Economics of Bitcoin

I posted some comments on the Eli Dourado page, but it looks like the conversation had long since stopped, so I'll repost them here:

-There could be a central monetary authority that conducts monetary policy (for Bitcoin), and signs its actions. That would kind of defeat the purpose of a decentralized currency though.

-Regarding the idea of making the money creation rate inversely proportional to total spending rate (“NGDP”), Wei Dai said:

The only problem I can think of with this right now is that a malicious attacker could try to slow down or stop money creation by doing a lot of transactions between accounts they control.

This isn’t so much a problem of attacks on the Bitcoin per se, but one inherited from the problems of current monetary theory: economists like Scott Sumner think it would all be so much better if monetary policy aimed to stabilize (the growth rate of) total nominal spending. But such a measure is uninformative and Goodhart-prone for the very reason you give: the goal can be trivially met by simply doing a bunch of “toy” transactions between people until NGDP is at the desired level.

Incidentally, this is why I think the idea of NGDP targeting is fundamentally misguided, as are the people who conclude it’s a reasonable solution.

Also:

Bitcoin is fully traceable, in the sense that you can see all transactions and for each transaction you can see the amount and the addresses of the sender and recipient. (An address is a public key, so you don’t necessarily know how they are linked to physical people.)

But how do you tell people who to send the money to without telling someone the connection between your identity and your public key (from which they can trace all further targets of the money from that key)?