I am a huge Monero supporter and I hope it replaces fiat, but I'm worried about its monetary policy in trying to replace cash. Im not raising privacy concerns, just monetary policy thoughts.
Fiat money is trash because the supply is unnecessarily increasing by central banks who have full control over it. Fiat loses purchasing power over goods because of this mechanism, therefore your real return with just holding it is negative most of the time.
But a currency with a fixed supply, or a fixed super low inflation rate like Monero, is deflationary against goods and its purchasing power increases against economic goods. By just holding it, your real return is positive, and you will be able to purchase more goods over time.
But this too has its problems. If a cryptocurrency succeeds as replacing fiat, **a super low inflation rate of its supply is deflationary against economic goods and people will not want to spend it.** They will want to hoard it. This has been brought up many times in criticism of bitcoin.
There is a video of Peter Thiel "foreseeing" something like Bitcoin in 1999 where he states a better monetary mechanism is not exchanging something that someone says has value (dollar bills) for value (goods), but rather value for value. See here (2:22) [https://www.youtube.com/watch?v=Osp\_Ug\_7r7Q&t=281s](https://www.youtube.com/watch?v=Osp_Ug_7r7Q&t=281s)
He suggests that in the US , a money that represents the S&P 500 (or the whole stock market) would be a mechanism for exchanging value for value. example - .000000587 of $SP500 for your house. Okay you can't really do this with Monero (I don' think). But we could tie the inflation rate to an index of global goods (that is immutable, not censorable)? If the inflation rate is tied to the general price of economic goods, money is still not being diluted by a central authority AND there isn't much reason to hoard it because its value isn't dramatically increasing against something like a car or a house. Tie th...