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Your armchair analysis is on the mark. in a fiat dominated world, any market distortions caused by monetary mismanagement (money printing through QE, asset infl

Your armchair analysis is on the mark. in a fiat dominated world, any market distortions caused by monetary mismanagement (money printing through QE, asset inflation) is not visible as everything in the market is priced in the same underlying asset (USD globally). Since bitcoin is outside this system it is actually holding up a mirror to the increasing worthlessness of the USD and other mismanaged fiat currencies.

SamBam 6y ago
> as everything in the market is priced in the same underlying asset > the increasing worthlessness of the USD I think you must be using words different from what I take them to mean, which means you can draw radically different conclusions from how I read them. If everything in the economy is tied together, such that $10 is still an hour of work at a grocery store, and $10 still buys you a lunch or three gallons of milk, and $10 still buys you 4 gallons of gas, etc etc, then I don't see how you can say that there has been some kind of "secret" sky-high inflation over the past few years that is only detectable "from the outside." Inflation is defined by the purchasing power of money within the economy. If that's not changing, inflation isn't happening. Pointing to a single asset whose price is fluctuating wildly and insinuating that that is the only real source of truth, and that literally everything else is hiding the true cost of living seems to be just showing what you want to believe. (Note, I'm not saying that there's been no inflation. It's been about 2.5%/yr over the past 20 years. But simply that the notion that it isn't visible from "inside" the economy is contradictory.)
- keithwhor 6y ago
  To my understanding, inflation -- and the causes of such -- is something that can only really be assessed ex post facto. What's being asked is, "is what we're seeing a warning sign of inflation-yet-to-come?" Rephrased, "are people bullish on technology stocks and Bitcoin because they're speculating that there's major fiat inflationary risk and these asset classes are most likely to hold value?"
  - IfOnlyYouKnew 6y ago
    Inflation is a loss of value and it hasn't happened until it has happened, and when it happens, you notice very much instantly.
    - christophilus 6y ago
      Not really. It’s a matter of what you’re measuring. If you measure inflation by assessing the price of a Whopper, you won’t find much. If you measure inflation by measuring the cost of college tuition, you’ll find plenty. What’s meaningful varies dramatically from person to person. That’s why I think it’s almost pointless to talk about inflation as a single, measurable thing.
      - imtringued 6y ago
        Consumer inflation is well defined and a policy goal so it does make sense. The problem is that you have to clarify which goods are inflating, otherwise you run into misunderstandings.
- sparkie 6y ago
  > If everything in the economy is tied together, such that $10 is still an hour of work at a grocery store, and $10 still buys you a lunch or three gallons of milk, and $10 still buys you 4 gallons of gas, etc etc, then I don't see how you can say that there has been some kind of "secret" sky-high inflation over the past few years that is only detectable "from the outside." The key ingredient missing from your calculation is time. If you are simply measuring how much an hour of work can purchase now, you are completely ignoring that some people want to save money. If $10 is the measurement for an hour of work and 4 gallons of gas today, in a decade or so, you might need $20 to pay for 4 gallons of gas, and you might get paid $20 for an hour of work. But somebody who saved $10 worked today, and chooses to spend it a decade later, will only be able to acquire 2 gallons of gas. The result of their labour would have been reduced to half. This is what Bitcoin intends to fix. We want to be able to store wealth into the future - so that an hour worked today is still worth an hour (or more) tomorrow. The potential appreciation in purchasing power is reward for thrift. As