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The inflation part is where I disagree.

The only reason to mine more gold is because the USD price is more than the cost to mine it, making it profitable by traditional thinking. There is an incentive to discover the gold because of a variety of economic and human factors.

Here is a thought experiment:

Pure economics doesn't dictate any reason to mine more gold. If we were on a gold standard today, and all mining stopped forever, what happens? Currency prices adjust to economic forces, and life moves on. Pure supply and demand dictate price, not inflation. As tech improves, life improves, and currency prices continue to drop because we are more efficient. It is deflationary, and nostr:npub1s05p3ha7en49dv8429tkk07nnfa9pcwczkf5x5qrdraqshxdje9sq6eyhe explains this very well.

So why mine gold? The same reason we print currency: to be closer to the source of funds, deploy the currency and "lock in" our financial plans...all before the currency prices rise. Small inflation is tolerable when asset prices, priced in fiat currency, grow higher than inflation.

But humans do not understand money. You cannot have the USD price of your 401k go up, and the price of your house go up, yet simultaneously have lower prices at the grocery store and the gas pump.

Currently all the gold in the world makes a ~70' square cube. That is enough gold for every country, they just have to get the currency price right. What countries need to adjust is the currency and the peg to the gold. for example $1 = 1oz. silver, and $20 = 1oz. gold.

If you want to "get richer" you can lower the price of your goods and services by being efficient, and passing the savings to your customers. They now have more free currency to save or invest.

You do not get "richer" by mining for more gold because that just makes prices go up, which steals purchasing power from people who saved in the currency. You get richer by providing value people pay for, not stealing value by debasing currency.

So I personally do not see a need for inflation in gold, or Monero. Inflation is a tool created by the fiat currency system. Debasement is the predecessor, which involved coin clipping, and mixing with base metal.

Saberhagen The Nameless 1y ago

Inflation is not needed for gold. You are right. My point was gold was still money *despite* small inflation for civilization for thousands of years. So obviously inflation is not an exclusionary criteria for money if you think gold was/is money.

Also, you have to contend with the fact that circulating gold supply doesn't disappear when everyone stops mining it like it does with crypto. Gold also doesn't have transaction fees that grow the more people use it and that secure the circulating supply.

Isn't the reason for mining anything (including crypto) because you can profit more than the cost to mine? This isn't unique to gold. Whether that is in terms of USD, another crypto, or stuff you can get, there is no real distinction.

Another massive difference between fiat inflation vs gold/monero mining is that fiat inflation is massive, centralized, and unpredictable.

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Delta Charlie 1y ago

The reason for mining anything is because it is profitable...under the current fiat system. In our theoretical story, we are under a hard money standard.

In the distant past, I would guess, that mining wasn't an industry. No technology, and also no reason to mine. Gold and silver was circulated as money. It crossed borders and the economies adjusted accordingly with prices. Let us assume no inflation(on a worldwide scale) because there is no mining. The only way inflation could happen would be at the local level.

For example, if one wealthy family moved into a small town, then the supply of gold and silver would increase(inflate) causing higher prices. The wealthy family would open businesses, probably pay some taxes, and generally contribute to the economy, making everyone more prosperous. Prices would rise and fall to the appropriate level without external interference like a currency printer. If the wealthy family moved out of town 10 years later, you might call that deflation because now a significant part of the money supply is gone, so prices wold adjust accordingly.

You are right about fiat currency inflation being massive. I disagree that it is centralized and unpredictable.

Literally all central banks inflate their currency, so if all do it, I would not call it centralized. Because we know they all do it, and have always done it, and will always do it, I wouldn't call it unpredictable, this makes it very predictable.