>I don’t see how it’s any different from the situation with, say, bitcoin. If you store a bitcoin, it just sits there, and its value follows that of the market.
Note, that by "expensive/risky" I was talking about the physical storage of the bills (eg. risk of theft or needing to install security equipment), not the opportunity cost of not putting the money to work. The latter is a whole can of worms that I don't want to get into.
>The fact that bitcoin is deflationary has nothing to do with decentralisation; a central bank could do that as well. They don’t because deflation is a terrible way of running an economy, not because it’s not possible.
>Mild inflation is much better than deflation from an economic point of view. What do you think are the advantages of deflation? I can see the “the value of my pile keeps getting bigger”, but how would that work e.g. for farmers who need to invest to produce food, or people who need a loan to buy a house, if the whole system is deflationary?
>But again, that’s a red herring because central banks can have deflationary policies. They don’t because that causes the economy to contract, unemployment to rise, and investments to fall.
I don't doubt there are great reasons to run an inflationary monetary policy, but the fact still remains that if you want to keep cash around you'll be subject to inflation.
>You could loan cash as well and get interests from that.
But now it turns into a full time job.
>Again, this has nothing to do with cryptocurrencies. The infrastructure that was built on top of cryptocurrencies enable doing it at larger scales and over longer distances, but that’s not a qualitative difference (besides the fact that this tends to concentration, running against the decentralisation ideal).
No, because with cryptocurrencies you can deposit your money into some sort of lending protocol and have that handle it for you, rather than having to do it yourself by being a loan officer/servicer and debt collector.
>It’s something that emerged because of economies of scale. Personally, I feel much safer with my money with an institution that is big and resilient enough that I am very close to 100% certain that it’ll still exist tomorrow. This can also be done with cryptocurrencies, but against this goes against the dogmatic ideal of decentralisation.
But the whole reason why you have to worry about your whether your money is in a "big and resilient" institution is that the only way of storing money in the finance system is at a fractional reserve institution, which can be subject to bank runs. It's possible to structure a bank that doesn't have this problem (eg. narrow banking), but for some reason the government isn't too big on it.
>How is it a problem in practice?
It's an issue any time you want to store/transfer a large amount of money. Although to be fair most americans don't have enough savings for this to be an issue so I'll let that slide.
