Dear Harry (and Harry),
I just read a book about Bitcoin. I was fascinated. My wife was repelled. That’s another story.
The decentralized, public ledger, idea behind Bitcoin seems brilliant to me. But the fact that there is a cap on the number of bitcoins that will ever exist seems like a problem. Am I wrong? Help me. It seems that this would encourage saving, which is good, but discourage any sort of investing in actual goods, such as homemade pies. Here is my thinking:
Let’s say that, right now, a home-made pie is worth one bitcoin. Next year, if the pie economy grows at all, a pie will be worth less than one bitcoin. So, if I have bitcoins, I’m never going to buy that pie because next year, I’ll be able to get a better deal on pies. Also, if I am a pie maker, I’m never going to spend bitcoins on the ingredients to make pies, for the same reason.
I see that some pies must still be made because bitcoins are not edible and humans have a basic need for pies that can’t be completely eliminated (I’m not counting paleo-dieters as human, for the purposes of this article.) Is this enough to balance things out? Perhaps this will result in the perfect amount of growth in the pie economy?
It seems like it would be better if bitcoin creation was tied to the creation of pies, instead of vice versa. If every time a pie was baked, a bitcoin was created, things would work much better.
So, Mr. Harry Tuttle and Mr. Harry Dexter White, help me out here. I need some basic economics lessons and I want pies (meat pies too) to go on being made.