The reason we need money, from a societal sense, is that there is a time gap between when we decide to build something and when that thing is finished. You need access to raw materials, or labour before the thing you are building is completed. The premise is that the thing you are building is more valuable than the raw material and labour that went into it. Money is basically a lubricant that allows you to pay people before you start and then balance the books after you finish.
If money increased in value over time, we would have a problem. Let's say that the thing you are building will return an extra 5% on the investment. If holding on to money and doing nothing returned 10% in the same time period, you would be stupid to build the thing. You will make more money by doing nothing.
In a deflationary system, people will tend not want to risk the money they have by spending it to build something. This means less demand for goods and services and causes people to be idle. Access to capital is harder because why would I lend you money when I can just make a return by doing nothing? If I'm going to lend it to you, you had better lock in a really good rate -- which means you need to have a spectacular return on investment in your enterprise.
Essentially, rich people are rewarded and poor people are screwed. Society has no incentive to build things and poor people can't bootstrap themselves out of poverty without incredible risk.
I think the easiest way to verify this for yourself is to look at BTC. If you own BTC, what value does it have on society sitting in your wallet? Now consider using those BTC to buy something and employ people. Would you do it? Or would you rather park the BTC in your wallet and hope for a 2-300% return through deflation? Imagine I wanted to start a game company and I would like to borrow your BTC so that I can hire artists, musicians and programmers? Would you lend me your money? What kind of promises would it take to entice you to lend me your money?
Now imagine a currency where the value decreases over time. So you have a million units and over the period of your lifetime, the value will decrease to almost nothing. How does that change your view of whether or not it's a good idea to lend me your money? How does that ultimately affect society?
People have used assets like gold as money for thousands of years without long term inflation and it worked very well. It's only in the last hundred years or so that we've been sold the idea that our money should be worth less tomorrow than it is today. Put that way it sounds like a bad thing and that's because it is a bad thing.
One way of looking at inflation is that it's a motivator to encourage us to give our money to other more powerful people before it loses its value. Those more powerful people are the people who told us that inflation is a good thing.
Cryptocurrency takes monetary control away from the rich and democratises it.
You think that the amount of gold in circulation has been constant for thousands of years?
> without long term inflation and it worked very well
Au contraire, past attempts at maintaining a non-inflationary currency have failed.
Technically the US was still on the gold standard up until the 70s.
Why is inflation better than no-inflation and no-deflation?
In essence, an inflation economy is one where the only money that is not in immediate circulation is the one that is currently reserved for anticipated imminent transactions (i.e. the bills in your wallet, or in the cash register before the end of the day) - which is a tiny amount. Everything else is parked in some bank account, investment fund, stock etc, where it generates interest for the holder by being loaned out to someone else who currently needs it to produce.
So with some non-zero inflation, you maximize the utility of your monetary tokens as medium of exchange.
My point really was that you would never intentionally build a modern economic system that was deflationary. It doesn't make sense, except in some limited circumstances. You will almost always want it to be very slightly inflationary to encourage people not to sit on cash. Exactly where you want inflation depends a lot on the situation, so it's not a one-size fits all.
One thing that's interesting to ponder on is that money is always out of sync with goods and services. So you do some work and get paid. That money should be worth something. But imagine the situation where everybody did a bit of work, got paid enough to retire and then expected to be able to spend their money at the same time -- there is nobody left to work, so they can't spend the money. The system actually requires that people spend pretty much all the money they make because otherwise nobody needs to work for the next round of goods/services. Accumulation of wealth is actually a serious problem for society. It's one of the reasons you have many people encouraging high birth rates and/or immigration so that the population grows -- it keeps your money valuable by having something to spend it on. Now this seems to be clearly insane, but I think human society has a long way to go in terms of giving everyone a comfortable life while still encouraging the work necessary to provide that lifestyle.
If money becomes noticeably less valuable over time it becomes less attractive to hold money at all - and instead scarce assets like a house, land, or gold, etc would be far more desirable. Suddenly everyone is happy to lend you money but no one wants to hold it. Prices soar.
It's true that BTC would be hard to keep as a currency because there is a tendency toward hoarding when something is rising in value. That doesn't prove inflation is desirable though.
Yet with our inflationary system, this is exactly what has been happening.
The fact that money sitting in a checking account depreciates due to inflation is a terrible argument for cryptocurrency. No one actually does that with any significant amount of capital.
https://www.ons.gov.uk/economy/inflationandpriceindices/bull...
Diversifying with a deflationary asset like Bitcoin is a wise strategy, one that is likely responsible for its $160B market cap.
Cash (at least major currencies) is one asset class that is relatively safe but tends to depreciate due to inflation, especially due to recent monetary expansion by central banks. Cash can also be easily seized, and this is a cause of concern for some.
Contrasted with other asset classes that have yield, having all your net worth in cash would not be something you want to do.