I’ve been spending a lot of time the past few days thinking about two things, and they’re related.
I’ve come to the conclusion that the young folks who are embracing Austrian economics really don’t like doing math.
That might represent why there’s the attraction to Bitcoin. There’s a maximum number. There will only ever be 22 million. The number in circulation continues to increase, though the rate of that increase continues to decline, and will almost endlessly. Nobody knows when the last coin will be mined.
While the number of new coins is decreasing as time progresses, there’s actually a decline in the supply due to lost bitcoins.
What does the total availability graph look like when you take into account the rate at which coins are being lost? Right now, the rate of new coin creation probably exceeds the rate of loss, but they will eventually intersect. At some point, there’ll be more inaccessible coins
Both the Chicago and Austrian schools of economics assume a money pool that’s predictably-growing, and not shrinking.
If your currency is based on something like precious metals, “production” might decrease, but it doesn’t just vanish. It can be reclaimed. Do you remember your unemployed RealtorTM who was scrounging around for gold? Or the person who stole the copper gutters off the tall apartment building where I was living?
It’s probably impossible to scrounge for those “lost” bitcoins. Maybe there’ll be some advance in computing that makes it possible, quantum, perhaps, that’ll make it possible, but I’m not going to hold my breath on that.
It’s a bit like the idea of what would happen if an asteroid full of gold gets tapped.