All currencies have price deflation built it, for some macroeconomic reasons about motivating agents that I don't fully understand yet. It could be a good thing for economic growth, or it may not be. Let's leave that issue aside.
Just to be clear, the reason that governments increase the currency supply is that citizens will do it with or without them. The most fundamental currency is a promissory note, an I.O.U. Every time you write someone an IOU you inflate the supply of currency, because the holder of that IOU can pass that around to others in the form of payment. Instead of sending your bushel of apples to the shoemaker who made your shoes, you now have to send half to the bread baker, and half to the candle maker as that IOU was spent.
A currency that doesn't grow will be naturally replaced by one that does. This is my biggest problem with bitcoin.
"A currency that doesn't grow will be naturally replaced by one that does." seems right, as long as the minimal discrete value of the currency that doesn't grow cause a problem for the economy.
But if you can move from discrete to continuous space (bitcoins can be cut up to 1E-8, and according to what I've read this is not a fixed limit), why bother moving to the other currency ?
(I hope I get it right - it's an area I don't fully understand)
yes, bitcoins in theory can be infinitely divided. classical observations about hoarding and "bad currency driving out the good" likely don't apply. if you want to spend, you just spend however little you want to spend.
Just to be clear, the reason that governments increase the currency supply is that citizens will do it with or without them. The most fundamental currency is a promissory note, an I.O.U. Every time you write someone an IOU you inflate the supply of currency, because the holder of that IOU can pass that around to others in the form of payment. Instead of sending your bushel of apples to the shoemaker who made your shoes, you now have to send half to the bread baker, and half to the candle maker as that IOU was spent.
A currency that doesn't grow will be naturally replaced by one that does. This is my biggest problem with bitcoin.