<h2>Your coins do not have 0 inflation in the long run</h2>

<p>First, we need to set straight that you have a <strong>critical error</strong> in your supposition: <strong>The rate of creation of money is not the only determinant of the inflation rate</strong>, <a href="https://economics.stackexchange.com/questions/166/from-an-economics-perspective-what-are-the-ramifications-of-a-currency-with-fix/167#167">see here</a>.</p>

<h2>Even if we ignore these equilibrium effects, is any of these coins superior in its rate of money creation?</h2>

<p><em>Suppose hereinafter that the actual inflation rate mirrors the money creation rate</em>.</p>

<p>The optimal inflation rate is something that is not clearly understood, but most Economists agree that it is somehow related to the current state of the economy.</p>

<p>Hence, an inflation rate that is independent of the state of the economy cannot be that great. It basically removes the central banking authority to manipulate the inflation rate to the greater good of society - but removing this power is also an explicit goal of many advocates of these coins. </p>

<p>I have answered few reasons for and again higher inflation <a href="https://economics.stackexchange.com/questions/5861/is-zero-inflation-desirable">here</a>. These make a case for a positive inflation rate. However importantly, they make a case for positive <em>unexpected</em> inflation rate. If high inflation is expected, all these benefits fall down. What remains is the shoe-leather-cost of inflation, implying that the lower inflation rate, bit coin, would be weakly better.</p>

<p><strong>Remember: This is based on the false supposition that the money creation rate is the only determinant of the  inflation rate.</strong></p>

<p>For the optimal rate of inflation, see also</p>

<ul>
<li><a href="http://www.frbsf.org/economic-research/publications/economic-letter/1997/september/what-is-the-optimal-rate-of-inflation/" rel="noreferrer">http://www.frbsf.org/economic-research/publications/economic-letter/1997/september/what-is-the-optimal-rate-of-inflation/</a></li>
<li><a href="http://www.nber.org/papers/w16054" rel="noreferrer">http://www.nber.org/papers/w16054</a></li>
</ul>

CC BY-SA 3.0
2015-07-15T11:12:56.413Z
2015-07-15T11:12:56.413Z
2017-04-13T12:51:38.253Z
FooBar
<p>Bitcoin can not have a real inflation rate because its value is purely speculative.  Bitcoins themselves have no inherit value (intrinsic nor extrinsic).  You only acquire a bitcoin because you think another person will want it for the same or higher value that you did.  Thus any deviation in its value reflects pure speculation.  At least with dollars, they have extrinsic value in that you can pay your taxes with them (public tender laws).</p>

<p>Bitcoins will like all speculative commodities will experience a "liquidity crisis" in the future in which their value will drop precipitously to the point of collapse. </p>

CC BY-SA 4.0
2019-12-16T14:45:34.200Z
"Bitcoins themselves have no [intrinsic] value." - As Bitcoin users will gladly point out to you, the same is true of Euros, Yuan or US Dollars. Bitcoins do have extrinsic value.
Criticize SE actions means ban
CC BY-SA 4.0
2019-12-17T15:02:38.470Z
Dollars/Euros/etc don't have intrinsic value...but they do have extrinsic value because they can satisfy public debts (aka taxes).  You can't pay taxes in Bitcoin so it doesn't have extrinsic value.
user2662680
CC BY-SA 4.0
2019-12-17T15:05:39.870Z
I can buy other things with Bitcoins, don't they count? Why do only taxes count?
Criticize SE actions means ban
CC BY-SA 4.0
2019-12-18T16:56:04.497Z
Because you don't have a choice with taxes.  In the USA, you MUST purchase dollars to satisfy tax obligations or you go to jail.  Legal tendar laws thus give dollars extrinsic value.
user2662680
CC BY-SA 4.0
2019-12-18T17:00:43.887Z
You can't pay taxes in USD unless USD is also used for trading lots of other things.
Criticize SE actions means ban
CC BY-SA 3.0
2015-12-04T04:18:34.983Z
2015-12-04T04:18:34.983Z
user2662680
<p>The supply of new Bitcoins and Dogecoins is depicted in the graph below.</p>

