Originally Posted by
IlPrincipeBrutto
By definition, if a group of nations move to a common currency (which Bitcoin would be) they are fixing their exchange rate. This means, again by definition, that for some of those countries the exchange rate will be too low, thus locking in a competitive advantage, and for the others it will be too high, putting them at a permanent disadvantage.
After the fixing, the dynamics of inflation differentials will take over; given that prices are determined, in the main by cost of raw materials and wages, and you normally can't control the former (unless you are Russia, for example), nations in the group with higher inflation will have no choice but to adopt deflationary policies, which means high unemployment and lower salaries (and a cut in welfare and social services).
Should these policies succeed (and eventually they do, once the local population is impoverished enough), they will trigger a response from lower-inflation countries, eager to maintain their competitive advantage, and the game starts again.
The whole system is inherently deflationary, in the most vicious sense, and it's vividly demonstrated by the Eurozone, whose monetary system is even stricter than the post-WWII gold-based one (and is advantageous for Germany because it allows them NOT to revalue their currency).
That system had at least two mitigating features, that reduced the burden of adjustments on higher-inflation nations (thanks, of course, to the benevolence and tolerance of the USA. This tolerance has been abused, chiefly by Germany, with the predictable results we see playing out now): controls on capital movement, and a clear separation of banking activities from speculative ones (thanks to the Glass-Steagall-type legislation, which predates the Bretton Woods agreement, of course).
The Eurozone is Bretton Woods without any of these mitigating features; replacing fiat currencies with Bitcoin would be at least as bad, if not worse.
Personally I find it quite surprising that someone from Italy, who has probably experienced first hand the effects of using the wrong monetary system, can advocate Bitcoin (and its ilk) so blindly and uncritically.
IPB