“(Deflation is a decrease in the general price level of goods and services, and was the scourge of the gold standard that destroyed millions of lives during the Great Depression.)”

Based on my understanding of what happened, this seems to be leaning a bit towards historical revisionism. In my understanding, the Great Depression was caused not by the gold standard but by loose credit practices influenced by the Federal Reserve, which led to already overleveraged investors borrowing even more to buy stock that ultimately crashed in value due to being overbought (among other things), causing a cascade of defaults, a credit crisis, bank runs, etc. It’s a big topic, and that’s admittedly a gross simplification of what occurred, but it’s more historically accurate than simply “the scourge of the gold standard” being at fault (as if the inability to debase one’s money supply is somehow a bad thing). You can read a more comprehensive explanation of where I get my understanding from here: http://wiki.mises.org/wiki/Great_Depression

“deflation… puts downward pressure on salaries… if you hold a large amount of savings, the purchasing power of your money appreciates with every day that the general price level falls”

If “the general price level falls”, then your point about downward pressure on salaries is moot – these effects ultimately cancel each other out. Plus, savings going up in value doesn’t exactly sound like a bad thing… more on that below.

“deflation incentivizes hoarding by materially rewarding the accumulation of money.”

Are you suggesting that saving money is a bad thing? Should people instead live paycheck-to-paycheck? I’ll answer my own questions, as you address this point later in the post when you say:

“Rather than throwing their money into circulation, as the worker would do when buying her basic necessities or as the “productive” capitalist would do when procuring machinery, raw material and labor power, the hoarder will hold on to his gold or Bitcoins as long as possible.”

That is a false dichotomy. If the worker earns a wage that is higher than her expenses in the same period, she will have excess money which it would be in her interest to save for a rainy day or a large purchase in the future. That her savings would go up in value during that time period (as opposed to decrease in value as in an inflationary environment), I would argue, is a *good thing*.

“[Bitcoin] is designed on the basis of the same Randian principle that animates bankster culture: fidite nemeni, trust no one!”

Cryptocurrency is not about “not trusting anyone”, it’s about “not NEEDING to trust anyone”. This distinction is important: of course you still have to trust counterparties to a transaction, any transaction, Bitcoin or not. The “trust no one” ethos in the cryptocurrency community is primarily about removing the NEED for trust by using either transactional protocols which remove incentives to betray trust (eg. multisig escrow) or cryptography that eliminates the ability to betray trust (eg. cryptographically secured transactions and currency supply).

In a centrally managed currency system, you NEED to trust multiple parties: you need to trust the issuer not to debase the currency or, if it’s digital, otherwise alter the digital ledger; you need to trust other people not to counterfeit or otherwise defraud the system; you need to trust other people not to attack the system and try to kill it outright. Bitcoin removes this need for trust by basing the system on the laws of mathematics rather than the laws of imperfect humans, and setting up an incentive system that makes it economically prohibitive to act maliciously in the system.

BUT, as other commenters here have pointed out, there are alternatives to Bitcoin which can provide users with similar cryptographic certainty while still basing the system on trust. Ripple allows users to issue their own currencies – so you have to trust the issuer not to debase the currency – but the ledger balances are all cryptographically verified and impossible to forge. In fact, trust is an explicit component of the Ripple system: in order to accept a currency issued by another user, you must first create a “Trustline” with that user agreeing that you will accept up to a certain amount of their currency from them.

Ripple-based mutual credit systems can be the Yin to Bitcoin’s Yang (to borrow from Bernard Lietaer).

@Sepp: You say “transaction fees are charged in XRP, and each user has to spend XRP to “trust” someone else on the Ripple network. So in the long run, with XRP’s exchange rate going up this might become much more expensive.”

Yes transaction fees are charged in XRP to prevent a spammer from DDoSing the network; currently that fee is .00001 XRP or .000004 USD. This anti-spam network fee, along with the other fees you mention, can be adjusted by consensus if it becomes too burdensome as XRP goes up in value. See: https://ripple.com/wiki/Transaction_Fee#Fee_Changes_and_Fee_Discovery

The saying today is “it takes only a few XRP to make Ripple work”, but … transaction fees are charged in XRP, and each user has to spend XRP to “trust” someone else on the Ripple network. So in the long run, with XRP’s exchange rate going up this might become much more expensive. There is a limited number of XRPs and they are all in the hands of a few people. Not a good start for a trust based system of exchange, in my opinion.

There is however, I hear, some work going on to revive the older Ripple code.

I definitely think that trust is an important thing that, and I would prefer to see it, along with more humane financial and business relationships in general, encouraged rather than eradicated – which is one of the things that drew me to Ripple.