Let's say you have a successful manufacturing business, and you need to buy a new machine to produce and sell more of your stuff. The machine costs 1M and will last 10 years. You go to a rich friend of yours and ask for 1M DeflationaryDollars to buy that machine; your friend accepts to lend you that money for 10 years, at a 10% annual interest. You agree to pay the interest every year, and to give back the principal at the end of the 10 years.
The first year, you buy the machine, put it to good use, and sell more of your stuff for an additional gross profit of 200K - a GREAT return for a 1M machine. After paying 100K interest to your friend, you're left with a good 100K in pre-tax profit, which isn't bad at all!
The second year, DeflationaryDollars deflated by 10%. You're lucky, because all your employees gladly accepted a 10% salary cut, you slashed your prices by 10%, and you still make 180K in gross profits from your machine. But you still need to give your friend 100K, so your pre-tax profit is only 80K.
Third year, another 10% deflation. Gross profits are 162K, you're left with 62K after paying interests.
Fourth year: gross 145.8K, 45K after interests.
...
Eighth year: gross 95.6K, but you need to pay 100K in interests. You better have saved your profits from the previous years, and not paid any taxes on them, otherwise you're already in trouble.
...
Tenth year: gross 77.5K, and you need to give 1.1M to your friend. But the total gross profit you made before taxes was 1.3M, so, even with a very low tax rate, you're broke, because your machine is worth nothing by now. Next time, instead of investing to expand your business in a deflationary environment, you should think better and just spend as little as possible, save and hoard your DeflationaryDollars under your mattress, like most other people are doing.
As in, creating software to produce a database which you call hmm maybe a "Softcoin" and you would limit the supply by typing an arbitrary number in the source code, say 21,000,000?
After you run the software to generate the coins, you can sell them to other people and tell them the coins are rare. Maybe you can leave a few coins to be generated by other people too, that way they you can let them feel like they're part of it.
Ahhhh, I see now. Well, yes, of course I was thinking about those Softcoin, but preferred using values in "dollars" that would make some sense to the reader ;)
The first year, you buy the machine, put it to good use, and sell more of your stuff for an additional gross profit of 200K - a GREAT return for a 1M machine. After paying 100K interest to your friend, you're left with a good 100K in pre-tax profit, which isn't bad at all!
The second year, DeflationaryDollars deflated by 10%. You're lucky, because all your employees gladly accepted a 10% salary cut, you slashed your prices by 10%, and you still make 180K in gross profits from your machine. But you still need to give your friend 100K, so your pre-tax profit is only 80K.
Third year, another 10% deflation. Gross profits are 162K, you're left with 62K after paying interests.
Fourth year: gross 145.8K, 45K after interests.
...
Eighth year: gross 95.6K, but you need to pay 100K in interests. You better have saved your profits from the previous years, and not paid any taxes on them, otherwise you're already in trouble.
...
Tenth year: gross 77.5K, and you need to give 1.1M to your friend. But the total gross profit you made before taxes was 1.3M, so, even with a very low tax rate, you're broke, because your machine is worth nothing by now. Next time, instead of investing to expand your business in a deflationary environment, you should think better and just spend as little as possible, save and hoard your DeflationaryDollars under your mattress, like most other people are doing.