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Fiat currencies are still reasonably stable compared to actual goods right now. I know that can and has changed in the past (pre/post WWII germany), but at the

Fiat currencies are still reasonably stable compared to actual goods right now. I know that can and has changed in the past (pre/post WWII germany), but at the moment, they are not in a bubble. Not at the same level that bitcoin is, anyway. How do I know this? Well, because I can still get a gallon of milk or loaf of bread for ~$3. If I put that $3 into bitcoin, I'd get some fraction of a coin (roughly 0.0001). Which is all well and good until the bubble bursts, and suddenly milk is worth 0.1 bitcoins. Did milk suddenly become 1000x more valuable? No, bitcoin lost value. This is something I don't understand about people who say they "cashed out of fiat currency". Fiat currency is still what everything is valued by. The value of a gallon is milk is relatively stable. Compared to this, fiat fluctuates a little, and bitcoin is a drunk on a rollercoaster. Which, if you consider fiat currencies to be a bubble, would make me even more concerned for bitcoin as it is a bubble within a bubble.

existencebox 9y ago
Just a comment to chime in with some interesting info. QE in the UK seems to have actually kicked into the inflation cycle. Commodity prices (butter was a big one, if I remember correctly, at >20% yoy) have been jumping alongside service costs (insurance). I'm sure that Brexit is _some_ sort of variable in this equation but I won't pretend to make heads or tails of how beyond that inflation is in fact happening in some places. [0][1] Given the level of concern there is over the "missing inflation" in USD that causes so much headscratching by the Fed WRT rate raises, I think the OP is fair to say that we should be at least somewhat concerned about the state of currencies during QE (My intuition as someone not in finance is that it's simply been "absorbed" somewhere in the system that doesn't trickle down to normal consumers, such that it doesn't manifest like the inflation they're looking for; would be curious if someone more informed could speak to this.); and more importantly, the position that a multi-year ZIRP regime puts us in to respond to the next crisis. Bitcoin is an obvious outlier for sure, and a correction would hurt. But compared to the populations currency exposure, bitcoin's pain would likely be much less widespread. [0] (because I trust reuters as a source) https://uk.reuters.com/article/uk-britain-economy-inflation/uk-inflation-hits-highest-in-nearly-six-years-peak-seen-soon-idUKKBN1E60YF https://uk.reuters.com/article/uk-britain-economy-inflation/... [1] (more fine grained breakdown from sketchier news site) http://www.trustnodes.com/2017/12/13/inflation-spikes-britain http://www.trustnodes.com/2017/12/13/inflation-spikes-britai...
- polotics 9y ago
  To answer your intuition: QE is trickling up into asset price inflation.

existencebox 9y ago

Just a comment to chime in with some interesting info. QE in the UK seems to have actually kicked into the inflation cycle. Commodity prices (butter was a big one, if I remember correctly, at >20% yoy) have been jumping alongside service costs (insurance). I'm sure that Brexit is _some_ sort of variable in this equation but I won't pretend to make heads or tails of how beyond that inflation is in fact happening in some places. [0][1] Given the level of concern there is over the "missing inflation" in USD that causes so much headscratching by the Fed WRT rate raises, I think the OP is fair to say that we should be at least somewhat concerned about the state of currencies during QE (My intuition as someone not in finance is that it's simply been "absorbed" somewhere in the system that doesn't trickle down to normal consumers, such that it doesn't manifest like the inflation they're looking for; would be curious if someone more informed could speak to this.); and more importantly, the position that a multi-year ZIRP regime puts us in to respond to the next crisis. Bitcoin is an obvious outlier for sure, and a correction would hurt. But compared to the populations currency exposure, bitcoin's pain would likely be much less widespread. [0] (because I trust reuters as a source) https://uk.reuters.com/article/uk-britain-economy-inflation/uk-inflation-hits-highest-in-nearly-six-years-peak-seen-soon-idUKKBN1E60YF https://uk.reuters.com/article/uk-britain-economy-inflation/... [1] (more fine grained breakdown from sketchier news site) http://www.trustnodes.com/2017/12/13/inflation-spikes-britain http://www.trustnodes.com/2017/12/13/inflation-spikes-britai...

polotics 9y ago
To answer your intuition: QE is trickling up into asset price inflation.