As they should be, given that populations increase.
Anyway, even if Bitcoins go underground, they'd have to be priced such that they'd be cheaper than other money laundering channels. Due to their finite supply, though, money laundering through Bitcoins will get very expensive. So their utility re: taxes will be squashed by either the government or the black market.
Is the U.S. Population increasing like this? [1] That's what the U.S. monetary supply looks like.
More correctly, fiat money supply should ideally match total economic output, not population. But the GDP graph also doesn't look anything like that monetary supply graph.
Given this, the BitCoin phenomenon is understandable: savers are looking for a currency that's not subject to manipulation and is most of all predictable in terms of supply. Whether or not it succeeds, I'm glad there's the pressure of a competing, not-centrally-manipulated currency.
[1] http://research.stlouisfed.org/fred2/graph/?s%5B1%5D%5Bid%5D...
[1] http://books.google.com/books?id=ZNAhXe2pz1cC&lpg=PA196&...
Read the sentence "Prices might even fall gradually as higher incomes led people to want to hold a large fraction of their wealth in the form of money." Inflation is a Money Supply / Money Demand phenomenon. In the long term, Money Demand tracks real output, but in the short term (such as the recession we're currently in) you can see major swings in demand that counteract what would normally be a quite inflationary money printing exercise.
Huh? [0]
[0] http://www.google.com/publicdata?ds=wb-wdi&met_y=ny_gdp_...
Edits: To make it clear I'm not arguing with the statement that money supply has tracked GDP fairly well until recently. Or that GDP has trended up exponentially.
Yeah, I won't take part except to say (a) you're sampling 4 years of incredibly volatile economic activity, and (b) the other, uh, 96 years exhibit a pretty strong exponential trend.
Imagining a rant, and a classification for the discussion, is not helpful. Your two points (a) and (b) I agree with.