Careful there. You are using the current system (central bank based) as an example of why bitcoin will not have the same problem (different).
Erm no? It's not like there's always been a central bank regulating currency in the entire history and yet we had stable prices. Particularly in USA between
1836 and 1913.
Fair enough, but in that time period all the countries were on a gold backed standard and everyone benefited from a universal stable monetary system. I'd imagine a country who adopted gold as their official currency say several years ago would've had quite the fun time dealing with massive deflation as gold appreciated at a tremendous rate. This rapid appreciation would adversely affect exports among other things. What I'm saying is that bitcoin is in an unique position as one of the few examples of free market money in a world dominated by fiat (in the true sense of the word) money. It will be interesting to see how the bitcoin economy grows and how it will be affected by the fiat economy whose money is tightly and centrally controlled.
The true test would come when the bitcoin economy faces the economist's bogeyman - the "market cycle." Which of the two systems would survive (ie between bitcoin and central bank controlled money) and in which manner is the really interesting test. If we look back in history even during the period of the classical gold standard there were boom and bust cycles. Bitcoin will no doubt be put to the test in the future with its very own boom and bust event or something else possibly much worse. I hope it comes out unscathed and survives this trial by fire.
