"It's is in limited supply, as money pretty much has to be."
An adjustable and growing money supply is much more the norm.
An adjustable and growing money supply is much more the norm.
In any case, I think there's no way to start from zero value, as Bitcoin did, and go to real value, without some serious price appreciation. The first transactions have to be for quite tiny amounts.
Aside from that, I see the deflation as a clever hack to drive adoption. Arguments that it prevents use in transactions would only really apply if it were our only money.
So it is adjustable and it is growing. The price rise is caused by speculation and demand, not because new bitcoins aren't being produced.
Whereas a money supply typically requires different rates of creation or even destruction to respond to the market demand, partiularly in a time of currency hoarding (such as we are experiencing now in the real global economy).
There is also a strong argument for multiple currencies with different supplies of money rather than a single global supply, so there can be mutual adjustment of prices and wages without the social wreckage of a deflationary spiral (such as Southern Europe is currently experiencing because of the Euro).
What are the forces that have caused those requirements to arise with traditional currencies?
Did you mean inflationary spiral for Southern Europe? Or are prices for things dropping there right now? Not sure.. But again, a lot of what happens is because of constantly 'hacking' the system (raise the debt ceiling, print more money, etc.). Using that as the norm and presenting an argument against the 'hack ability' of the new system seems flawed. Maybe there needs to be better research into what happens, why it happens, and how it can be prevented. Inflationary currency most likely isn't the right answer considering the issues it has caused so far... Deflationary may not be either.
So what constitutes a "hack", vs "bug", vs "works as designed" is a matter for debate. You point to the debt ceiling - that's a non-economic political enomaly unique to the USA (and interestingly, iirc, Denmark). It's not so much a hack as a periodic configuration change.
You also mention inflation. Currently there's very little inflation anywhere in the world. We are printing money everywhere, and yet there is no real inflation, not a peep, completely contrary to over 5 years of dire warnings from inflation hawks. Why is that? You'd think there may be a lesson here.
Southern Europe had massive capital inflows from the North during the past 10 years, leading to wage and price inflation. Private excesses led to a massive crash in demand when the financial crisis hit, and a major outflow of capital. So now the South is uncompetitive relative to their Northern neighbors. The typical tool to get more competitive is to drop their exchange rates relative to their peers to bring export prices inline. but with the Euro, they can't do that. So they're stuck in a deflationary spiral - difficult (high unemployment, lowered workforce participation) and destructive (business and livelihoods destroyed and permananent damage to the country's wealth generating capacity) considering prices and wages tend to be sticky downwards and thus don't trend in a nice linear manner.
The above situation doesn't occur quite as suddenly and badly in the USA among its member states because they have fiscal integration, which enables Federal transfers to poorer states to shore them up relative to their peers. Decay and deflation still eventually happens if the underlying reason is structural (see the Detroit area). But Southern Europe itself was a growth story, not a case of mismanagement but rather a victim of reckless investment with no EU system to soften the blow when there is a crisis.
As for the requirements on the money supply, there is plenty of history out there discussing the trouble with previous eras of the gold standard (see the Great Depression), or decentralized free money (the USA had hundreds of currencies in the 18th century- the civil war reparations was the onus to coalesce into a standard Federal reserve currency).
We have switched between predominantly commodity (deflationary) currency and debt-issuance (inflationary) currency for thousands of years. There's dangers on both sides.
Keep in mind General Theory wasn't published until 1936. FDR didn't become a convert until 1938 -- after his attempt to balance the budget in 1937 led to a disastrous recession that undid a lot of the prior gains from the depression (the US government had a budget surplus!). WW2 spending was what wound up being the stimulus that dragged the world out of the recession.
Liaquat Ahamed's _Lords of Finance: The Bankers Who Broke the World_ goes into great detail as to why the great depression occurred (the Gold standard), and why it lingered.
I also think you may want to read more into Japan's economic policy and financial history. Japan's troubles started with a financial crisis and asset bubble bust twice - in the late 80's and late 90's, similar to the global 2008 crisis, Except Japan had a much, much weaker institutional response than the USA and even the UK did. They shuffled almost annually through a series of milquetoast PMs. Their central bank governors wouldn't commit to anything. Japan had to nationalize a lot of the private losses and bank bankruptcies that were occurring while contending with no growth and a deflationary spiral. Japan's debt was not the result of Keynesian stimulus (that would have required sudden and massive expenditure, given the size of Japan's economy), it was the result of "keeping the lights on" in an era of almost no growth.
Now, in 2013, Abe and Kuroda are finally attempting what looks like a quasi-Keynesian approach -- massive quantitative easing to drive inflation expectations skyward. I say "quasi" because it's not a fiscal stimulus (people are too nervous to try given their debt-to-GDP ratio). And this approach is more Krugman than Keynes. It will be interesting to watch.
Detroit was a case of structural problems combined with bad governance. Sorry if that was not clear. It was a side point to basically say that Southern Europe is not Detroit. They were a victim of private excesses fed by capital flows from the North and a lack of EU-wide fiscal integration to cushion their economy after the crisis.