Inflation in any economic environment is asymmetric which means it takes a longer time to tricke down, and it doesn't affect all industries with same proportion.

In English that means that an immediate increase in Steem's money supply, won't immediately decrease the value of Steem relative to Dollar or Bitcoin.

It always takes some time until the inflation trickes down completely, because the major players are usually long term holders, and only smaller players cashout regularly.

Inflation only manifest itself, if the new Steem goes to the exchanges for trading. If people are constantly selling the newly created Steem, then the price goes down proportional to how much Steem is created and subsequently sold.

However in reality, that is almost never the case, long term holders hold, long term holders earn the most (as they have the most Steem Power) and they are usually long term holders, since they know if they would sell now, the price would drastically drop. Imagine if @ned would sell all his Steem holdings, it would hurt his wealth too , because by the time he finishes the price would drop drastically. You would need a dark pool for huge transactions, which we don't have for Steem yet.

So even the long term holders sell in slow small steps. Yes they might power down, but that doesn't mean they sell the Steem, they might buy Steem Dollars.

And if the newly created Steem goes into Steem Dollar and not into Bitcoin, then the inflation will very slowly tricke down. In the fiat economy it takes 1-2 years before the price inflation (the effective inflation) will reflect the monetary inflation (the money creation rate). There is always a delay, a trickledown period, because people are holding.

If they would not hold, then nobody would be interested in Steem in the first place. And it always boils down to confidence. If people have confidence in Steem & Steemit, then they will hold. And Steemit is doing pretty well, it's growing in popularity constantly, so the confidence is Steem is also high.

Therefore, I expect smaller price inflation than usual, because we all have confidence in Steem & Steemit.

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If you want to know the technical details you can read this research paper: http://docs.lib.purdue.edu/cgi/viewcontent.cgi?article=1119&context=ciberwp

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