Re: why?
btrower,
I found your post came over rather on the arrogant side for my tastes. Ironically given the way you chose to say it, I also think it showed quite a serious lack of understanding of the issues involved too.
All fiat currency is destined to be worthless. Originally $20 USD bought an ounce of gold. It now buys about 0.016 oz. Long term, that number is not going up. At less than 2% of its original value, the USD is already essentially worthless relative to its original value.
I think you might want to re-assess your choice of comparison there. Not that I'm arguing their hasn't been inflation, but the measure of inflation used is a basket of goods that people buy, not an extremely volatile asset class such as gold, for a good reason. So the dollar is worth less, but not as catastrophically as you say - partly because you've measured at a time when gold is just off the top of a rather big bubble.
You example of Zimbabwe is even sillier. They collapsed the economy. Inflation was both cause and symptom. Had Zimbabwe been using Bitcoins, so that Zanu-PF weren't able to print them, the economy would probably still have collapsed becuase they'd have simply seized the assets they were buying with printed money instead. A massively corrupt and disfunctional government was the problem there. Bitcoin won't save you from a goverment that could always torture you for the password to your wallet, and if you don't hand it over they can just shoot you, so no-one gets it.
A well-run economy can deal with some inflation, if it's predictable. At low levels, it even has some good side-effects. It makes hoarding cash cost, thus incentivising people to invest it. At varying degrees of risk. That means others can borrow it. If you can't borrow, you will struggle to build capital goods, without that investment your economy will stagnate. But with deflation, borrowing is madness, becuase the amount you have to pay back is more than the amount you borrowed, even before you've accounted for interest. Extreme Example Time:
In January I borrowed 1,000 bitcoins for a year to buy a 3d printer. Planning to sell 1,000 3d printed gubbins at 2 BTC each for Christmas and pay back the loan with 10% interest. Plus yummy profit for me.
Now Bitcoins aren't worth the same $100-odd of January, they're up to $1,000. So Bitcoins are worth 10 times as much as before. My printer can now be bought for BTC100, and I can only sell my gubbins at 0.2 BTC each. Thus even if I sell the full thousand, I end the year with assets of 120 Bitcoin, and a debt of 1,000 Bitcoin. Oops! Bankruptcy ahoy!
This is obviously ridiculous, but only because no-one seriously uses Bitcoin for everything - and it represents a tiny economy. It shows the problem of the debt denominator effect in deflation though. Debt becomes a crushing millstone, if asset values fall in money terms. Now I've heard some people say this is a good thing, because debt is bad. But debt isn't bad. It's just a thing. It can be either good, bad or indifferent. It can allow growth, investment, social mobility and improvemtent. If handled sensibly, obviously. It's logical for me to buy my flat. I've got to spend £800 a month to live in it anyway, so I may as well borrow the cash to buy it and make sure that money goes to me (plus profits to the bank of course). This is a perfectly prudent use of debt, even though I now owe the bank loadsamoney. If I was borrowing because I couldn't afford to pay for my dinner (or holiday), that would be a different matter.