There's been a huge macro bubble in govt that has been coming whereby the govt spends ever larger and larger percentage of GDP. We're now over 40% in the US and that's just going to continue going up, if you look at the pattern over the last 100 years. They can't increase taxes and they can't cut spending. And yet the spending keeps increasing ever more and more. Who's paying for it all? everyone holding Cash and Bonds. Look at the govt deficit as percentage of GDP, it's been increasing more and more. in the last decade: it was 3-4% in the good years and 10-15% in the bad ones. That's going to continue. GDP is mostly inflation. Which means if the deficit average 6-8% then inflation will need to match that too in the long term, otherwise debt as percentage of GDP keeps increasing.
i know this will get downvoted but I'd rather take an occassional 25% loss with the knowledge that I'll regain it in the future, rather than a guaranteed loss of 6%+ per year for the next 20 years that I will never regain. When fiat and the dollar goes down the tubes, people are going to want something else that can't be inflated away.
There's something to be said for diversification. Now that cash and bonds are finished, that only leaves equities and gold. for some people that's not enough. and if you want more diversification then you'll need some crypto.
Crypto is 1.5 trillion (bitcoin is 600B) and there are 300 trillion dollars in the world worth of assets. if the world invested 10% of assets in crypto, that's 30T. Gold is about 10T. How is 1.5T or even 3T insane?
EDIT: when i say crypto, i mean Bitcoin because the supply is limited.
> i know this will get downvoted but I'd rather take an occassional 25% loss with the knowledge that I'll regain it in the future, rather than a guaranteed loss of 6%+ per year for the next 20 years that I will never regain.
You're making the claim that you have the "knowledge" that you'll regain any losses with crypto. I'm not sure what the basis for that is.
The comparison is flawed anyway, the point of cash isn't supposed to be an investment with returns, it's currency you buy stuff with! Even with inflation running at over 8%, the dollar is still good as currency, you don't need to convert it to get paid in it and buy things with it.
Crypto can be either a currency or a volatile investment, not both. The gold standard famously linked the price of gold with our currency, and it forms part of the reason the Federal Reserve didn't act to stop the Great Depression - they couldn't just print more gold to increase the money supply (to grossly oversimplify)!
If inflation is your problem, then the solution is to make central banks' inflation mandates stronger, not to pick the next commodity-like thing to link our currency to, completely ignoring lessons learnt from Depression-era monetary policy. This problem doesn't have to involve crypto as a solution, even wacky stuff like the balanced budget amendment is closer to a solution to inflation than crypto.
If you're advocating crypto as a high yield investment, then that's something different and you shouldn't compare it to the dollar.
> Crypto can be either a currency or a volatile investment, not both. The gold standard famously linked the price of gold with our currency, and it forms part of the reason the Federal Reserve didn't act to stop the Great Depression - they couldn't just print more gold to increase the money supply (to grossly oversimplify)!
Uhm, why can't it be both? You describe as if there is one ominous "crypto" with a single set of static rules. There are many different tokens/coins/etc, some are "store of value", some are "stable coins", and some are "volatile investments". Crypto can and is all of them at once.
I was a bit sloppy and I apologise, but if you take a given cryptocurrency, it's not possible for it to be a volatile investment and a stable, useful currency at the same time, those are completely at odds.
If you take Bitcoin as an example, it's too volatile to be used as currency, and most vendors accepting Bitcoin price items for sale in dollars, and convert the Bitcoin to dollars rather than holding them. It's not actually used as a currency.
Stablecoins could conceivably be used as currency but then they're not a volatile investment. Except if they become volatile UST-style and thus become useless for any purpose.
I don't know what will happen in one, three, five, or 10 years. But I do know this: the performance of your crypto investments will be measured in fiat, just like they have always been.
Nobody cares about how many Bitcoins they have. They care how many USD those coins are worth.
