Are there economists that support the idea of stopping the creation of new money? I assumed this was an underlying requirement of a health currency? New value is created every day by thousands of different sources, and the currency needs to be able to expand at the same rate.
Not necessarily, and you may be conflating demand for a currency (which controls its valuation and exchange rate) with economic productivity in an economy.
Its not so much, I imagine, about stopping the creation of money - the economic fundamentals behind why inflation is good are obvious. The promise of digital currencies going forward is the hopeful removal of human irrationality from the process.
Would you prefer to trust the Federal Reserve, with all its own internal goals and motivations, to print money "honestly", or would you rather have an algorithm that adjusted the block payout rate to maintain constant 1% inflation in the monetary base, relative to monetary velocity? IE, when the money slows down, which implies money is being hoarded because its value is rising, you print more to offset it, and when money speeds up you reduce the printing speed to try to keep the velocity stable.
I would prefer that people not have to create their own promissory notes during economic booms because it's impossible to create a legitimate loan due to the current monetary supply. You're begging for a black market currency at that point.
We have not yet found a consistent set of rules for setting monetary policy that work across the board. The problem is compounded for dual-mandate central banks such as the Federal Reserve. Even measuring inflation is a manual process - how would you code basket selection into your currency?
At the moment I'd rather have a (democratically accountable) human in the loop. I don't have anything like the level of confidence in economic theory to trust any argument that 1% is the "right" level of inflation for all time. If there are unforseen shifts in the economy and we end up thinking that (say) 10% inflation is the best thing to do at the moment, I'd rather we had the capability to do that.
Until we have evidence of an optimal money growth rate, I want the system to be flexible.
>keep the velocity stable.
Velocity is, basically, a fudge factor in the PQ = MV equation (as in, it makes the formula work). Is there any research that points to stable velocity being optimal? I think it changes drastically over time.
I think you're on the right track, and "the system" could definitely use more transparency and objectivity. But I don't think there's any algorithm near ready for prime time. The economy is too complex.
Why does the currency need to expand at the same rate? You could also have the real value of the currency appreciate. Before you say, 'that's deflationary' - many countries had large swaths of time when their currency was deflationary with little or no ill effect to the population, and increasing standards of living.
(I don't intend that as a rhetorical question - I'm sincerely asking.)
Curious, are US treasuries or interest in a savings account considered "dead weight" in your definition?
[1] http://treasurydirect.gov/NP/debt/current [2] https://fred.stlouisfed.org/series/WSAVNS
Because the demand for money and credit ebbs and flows. Why would you curb the supply? It's literally paper and bits.
Do you think there should be the same amount of money in a world of 100 people as there is in a world of 100 million?
Neither are inherently necessary for a growing economy. And there are other alternative ideas that are reasonable tools to expand the money supply if needed.
You've just identified the most difficult problem facing the financial world today: how to expand the money supply at a rate that's fair to all market participants.
market participants === us
Value/resources are also lost and/or used up. Inflation is only necessary for an expanding human population.