As much as I favor low taxation and hate class warfare attacks on the wealthy, I think we ought to tax "freshly printed money" at a much higher rate, or figure out a more equitable way to create money... if we have to create money. Our financial system (the one created and regulated by the U.S. Federal Government) is so corrupt, as evident by TARP and the lack of lending and recovery. The only way its gonna change is if the dollar stops acting as the world's reserve currency, i.e. collapses. Only then do I think we have a chance of replacing it with something better. Don't hold your breath. The rest of the world is just as corrupt and financially unhealthy, so the dollar will remain superior.
There's no reason to create new money[1]. As I argued in my post, all inflation can do is change the distribution of the purchasing power of the money... not create new wealth. But the market already handles the distribution or purchasing power just fine through normal market forces. Good businesses get more purchasing power and grow. Bad businesses lose purchasing power until they collapse. The only reason to inflate the money supply is to scam everyone because you get all the new money.
As for replacing the dollar, bitcoin is the only reasonable alternative that presently exists. Fiat currencies almost certainly will never work, because the temptation to inflate them is too great. Gold can't work because you can't send it over the internet. But bitcoins both can't be inflated and can be sent over the internet. No government will decide to switch from dollars/Euros/whatever to bitcoins. Rather, it will be the market that chooses them if they are appropriate.
[1] If you actually halted inflation of the dollar, then as technology continues to increase the supply of everything, eventually the dollar would be so valuable that a cup of coffee would cost less than a penny. You would need to make new monetary units worth less than a penny so that cheap things like coffee can be purchased with them. You would do this by taking your pennies to a bank and getting, say, 100 penny pennies with each penny, and then a cup of coffee could cost 78 penny pennies.
Right, new dollars have to enter the economy somewhere, and the purchasing power is increased at those points of entry, decreased everywhere else by an proportional amount.
I'm all for bitcoin but the powers at be will find a way to stop it if it catches on. But the cat is out of the bag. I just can't see the dollar standing up to all the benefits a technology like bitcoin affords.
What he's saying is that new dollars don't have to enter the economy. If you remove one penny and inject 100 penny pennies, you've only split up the penny, nothing else. With electronic banking this doesn't even have to be anything, as you can just work with fractional dollars (yes I know current software doesn't work like that, but it could).
And I agree with that as well. There might be some psychological issues switching to a deflationary system, though. Things that typically appreciate in nominal value (real estate, job skills, precious metals, art, etc.) will be appear to not be appreciating, even though relative to everyday goods in services, they will still appreciate. The only problem is that you can't have too much deflation, or else people will want to hold onto cash too much, will they not?
Edit: Oh come on, why the downvote?