One of the arguments of Bitcoin community is that the fiat currencies which carry the backing of a Government are being produced without any consideration to the inflationary aspects. After the de-linking of the Gold standard, the supply of fiat currency has become an administrative decision of the political party in power. With deficit budgeting being the order of the day, each year large quantities of currency are simply printed out from the Government mints and released to the market. Additionally, in countries like India, fake currencies printed in Pakistan also enter circulation. As a result the inflation becomes uncontrollable.
The latest development in India that adds to this inflationary push is the decision of the Aam Admi Party (AAP) in Delhi to provide electricity subsidy. So far other political parties have been doling out TVs, laptops, free power to agriculturists etc. Now AAP has introduced competitive sop distribution to the cities also. This will be as dangerous as the policy of division of the society based on castes with Mr V.P.Singh introduced into the Indian politics.
With some Congress members demanding a similar subsidy in Mumbai, it is likely that many other Governments may consider free power as a part other political agenda. With the Lok Sabha elections due in 2014, it is expected that there will be many more Sops announced by ruling parties in all states to attract the voters.
Already the populist schemes such as the Food Security Bill has drained the resources of the Government completely. Now with the fresh bout of sops for the urban population spearheaded by AAP, the supply side of currencies is completely under political influence and there is no limit to the new stock of currencies that will reach the Indian markets by 2015.
In this context the Crypto Currency system which comes with a cap on the total stock assumes a special value. However it must be remembered that while each crypto currency comes with a cap dictated by the respective protocol, there could be no limit on the number of Crypto coins that may come into the market. However it is not going to be easy for different crypto coins to gain the critical acceptability of the community to gain in status as a credible currency. Bitcoins which has already established a certain level of credibility has only 9 million more units to be mined across the globe. This “limitation” may itself contribute significantly to the increase in the value of Bitcoins in the coming days.