Yes, this is correct insofar as this is in fact how maximalists think of it. No genuine maximalist is pressed about yet another dip in the BTC value, and the term 'shitcoin' is broadly applied to LUNAesque creations, the feeling in that community being that the proper value is in fact zero.
My take tends to be that the cryptocurrency market is undervalued, and that 99%+ of all blockchains/tokenthings/whatever which exist are properly valued at zero.
The difference between that and BTC/ETH maximalism is those camps are convinced they know where the value will land, and I'm agnostic on that question.
This is not a valid comparison. BTC has a cap and LUNA can be minted.
In fact if anything the LUNA collapse is just a demo of what money printing gets you and how people with capital leverage off-market lending to take (steal) assets for a lower price.
Uh, no. The 40% number is completely wrong. We only topped 40% during WWII. We've been very consistently around 20% during non-recession years where it goes up largely because GDP goes down. We topped 30% for 2020 during a massive contraction and countercyclical stimulus. It will be back down in the low 20s for 2022. We not only are not on a runaway spending trend and we have survived shocks really, really well. Fiat has served society incredibly well. I'd sooner take a year of 8% inflation over bread lines due to deflationary spiral.
Edit: This chart is federal spending only, total gov spending is higher but OP is still probably looking at 2020 as the most recent data and it's a huge outlier due to the pandemic.
By that logic, the supply of 1996 Toyota Corollas is also limited, in fact even more limited than Bitcoin's. Should we therefore invest in 1996 Toyota Corollas?
Sure, comparing and old physical asset that deprecate over time with a pure digital asset built on a blockchain makes a lot of sense. Currencies are way easier to trade than physical goods.
Everything is a question of supply and demand, it does not mean it's valid to compare every goods to another on the market.
Well, if you have a theory of prices that only applies to one good and fails when applied to any other good, it means your theory is rubbish. This is why we must check whether the proposed theory works when applied to goods other than bitcoin. It's not a comparison. Although, there's nothing wrong with comparing different goods either.
Eh, once you stop caring about a functional 1996 Toyota Corolla the difference becomes extremely small. You can basically reduce the automobile to its VIN - that's how it's referred to legally. Whoever owns the number owns the "car".
Only 2.1 million 1996 Toyota Corolla VINs were ever minted; there will never be another. If 10% of the world assets were held as Toyota Corolla VINs, that would give us a value target for a VIN of about 14 million dollars per VIN; I think with those assumptions it's quite reasonable to value a Toyota Corolla at 1 million USD, regardless of condition.
So how do I transfer VINs between owners, that’s somehow different to any other (artificially) scarce asset? Whats the risk of counterfeiting with VINs? What if I don’t want a whole VIN but a fraction of one?
Bitcoin having any value is absolutely a shared delusion. But it at least has other properties that differentiate it from other shared delusions.
Bitcoin is limited until a sufficient number of stakeholders decide that the number should increase. While it may be true that this will never happen, it isn't bounded by physics or math.
If there is anything to learn from LUNA/UST, it's that the quantity of tokens in circulation has basically no bearing on the the _supply_ of tokens offered for sale at any given price.
Isn't your assessment forgetting something more fundamental about currency itself? I'm no economist, but the way I see it, all currency is "we owe you".
The real work is actual physical production and services. Currency tries to measure the worth, and later other people might recognize that you provided a lot of useful things in the past which afford you this thing that they're making now in return.
In my opinion, the most stable thing would be something of real value, like ownership over land, or production. If you own part of a business that makes real goods, or own land, or own raw sources of material, etc.
Like inflation might sound stupid, but inflation is kind of asking everyone to work harder for each other to get over a rough patch.
A dollar is worth less because we weren't able to produce enough things for enough people that wanted them.
It's all a bit vague in my head, but concretely, it's all an agreement between people of a society that decide to work together instead of against each other.
