I think, someone in the government has figured out that if you simply print money and hand it out to people, a sufficient amount of them will use it to buy stocks.
So, on paper everything looks great: people are receiving stimulus checks, the stock markets go up and nobody ever bothers to look at the monetary supply graphs to see that your $1000 in the bank has lost almost 50% of its value since the beginning of 2020. If you care to define the value as a share of the overall money supply (which does not immediately translate to purchasing power, but will eventually do through supply and demand).
In reality, the publicly traded corporations get unprecedented cash flows through stock value increases and low-interest loans, and together with very lax interpretation of antitrust law, can effectively destroy any competing business by subsidizing their offerings through channels that are not available to those who aren't a part of the club.
I used to think that we are on a brink of another 2008-like recession, where the stock markets will crash and people will have to rethink what they do with their money. I think, this time it will be different - we may have some years years of roaring stock markets and stagnating wages, where a typical salary will barely cover a room in a shared apartment, followed by a massive civil unrest, where people will get disappointed in the unfair economic system and will proceed to just grab what they can by force. Interesting times we live in.
After seeing how much money was printed and pumped into business, its no wonder stock market is going up.
I was worried it will cause some inflation runaway effect fueled by the pandemic instability. But no. Despite what we have been taught - "You cannot just print money" - nothing happened.
It really got me thinking either nobody has any idea whats going on and they just keep pushing the limits or we are at the bring of monetary crash.
Keep in mind that the U.S. Dollar will always trend lower. The government actively wants a weaker dollar (for international trade advantages) and they also want an inflated dollar because that's how the US finances it's debt.
When compared to other fiat currencies, which this article says in the first paragraph and how 99.9999% of the US dollar is traded, the US Dollar will not “always trend lower”.
Because all fiat currencies are periodically weakening themselves, so in relation to each other this is not visible.
Assets with a completely different and known emissions schedule will always be “inflation-linked”, including bitcoin.
The US government benefits from inflation for two main reasons:
1. It lowers their debt.
2. It collects more taxes from capital gains.
The average tax payer is burdened from inflation because their salaries do not keep up with inflation.
Don't forget that people use wage & asset prices increases as a barometer for economic performance. People love to see their 401ks and houses increase in price every year. And they definitely love the news reports of wage increases happening at the fastest rates in decades.
If welded correctly, inflation can make an administration look like economic wizards.
Interest rates are pegged to inflation so at a steady rate it’s not particularly helpful for government debt unless they can run a surplus.
The actual benefit from inflation is as an economic lubricant. People are less willing to sell assets at a loss, but tend to ignore low levels of inflation in their mental arithmetic. Also, holding savings as cash is now a loss which promotes either spending it or investing it.
Most importantly small scale inflation reduces the risk of a deflationary spiral which quickly makes large debts impossible to pay back. Aka 0% to 2% is much better than -1% to 1%.
But to the degree that they're just inflation hedges, they're poor investments. They would earn less than 2% per year. They may be better than holding dollars, but most people don't want to hold dollars, beyond enough to keep their finances going.
To the degree that they investments, they're subject to the same factors as other investments. And money flows into and out of them according to other factors. Housing goes up and down according to geography. Gold goes up and down when people want to get out of or into stocks. Bitcoin goes up and down in a similar way, though with more attraction as new people discover the market.
In all of those cases the risk is much larger than inflation. Those things can be either inflation hedges or investments but not both. They're more attractive than dollars, but dollars are neither investment nor hedge. They're a temporary store before you either buy goods or invest.
housing becoming more expensive is a result of bad city planning and zoning policies, rather than any other factor. Build dense, build more, and allow demand for housing to be satisfied.
These two don't exactly feel related. I think BTC shooting up has more to do with Elon's announcement and the US dollar being weak might have to do with the trade advantages that come from it.
edit: looks like a few other folks are also in the same camp of thought
This is basically what caused the spike we see in BTC price this week - Tesla purchased a lot of the stuff (somewhere around $1.5bn USD worth at their purchase time), and announced plans to start accepting it for their cars.
Tesla is only “major” to guys like us. Nobody in the masses really even knows or cares about them. Just like Crypto; nobody really knows about it — it’s just a big scary thing they don’t understand, that they are vaguely aware they’re maybe missing out on.
When big names they actually know and invest in (Apple, Walmart, Citibank, ...) start investing, they’ll force their investment guy to get them some. Nobody (ie. 99% of the population) will, can, or should hold Crypto personally.
