that many bitcoiners tend to ignore:https://bitcointalk.org/index.php?topic=28276.msg421352#msg421352
I think demurrage solves the problem:http://www.freicoin.org/should-we-fear-deflation-when-there-s-demurrage-t7.html
The cost of borrowing will work out to be exactly the same.
No, it would be lower with demurrage than with inflation. With inflation they would be equivalent in real terms to the interest without inflation, but higher in nominal terms.
With demurrage interest would drop in real terms.
If you want to change my mind you will have to support your claim with something.