Breaking down Bitcoins as possible currency of the future, in four steps.

I just love reading opinions suggesting that Bitcoin, as a transactional currency, is the future of trade.  I can break down the logic in four steps (and I won't even use the volatility of Bitcoins as an argument!):

1. A Bitcoin's value is meaningless until it is converted to a sovereign currency -- in this case, the US Dollar -- which makes Bitcoins no less fiat than the US Dollar.  If the value of a Bitcoin drops to $0.01 or the real cost of a new car goes up from $20,000 to $30,000, good luck trying to convince someone to sell that new car to you for your 100 Bitcoins.  One of the reasons people proffer for avoiding fiat money, is to avoid inflation; well, too bad because so long as you have to covert it back to a sovereign currency, you'll always have inflation.
2. But if Bitcoins never needed to be converted to a sovereign currency (that is to say that you could live your real life exclusively in Bitcoins), the cap on the total number of Bitcoins means that there is a cap on wealth creation.  That is the antithesis of Capitalism.
1. Some will argue that during the gold standard, there was no cap on wealth creation (and its inverse, wealth destruction).  But they are forgetting that gold, as a commodity no different than oil, was not capped insofar that, when the value of the commodity increased, so did the effort to find more of it; gold was a rare commodity, not capped.  Bitcoin is capped, no exceptions.
2. Others will say that, because there is no inflation, the value of Bitcoins will only go up as demand increases.  True, but what you're getting is deflation.  As the population grows, if one Bitcoin was worth one sandwich, in the future it would be worth two sandwiches, and even further into the future, it would be worth 100 sandwiches.  Before you know it, your income will go from 1000 monthly Bitcoins to 500 Bitcoins to 1 Bitcoin.  Older people who have had the most amount of time in the Bitcoin system that they've horded the most amount of Bitcoins, will be permanently wealthy.
3. But you can't turn Bitcoins into a universal currency, because as it's currently set up, there is no taxation on income -- illegally, of course -- so, in order for Bitcoins to gain relevance as a universal currency, it needs to have a built-in transactional tax, which defeats the decentralized nature of the Bitcoin system, because the transactional tax will require tracking of where the buyer is located, in order for that tax money to follow.
4. So, let's say that some of the smarter folks decide that Bitcoin needs to be adjusted, such that the cap of Bitcoins is eliminated, that a transactional tax (consumption tax) is needed, and, so that there is no currency conversion, all sovereign currencies are eliminated in favor of the Bitcoin.  Now you've got the Euro and the PIIGS.

There you go.