They will just lose it.
Disclaimer: I write cryptocurrency systems, have been involved with it since way before Bitcoin, and have tried to help “normals” invest. It is simply not. going. to. happen.
The next gen stuff we’re working on? Now, that’s something normals could use. Safe, secure, error-resilient, forgiving. Something dad can set up and use without help.
But in the mean time; DeFi alone is going to tear the doors off, let alone all the other uses.
> Disclaimer: I write cryptocurrency systems, have been involved with it since way before Bitcoin, and have tried to help “normals” invest. It is simply not. going. to. happen.
What do you think the future of cryptocurrencies is if the vast majority of regular people won't invest in it?
It's not that they "won't"; they can't; it's just too complex and fragile for normals to want to understand and use safely. Heck, even most of us don't use Shamir's Secret Sharing to secure our private keys (or any other really robust method for securing/sharing). We all know what its like to help normals manage their password (!) for their 5 accounts...
Beyond that, there is a fixation on A) Global consensus systems, and B) Deflationary assets -- neither of these can or should form the foundation of what we call "money"; too fragile and dangerous. See https://perry.kundert.ca/range/finance/holochain-consistency...
However, next-generation offerings are promising to solve most of these shortcoming, including one that I'm helping implement presently. These could be useful to normal people, and quite easily wrap existing assets (Crypto and others) in value-stable and robustly exchangeable tokens.
Many people will try to play with crypto, and will blow off their fingers while these systems get ready for release.
Why are deflationary assets bad for the economy? We've been using gold and silver (as well as commodities that can go a long time such as wheat, barley, dates, etc.) as currency for a long time now. That's a good balance we should strive to go back to. We shouldn't let the government and banks be able to print money at will, devaluing the hard work that people put to get their money in the first place. The people shouldn't have to pay the price of the government debt when it prints more money to cover its interest bearing loans.
I am quite certain that this is one of the sources of distress that many people in the lower socioeconomic scale have towards the very rich, and I can't blame them. What do you think it feels like to work and save your money for the future, when the government actively makes it worth less?
Absolutely agree with everything you said. However, it conflates two separate concerns.
1) Inflationary or Deflationary assets aren't useful money. Everyone wants to get rid of the former, and nobody will spend the latter. The very reason that gold and silver are useful money is because they traditionally have not inflated or deflated; they'll buy more or less (in real terms) about what they did 2,000 years ago. They only appear to be Deflationary, because we operate in such an Inflationary monetary milieu.
2) Return on investment on cash. Investing (lending) cash should return an ROI. It only does not because of central-bank interest rate interference.
When we return to direct monetization, ie. wealth --> money without a banker in the middle, and algorithmically value-stable money, this will spell the doom of our tragic central-bank fiat-money experiment.
This day is coming, sooner than anyone expects... ;)
> I don't see others following soon, but you never know.
If other companies were going to accept BTC, they would have done so already. If you remember 5-7 years ago, there was a big push to accept BTC, so much so that local coffee shops and even NPR started accepting it for a brief period.
I think Telsa is doing it to combat the short sellers that Musk is at war with. The $1.5 billion in BTC they purchased represents something like 2% of their net asset value and the prices of BTC can be readily manipulated up or down rather significantly with relatively little capital.
Musk and his team are all much brighter and savvier than I am, so I could be wrong. But this strategy makes a lot of sense in context, especially considering the market cap of Telsa has reached absurd levels (growing 800% in one year).
So, on paper everything looks great: people are receiving stimulus checks, the stock markets go up and nobody ever bothers to look at the monetary supply graphs to see that your $1000 in the bank has lost almost 50% of its value since the beginning of 2020. If you care to define the value as a share of the overall money supply (which does not immediately translate to purchasing power, but will eventually do through supply and demand).
In reality, the publicly traded corporations get unprecedented cash flows through stock value increases and low-interest loans, and together with very lax interpretation of antitrust law, can effectively destroy any competing business by subsidizing their offerings through channels that are not available to those who aren't a part of the club.
I used to think that we are on a brink of another 2008-like recession, where the stock markets will crash and people will have to rethink what they do with their money. I think, this time it will be different - we may have some years years of roaring stock markets and stagnating wages, where a typical salary will barely cover a room in a shared apartment, followed by a massive civil unrest, where people will get disappointed in the unfair economic system and will proceed to just grab what they can by force. Interesting times we live in.
[0] https://tradingeconomics.com/united-states/money-supply-m0