We used to barter, I want X, I have Y, let's trade, but that wasn't as convenient if no one that wants Y has an X, things would get complicated. So we kind of all agree, okay fine, let's say Y is worth some amount of a universal currency, and the price of everything will reflect the demand for each. But what if the production isn't keeping up? Isn't that when inflation kicks in? Seems like it's a good thing no? There's not enough things for everyone anymore so everything is worth more all at ounce.
What would happen with Bitcoin? Things would cost more no? Say there's major food supply issues, the amount of groceries you used to be able to buy for 1 Bitcoin, now it'll cost you 2 for the same amount. Isn't that just inflation?
Money was invented to solve the “coincidence of wants” problem (aka barter) but it was traditionally in the form of a commodity which was hard to come by (to resist inflation) so it could also serve as a store of value.
There’s also a difference between monetary inflation (increasing the amount of money in circulation) and price inflation (increases in prices due to normal supply and demand). “They” spend an enormous amount of time and energy to ensure people don’t understand the difference.
Did we? Really? Does economic exchange without money have to be barter? I've yet to see actual evidence of this, rather than just bald assertions or just-so stories.
Or is it just that the kinds of mental debt-tallying we've always done is facilitated by physical tokens (money) commonly accepted as unit of account?
How did you come to the 300T? Back when I looked into this I found around 45T (by just adding M0, M1, M2, and physical cash) [1]. Note that the numbers are from march 2021. The large difference with your number makes me suspect I’m missing something
Not really, since USD in the international currency of exchange, and every country needs to have reserves in dollars in order to purchase things like petrol and gas - so in effect every other currency tries to align to the dollar, for better or worse.
It isn’t that simple. Inflation indexed bonds have a coupon and a factor.
As inflation goes up, the factor goes up. Yay, keeping up with inflation!
But as market interest rates go up, the price of your bond with the lower interest rate goes down. Boo, crippling losses!
Now you can buy Series I Bonds to avoid this interest rate risk (i.e. duration) but you’re limited to $10,000 per year per social security number.
If you’re worried about inflation the best thing to buy is a productive asset. Like stock in a profitable business. That is… until so many people do that it makes every company wildly overpriced.
And...? The fact that your consumer habits are not reflected with 100% accuracy doesn't mean the basket is not representative of the average consumer. Again, feel free to come up with a better basket and explain why yours is better than the one used officially.
Correct, but I-bonds cannot be cashed out in the first year, and households who can't afford to save more than $10k/year probably aren't interested in having their investment tied out for 1 year.
Quite frankly, a S&P 500 index fund would serve them better than an I-bond, even during severe market drawdowns.
The occasional 25% loss? You mean an average month? Or a 99.9999% loss, as this very thread you are commenting on?
You are not decoupling anything. A minor correction in the real life markets caused huge parts of crypto to implode. You are leveraged, not diversified.
> Crypto is 1.5 trillion (bitcoin is 600B) and there are 300 trillion dollars in the world worth of assets. if the world invested 10% of assets in crypto, that's 30T. Gold is about 10T. How is 1.5T or even 3T insane?
Crypto is not worth 1.5 trillion of dollars, please remove the 1 trillion of USDT which are backed by air. At the very best crypto is worth 500B, in reality it's closer to 0.
i know this will get downvoted but I'd rather take an occassional 25% loss with the knowledge that I'll regain it in the future, rather than a guaranteed loss of 6%+ per year for the next 20 years that I will never regain. When fiat and the dollar goes down the tubes, people are going to want something else that can't be inflated away.
There's something to be said for diversification. Now that cash and bonds are finished, that only leaves equities and gold. for some people that's not enough. and if you want more diversification then you'll need some crypto.
Crypto is 1.5 trillion (bitcoin is 600B) and there are 300 trillion dollars in the world worth of assets. if the world invested 10% of assets in crypto, that's 30T. Gold is about 10T. How is 1.5T or even 3T insane?
EDIT: when i say crypto, i mean Bitcoin because the supply is limited.