<p>The Bitcoin inflation rate is currently higher than the Dogecoin rate, but it reduces sharply to a rate close to zero. It eventually reaches 0% in 2140, after which there will be no new Bitcoins.</p>

<p>There are currently 100 billion Dogecoins. The Dogecoin inflation rate is fixed at an additional 5.256 billion coins per year for every year henceforth.</p>

<p><img src="https://i.sstatic.net/bSpuf.png" alt="Dogecoin inflation vs Bitcoin inflation"></p>

<p>Which inflation rate is more appropriate for a general-use currency intended for use for transactions of all sizes? I realise this isn't necessarily the stated aim of either currency.</p>

<p>Answerers should assume that the inflation rates are sacrosanct and can't be altered in years to come.</p>

CC BY-SA 4.0
2021-03-18T12:13:18.787Z
What about inflation expressed through the *exchange rate*? There may cease to be any further BTC produced, but if the price of things denominated in BTC inflates, including the rate at which BTC is exchanged for other currencies, then there will still be inflation.
Steve
CC BY-SA 4.0
2021-03-19T11:11:37.110Z
@410gone Well, Bitcoin is absolutely useless because of the designed-in deflation, but (besides being a meme) why is Dogecoin useless as a currency? Of course you'd be better off if your currency was something more technically capable like Ethereum
Criticize SE actions means ban
CC BY-SA 3.0
2015-07-15T10:41:35.797Z
I doubt you can talk about inflation with respect BTC as clearly if their creators had anything in mind when they conceived Bitcoin, it was the upper limit of supply which will only be reached in decades. Until then its supplies grow logarithmically. The interest in BTC dropped after it has no reached a currency status in so many countries, in others has been banned completely, hence the drop in interest. You would not call a deflation period two years ago when the whole world turned to Bitcoin, would you?
matcheek
CC BY-SA 3.0
2015-07-15T11:11:10.357Z
Those aren't inflation rates. They're expansion rates. And neither are suitable as use for currencies: they're both ponzi schemes.
410 gone
CC BY-SA 3.0
2015-07-15T16:01:57.480Z
http://bitcoin.stackexchange.com/questions/37217/how-to-answer-to-whether-bitcoin-is-a-ponzi-scheme
gerrit
<inflation><currency><nonexpert><cryptocurrency><bitcoin>
Does Dogecoin or Bitcoin have a more appropriate rate of monetary inflation?
user1205901 - Слава Україні
# Does Dogecoin or Bitcoin have a more appropriate rate of monetary inflation?

(Asked by: username_0 on 2015-07-15)

The supply of new Bitcoins and Dogecoins is depicted in the graph below.

The Bitcoin inflation rate is currently higher than the Dogecoin rate, but it reduces sharply to a rate close to zero. It eventually reaches 0% in 2140, after which there will be no new Bitcoins.

There are currently 100 billion Dogecoins. The Dogecoin inflation rate is fixed at an additional 5.256 billion coins per year for every year henceforth.

![Dogecoin inflation vs Bitcoin inflation](https://i.sstatic.net/bSpuf.png)

Which inflation rate is more appropriate for a general-use currency intended for use for transactions of all sizes? I realise this isn't necessarily the stated aim of either currency.

Answerers should assume that the inflation rates are sacrosanct and can't be altered in years to come.

