Why would you want to prevent deflation?
Discussion
I’ve always thought deflation was a good thing, but I was talking to the AI and it brought up deflationary spirals.
Basically people are less likely to spend as prices fall over time. So low demand -> low profit -> layoffs -> less discretionary income-> low demand -> repeat
So maybe like a 1.5% inflation rate like Monero would be good. It would also keep transaction fees low as mining becomes less profitable.
The AI is repeating the academic consensus that is used to justify fiat currency and a debt/consumption based economy. People will always buy things they need. In a deflationary environment people are more likely use their money for savings than excess luxury consumption. This isn't a bad thing.
Monero inflation is lower than bitcoins and will remain lower for quite a while. It is also continuously decreasing and trending to zero.
Isn’t Monero inflation a percentage of the total supply and not a constant amount?
Bitcoin inflation will be negligible in a couple more halvings. Right now it’s about where Keynesians want fiat inflation
Monero inflation is not a fixed percentage. It's disinflationary tending against 0 over time.
Supply is currently smaller than Bitcoin even more so since its delisted from CEX which means no more fractional reserve shenanigans.
Inflation is currently the same as Bitcoin and about half of gold at around 0.8% per year.
There's a trade off between Bitcoin and Monero auditability.
There's also the privacy/ fungibility trade off.
There's an ASIC vs CPU decentralisation trade off.
There's tail emission (disinflation) to make sure there is enough security budget and not a wildly fluctuating fee market when subsidies become negligible.
There's also a trade off when it comes to quantum computers resistance where Monero has lesser work to do.
If you trust well understood mathematic assumptions and can live with disinflation at a rate half of gold inflation Monero is for you. Especially if you need a private store of wealth. If you are demanded to transact in public want to be absolutely sure (outside of custodian fractional reserves) that supply has not been tampered with and you need a deflationary asset (after losses) then Bitcoin is for you.
Most OGs from 2009-2012 own both and balance according to their needs.
Monero inflation is a constant amount (0.6 xmr every ~2 minutes)
So in relation to the total supply the % inflation is constantly falling closer and closer to zero (but never reaching it)
Oh so it would have the same deflation problems as bitcoin. With non linear population growth, linear inflation is practically equivalent to no inflation
You could make that argument. I've heard some argue that it should be a small % of inflation instead of a fixed amount.
But still, a fixed amount > 0 as far as block rewards go. We'll discover how it works out in practice.