it stands, if one wants to preserve wealth into the future, they must put money into risky investments to ensure that the dollar value of the savings appreciates at a greater rate than its purchasing power is lost to inflation. They also run the risk that their savings or pensions could be lost with companies going bust or if hyperinflation occurs. Bitcoin is a pension plan. As for using Bitcoin as a reference frame of measurement, there's a good reason to do this. Bitcoin is a fixed system of measurement which is disjoint of time or other externalities. There is an absolute maximum of 21M bitcoin, so any whole bitcoin is always 1/21M of the total supply. This is a truth that holds today and in a decade. It is immutable. Consider measurement of length. If you only have cows in a field, how do you measure the length of a field? You could say it is 100 cows long and 80 cows wide, but how long is the cow? The cow grows as it ages. Once you get hold of an external tool of measurement - a meter (or yard, etc), then you can measure both the field and each cow against it. The same is now true for economic value. Before Bitcoin, there was no fixed scale of measurement. The dollar was flexible, just as any other commodity. Bitcoin OTOH, is not flexible. The exchange rate of BTC/USD might be flexible, but when you use BTC as the frame of reference, you can instead measure how much value the dollar is losing against bitcoin. https://usdsat.com https://usdsat.com As you can see, the dollar is losing value so rapidly that inflation of the dollar is negligible. It is the perception of inflation which is causing it to plummet far quicker than the actual rate of inflation.
542458 6y ago
Economists weren’t born yesterday. Inflation is measured in many ways, most often by looking at a basket of goods where the prices are relatively non-volatile. Using the USD/Bitcoin ratio as a yardstick for inflation seems very misguided, as Bitcoin is heavily speculated.
- beaner 6y ago
  Inflation doesn't need to be measured in many ways, you can view it directly on the m2 money supply chart: https://fred.stlouisfed.org/series/M2 https://fred.stlouisfed.org/series/M2 Everything else is just a derivative of this. You're measuring the side effects of inflation. If you want the deeper cause, it's here.
  - IfOnlyYouKnew 6y ago
    Inflation is a loss of value, most directly observed in rising prices. Everything else–money supply, borrowing costs, etc are linked to it, but do not necessarily correlate. The price of a Big Mac is almost certain to be a far better approximation than any of those indicators. This really isn't that complicated.
    - beaner 6y ago
      It really isn't, you're right. Historically, inflation always meant inflation of the money supply. Its definition has changed over time and you've been swindled. If you have a name for something, name the root cause, otherwise you're obfuscating its study, and perpetuating the non-identification of the root cause. "Inflation, as this term was always used everywhere and especially in this country, means increasing the quantity of money and bank notes in circulation and the quantity of bank deposits subject to check. But people today use the term `inflation' to refer to the phenomenon that is an inevitable consequence of inflation, that is the tendency of all prices and wage rates to rise. The result of this deplorable confusion is that there is no term left to signify the cause of this rise in prices and wages. There is no longer any word available to signify the phenomenon that has been, up to now, called inflation. . . . As you cannot talk about something that has no name, you cannot fight it. Those who pretend to fight inflation are in fact only fighting what is the inevitable consequence of inflation, rising prices. Their ventures are doomed to failure because they do not attack the root of the evil. They try to keep prices low while firmly committed to a policy of increasing the quantity of money that must necessarily make them soar. As long as this terminological confusion is not entirely wiped out, there cannot be any question of stopping inflation." [0] [0] https://mises.org/library/defining-inflation https://mises.org/library/defining-inflation