**Tags:** inflation, currency, nonexpert, cryptocurrency, bitcoin
> **Comments:**
> **username_3**: I doubt you can talk about inflation with respect BTC as clearly if their creators had anything in mind when they conceived Bitcoin, it was the upper limit of supply which will only be reached in decades. Until then its supplies grow logarithmically. The interest in BTC dropped after it has no reached a currency status in so many countries, in others has been banned completely, hence the drop in interest. You would not call a deflation period two years ago when the whole world turned to Bitcoin, would you?  
> **username_4**: Those aren't inflation rates. They're expansion rates. And neither are suitable as use for currencies: they're both ponzi schemes.  
> **username_5**: http://bitcoin.stackexchange.com/questions/37217/how-to-answer-to-whether-bitcoin-is-a-ponzi-scheme  
> **username_1**: What about inflation expressed through the *exchange rate*? There may cease to be any further BTC produced, but if the price of things denominated in BTC inflates, including the rate at which BTC is exchanged for other currencies, then there will still be inflation.  
> **username_2**: @410gone Well, Bitcoin is absolutely useless because of the designed-in deflation, but (besides being a meme) why is Dogecoin useless as a currency? Of course you'd be better off if your currency was something more technically capable like Ethereum  

---

## 2 answers

### Answer by username_6 on 2015-07-15. Score: 11

## Your coins do not have 0 inflation in the long run

First, we need to set straight that you have a **critical error** in your supposition: **The rate of creation of money is not the only determinant of the inflation rate**, [see here](https://economics.stackexchange.com/questions/166/from-an-economics-perspective-what-are-the-ramifications-of-a-currency-with-fix/167#167).

## Even if we ignore these equilibrium effects, is any of these coins superior in its rate of money creation?

*Suppose hereinafter that the actual inflation rate mirrors the money creation rate*.

The optimal inflation rate is something that is not clearly understood, but most Economists agree that it is somehow related to the current state of the economy.

Hence, an inflation rate that is independent of the state of the economy cannot be that great. It basically removes the central banking authority to manipulate the inflation rate to the greater good of society - but removing this power is also an explicit goal of many advocates of these coins.

I have answered few reasons for and again higher inflation [here](https://economics.stackexchange.com/questions/5861/is-zero-inflation-desirable). These make a case for a positive inflation rate. However importantly, they make a case for positive *unexpected* inflation rate. If high inflation is expected, all these benefits fall down. What remains is the shoe-leather-cost of inflation, implying that the lower inflation rate, bit coin, would be weakly better.

**Remember: This is based on the false supposition that the money creation rate is the only determinant of the inflation rate.**

For the optimal rate of inflation, see also

* <http://www.frbsf.org/economic-research/publications/economic-letter/1997/september/what-is-the-optimal-rate-of-inflation/>
* <http://www.nber.org/papers/w16054>


---

### Answer by username_7 on 2015-12-04. Score: 3

Bitcoin can not have a real inflation rate because its value is purely speculative. Bitcoins themselves have no inherit value (intrinsic nor extrinsic). You only acquire a bitcoin because you think another person will want it for the same or higher value that you did. Thus any deviation in its value reflects pure speculation. At least with dollars, they have extrinsic value in that you can pay your taxes with them (public tender laws).

Bitcoins will like all speculative commodities will experience a "liquidity crisis" in the future in which their value will drop precipitously to the point of collapse.

> **Comments:**
> **username_2**: "Bitcoins themselves have no [intrinsic] value." - As Bitcoin users will gladly point out to you, the same is true of Euros, Yuan or US Dollars. Bitcoins do have extrinsic value.  
> **username_7**: Dollars/Euros/etc don't have intrinsic value...but they do have extrinsic value because they can satisfy public debts (aka taxes).  You can't pay taxes in Bitcoin so it doesn't have extrinsic value.  
> **username_2**: I can buy other things with Bitcoins, don't they count? Why do only taxes count?  
> **username_7**: Because you don't have a choice with taxes.  In the USA, you MUST purchase dollars to satisfy tax obligations or you go to jail.  Legal tendar laws thus give dollars extrinsic value.  
> **username_2**: You can't pay taxes in USD unless USD is also used for trading lots of other things.  

---

