This story is off the front page, and I don't know if anyone will read it. Also, this post is far too long, and I haven't got the time to make it any shorter. As a result, I'm not putting a lot of effort into polishing it. Some parts are detailed, other parts are just bare comments on parts of the parent post. If you get lost, read it along with the parent post and you should be able to get context by following along with what I was reading as I wrote each section (sometimes each sentence).
You dislike the generation curve chosen. Can you demonstrate an objective measure of the goodness of such curves? I personally can't think of any arbitrary curve where someone can't raise objections similar to the ones you raised. Oh, and don't forget that the acceptable inputs to the curve generating function are necessarily limited to verifiable objective facts, like block height.
Simply put, a curve had to be chosen. Every possible curve has good points and bad points, with no way to predict the future, and no way to collect feedback from the outside world. The curve we have has advantages above and beyond most curves in that it depends on two very simple integer math operations that no one can possibly mess up.
By the way, this comes up on the forums pretty often. Every single one so far has been at least as "stupid", and most are far stupider.
Science is that which is testable. If something isn't testable, it is by definition part of that "large pile of untested bullshit", and thus, not science. We are concerned with the nature of the things, not the names people like to call them by. "Computer Science" is mostly not science (but parts are). "Political Science" is not science at all, unless I've missed some recent developments. "String Theory" is a funny one. We aren't really sure if it is testable or not, so it currently exists in an indeterminate state. Eventually, we will either prove that it is untestable, or find a way to test it.
And no, we can't do economic tests. Not macro, not micro, maybe gedanken. For an amusing experience, read some papers claiming to have tested various economic theories. Count the controls that the authors acknowledge ignoring. Now find five more that they ignored, but didn't know or admit to ignoring. Now imagine someone finding five more that you didn't find...
As for macro, the central banks don't do experiments, they fiddle with knobs. When things go the way they wanted, they claim success. When things don't, they claim a confounding factor. What is really happening is that the confounding factors are always there, but they are just as much responsible for the successes as the failures. Since the "experiments" are unable to distinguish, they are not tests, and no science happens.
Your opinions on velocity are not needed, the data is public. Everyone in the world can see for themselves exactly how fast bitcoins are moving. Lack of a credit market does not in any way impede money velocity. Why on earth do you think it does? Also, there is absolutely no reason why credit markets cannot work with bitcoin. Don't take this the wrong way, but you are taking features of the specific financial system that we are currently using, and confusing them for universal constants. A lack of credit markets would be the death of the dollar because the dollar *is* the credit markets. Bitcoin is not built upon (that kind of) credit.
There are soft and hard constraints on bitcoin velocity, but we are nowhere near either of them. When you think of "Supply and Demand", you must always keep in mind that the market only acts on "effective supply" and "effective demand". In bitcoin, "effective supply" is "coins not hoarded" multiplied by velocity multiplied by value. I'm using value here as an abstraction, rather than any particular exchange rate. Velocity is practically unbound because the system is fairly efficient. Value is practically unbound because the currency supports division down to very small units. Put them together, and they can serve a very large economy indeed.
(Side note, fiat currency is not used because it is helpful to you or me or the economy in general. It is used because it makes certain forms of theft very simple and nearly invisible. That banks and governments can steal your wealth by devaluing your currnecy is not an unfortunate coincidence, it is a design feature.)
The bitcoin economy is very small compared to what it could be, not because of errors in the design, but because it is new and strange.
Stability comes from size. If you see a bit of sawdust blowing in the breeze, do you find that instability is a property of wood? A while back a couple of bored Texans grabbed the silver market and started dragging it around by the nose. They were able to do this because the silver market is small compared to the dollar market, and the silver market is relatively small because dollars are more useful. A few hundred years earlier, the silver market was the whole economy because most of the planet used silver as money. Silver was stable when it was big, and unstable when it was small. This is a property of size, nothing more. As bitcoin gets bigger (if it gets bigger), it will become more stable simply because it will take more effort to push it around.
Personal note, there was a time when my meager bitcoin holdings could have moved the market by a dollar or so. Now I'd be lucky if I could move it by a penny. Bitcoin didn't change, the size of the market did.
As explained before, I don't cry for the credit markets, and I don't see instability as a property of bitcoin, but a property of the current market size. With a fixed issue of currency, unending growth means unending deflation, but there is no reason to think that it must be large enough to make worthwhile lending unprofitable forever. I look forward to the day when they are forced to be honest.
Your notion of deflationary expectation is not supported by any evidence. Consider that right now the value of virtually everything is deflating relative to the dollar. According to the deflation theory, everyone should get rid of dollars as fast as they can because everything else that they might hold will be worth more dollars tomorrow. In reality, that only happens when inflation is very severe. Might it not be severity of change in currency value that is the problem, and not the direction?
I've addressed most of your paragraph about borrowing vs. selling equity already, so I won't ramble on. But note carefully that credit has special legal status. Lenders get a pass on proper risk evaluation because man's laws makes that acceptable. This is not a property of credit, nor of dollars, but of law. As such, that line of argument has no place here.
I have no problem with credit. I just want credit built on top of sound money, not shitty money built on top of credit. And I want an honest credit market, one where risks and rewards can be properly assessed. I can see no way to build an honest credit market without having honest money first.