SamBam 6y ago

> as everything in the market is priced in the same underlying asset > the increasing worthlessness of the USD I think you must be using words different from what I take them to mean, which means you can draw radically different conclusions from how I read them. If everything in the economy is tied together, such that $10 is still an hour of work at a grocery store, and $10 still buys you a lunch or three gallons of milk, and $10 still buys you 4 gallons of gas, etc etc, then I don't see how you can say that there has been some kind of "secret" sky-high inflation over the past few years that is only detectable "from the outside." Inflation is defined by the purchasing power of money within the economy. If that's not changing, inflation isn't happening. Pointing to a single asset whose price is fluctuating wildly and insinuating that that is the only real source of truth, and that literally everything else is hiding the true cost of living seems to be just showing what you want to believe. (Note, I'm not saying that there's been no inflation. It's been about 2.5%/yr over the past 20 years. But simply that the notion that it isn't visible from "inside" the economy is contradictory.)

keithwhor 6y ago
To my understanding, inflation -- and the causes of such -- is something that can only really be assessed ex post facto. What's being asked is, "is what we're seeing a warning sign of inflation-yet-to-come?" Rephrased, "are people bullish on technology stocks and Bitcoin because they're speculating that there's major fiat inflationary risk and these asset classes are most likely to hold value?"
- IfOnlyYouKnew 6y ago
  Inflation is a loss of value and it hasn't happened until it has happened, and when it happens, you notice very much instantly.
  - christophilus 6y ago
    Not really. It’s a matter of what you’re measuring. If you measure inflation by assessing the price of a Whopper, you won’t find much. If you measure inflation by measuring the cost of college tuition, you’ll find plenty. What’s meaningful varies dramatically from person to person. That’s why I think it’s almost pointless to talk about inflation as a single, measurable thing.
    - imtringued 6y ago
      Consumer inflation is well defined and a policy goal so it does make sense. The problem is that you have to clarify which goods are inflating, otherwise you run into misunderstandings.
sparkie 6y ago
> If everything in the economy is tied together, such that $10 is still an hour of work at a grocery store, and $10 still buys you a lunch or three gallons of milk, and $10 still buys you 4 gallons of gas, etc etc, then I don't see how you can say that there has been some kind of "secret" sky-high inflation over the past few years that is only detectable "from the outside." The key ingredient missing from your calculation is time. If you are simply measuring how much an hour of work can purchase now, you are completely ignoring that some people want to save money. If $10 is the measurement for an hour of work and 4 gallons of gas today, in a decade or so, you might need $20 to pay for 4 gallons of gas, and you might get paid $20 for an hour of work. But somebody who saved $10 worked today, and chooses to spend it a decade later, will only be able to acquire 2 gallons of gas. The result of their labour would have been reduced to half. This is what Bitcoin intends to fix. We want to be able to store wealth into the future - so that an hour worked today is still worth an hour (or more) tomorrow. The potential appreciation in purchasing power is reward for thrift. As it stands, if one wants to preserve wealth into the future, they must put money into risky investments to ensure that the dollar value of the savings appreciates at a greater rate than its purchasing power is lost to inflation. They also run the risk that their savings or pensions could be lost with companies going bust or if hyperinflation occurs. Bitcoin is a pension plan. As for using Bitcoin as a reference frame of measurement, there's a good reason to do this. Bitcoin is a fixed system of measurement which is disjoint of time or other externalities. There is an absolute maximum of 21M bitcoin, so any whole bitcoin is always 1/21M of the total supply. This is a truth that holds today and in a decade. It is immutable. Consider measurement of length. If you only have cows in a field, how do you measure the length of a field? You could say it is 100 cows long and 80 cows wide, but how long is the cow? The cow grows as it ages. Once you get hold of an external tool of measurement - a meter (or yard, etc), then you can measure both the field and each cow against it. The same is now true for economic value. Before Bitcoin, there was no fixed scale of measurement. The dollar was flexible, just as any other commodity. Bitcoin OTOH, is not flexible. The exchange rate of BTC/USD might be flexible, but when you use BTC as the frame of reference, you can instead measure how much value the dollar is losing against bitcoin. https://usdsat.com https://usdsat.com As you can see, the dollar is losing value so rapidly that inflation of the dollar is negligible. It is the perception of inflation which is causing it to plummet far quicker than the actual rate of inflation.

542458 6y ago

Economists weren’t born yesterday. Inflation is measured in many ways, most often by looking at a basket of goods where the prices are relatively non-volatile. Using the USD/Bitcoin ratio as a yardstick for inflation seems very misguided, as Bitcoin is heavily speculated.

beaner 6y ago
Inflation doesn't need to be measured in many ways, you can view it directly on the m2 money supply chart: https://fred.stlouisfed.org/series/M2 https://fred.stlouisfed.org/series/M2 Everything else is just a derivative of this. You're measuring the side effects of inflation. If you want the deeper cause, it's here.
- IfOnlyYouKnew 6y ago
  Inflation is a loss of value, most directly observed in rising prices. Everything else–money supply, borrowing costs, etc are linked to it, but do not necessarily correlate. The price of a Big Mac is almost certain to be a far better approximation than any of those indicators. This really isn't that complicated.
  - beaner 6y ago
    It really isn't, you're right. Historically, inflation always meant inflation of the money supply. Its definition has changed over time and you've been swindled. If you have a name for something, name the root cause, otherwise you're obfuscating its study, and perpetuating the non-identification of the root cause. "Inflation, as this term was always used everywhere and especially in this country, means increasing the quantity of money and bank notes in circulation and the quantity of bank deposits subject to check. But people today use the term `inflation' to refer to the phenomenon that is an inevitable consequence of inflation, that is the tendency of all prices and wage rates to rise. The result of this deplorable confusion is that there is no term left to signify the cause of this rise in prices and wages. There is no longer any word available to signify the phenomenon that has been, up to now, called inflation. . . . As you cannot talk about something that has no name, you cannot fight it. Those who pretend to fight inflation are in fact only fighting what is the inevitable consequence of inflation, rising prices. Their ventures are doomed to failure because they do not attack the root of the evil. They try to keep prices low while firmly committed to a policy of increasing the quantity of money that must necessarily make them soar. As long as this terminological confusion is not entirely wiped out, there cannot be any question of stopping inflation." [0] [0] https://mises.org/library/defining-inflation https://mises.org/library/defining-inflation