All over crypto twitter, people talk about how inflation is stealing from savers and crypto is the solution. This is a silly statement and is not why crypto-currencies will be successful.
There are two inflation scenarios - moderate and runaway:
Moderate inflation is nothing more than a redistribution from the rich (people with savings) to the poor (people with debt). Even if the world switches to crypto with fixed or zero inflation, governments will still tax the rich and redistribute to the poor. And since governments have guns, it doesn’t matter where and how you store your wealth, they can take some of it and give it to the poor¹.
Runaway inflation is catastrophic for the economy. But it is not a problem that needs fixing in most places in the world. Even in countries with runaway inflation (Argentina and Zimbabwe), crypto-currencies won’t be a great solution as tyrannical governments will try to outlaw crypto in every way possible.
Therefore, in either case, crypto is not solving anything significant. Crypto’s greatest feature is disintermediation — replacing banks with decentralized software and creating frictionless payments. That’s the reason cryptocurrencies will be successful, not because of inflation.
Note on Quantitative easing
“QE has robbed us of our wealth” is another silly statement that is commonplace on crypto twitter. QE was not printing of money, and it did not create inflation. The fed bought treasury bonds from banks in return for fed reserves. Typically, reserves pay lower interest than bonds. So if you are a bank sitting on reserves, you are incentivized to lend out reserves for higher interest-bearing loans. This could lead to inflation as more credit in the economy can drive up prices. But as we saw in the recovery, banks didn’t increase lending by much and just sat on the reserves.
If you are wealthy, QE probably made you more prosperous. Demand from fed drove up bond prices (and yields down). Lower bond yields pushed fund managers to seek out higher-yielding assets such as stocks, driving a multi-year bull market in stocks. Most wealthy people invest in stocks and saw them appreciate over the last ten years.
: Moderate redistribution is probably a good thing as capitalism rewards the highly skilled and creates significant wealth inequality, which then leads to populism, nationalism, xenophobia, and socialism. If you are rich, you should choose moderate redistribution over the other pie-shrinking options because you and your kids will be poorer in the other scenarios (along with everyone else).