Can a finite supply (like IOTA) deal with a growing (m2m/p2m/p2p) economy? Because you might end up in a situation where everyone is hoarding. There is nothing wrong with a bit of speculation but primarily IOTA should fulfill its transactional role. So I wonder what would be the best monetary policy or won't the finite supply pose any problems?
Once m2m economy requires more fine-granular payments (even less than 1 iota maybe) the founders stated that the supply would be increased proportionally to the owners' stake. They wanted to avoid having comma-values in iota ever since. Also Integer values are easier to handle by low-range iot devices than floating point calculation
Surely there is a point in time where the value will stabilize around real market value. Currently all crypto assets are highly speculative.
The Austrian School of Economics argues that a finite money supply can actually work for a well functioning and sustainable economy. The key reasoning is as follows:
Growth in economic output has three components: productivity improvements, population growth and debt.
In a world with debt there needs to be price/wage inflation to keep things stable (only then debt can be kept paying off). However inflation is actually an invisible taxation for existing cash holders and the earnings potential of future generations.
The standard line of reasoning is that removing the debt component, will result in a deflationary spiral (everybody is hoarding and no investment-incentive anymore) and as such can not work.
However if investments can return a higher rate than what a saver would get hoarding their cash, then investment will still occur in the economy. So a good investment will benefit the society (purchasing power will increase) and even more the investor himself (which is exactly his incentive to do so).
So in a deflationary economy, debt will be removed from the equation automatically since debt will only get more expensive over time.
For a more illustrated explanation and context, pls read this article about deflation and BTC. Of course this applies equally well for IOTA and maybe even more so since Austrian economics is also a proponent for a competitive money market; the best form will survive. Pls see Hayek’s competitive currencies proposal.