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I was just looking for something like this the other day when talking with someone about how they should be thinking of their investment returns in terms of BTC

I was just looking for something like this the other day when talking with someone about how they should be thinking of their investment returns in terms of BTC and not USD (which has increased in supply > 25%) in the past year. This website, though a bit barren, nicely illustrates the point. Another related one is: https://www.fiatmarketcap.com/ https://www.fiatmarketcap.com/

larrysalibra 6y ago
And the ever classic: https://hodlroi.com/ https://hodlroi.com/
arcticbull 6y ago
> ...in terms of BTC and not USD (which has increased in supply > 25%) in the past year. It's just shocking to me how people here don't understand inflation. There's such a disconnect between economics education in school and where people end up in reality. Remember folks, supply is only half the picture. Velocity of money matters. They both matter. [1] Supply went up, velocity went down, net 2% inflation. The fed nailed their target. Once velocity goes up printing will slow, or reverse, to maintain the - wait for it - 2% target. 2%. Not 25%. I mean are you telling me you paid $4 for a loaf of bread last year and now it's 5 - and nobody noticed? Compare the performance of both BTC and other speculative assets, and stocks, in USD. That's the only one that matters, because taxes. > Another related one is: https://www.fiatmarketcap.com/ https://www.fiatmarketcap.com/ Holy moly is this one off base. This is not how you compare currencies. China has 4X as many people as America does. There's local and regional differences in the cost of goods in the area. You can compare currencies in a lot of reasonable ways but this sure ain't one of them. A good way is something like the way DXY (the Dollar Index) is calculated - it's based on the relative strength of the dollar compared to a basket of other foreign currencies. But this in and of itself is also not a meaningful number in the sense that the relative strength of a currency is a knob - turn it one way, and you favor exports over imports, and the other way, imports over exports. You can also convert to a neutral currency like USD then compare the PPP factor - which shows you how far a neutral dollar goes in one country vs another, and this varies based on market conditions, regional conditions and local conditions. In some island nations, the dollar won't go as far as goods are expensive. In Canada, it goes much longer. [2] Currencies. Do. Not. Have. Market. Caps. Equities have market caps. You measure market caps of companies in terms of currencies. Why? Because if you have a $1B market cap in equities and you start selling, you'll be left with way less than $1B in hand - selling increases supply. If you sell $1B in currency you get exactly $1B dollars. Comparing money supplies between different countries based on number of units issued, are you serious? It's an utterly and totally meaningless number. It means nothing. You've given me a headache. It's not often you see stuff just so plain wrong on HN. [1] https://www.investopedia.com/terms/v/velocity.asp https://www.investopedia.com/terms/v/velocity.asp [2] https://www.indexmundi.com/facts/indicators/PA.NUS.PPPC.RF/rankings https://www.indexmundi.com/facts/indicators/PA.NUS.PPPC.RF/r...
- joe_91 6y ago
  A great breakdown - thanks for the insight! I often panic when I look at the amount of money printing thats going on but I always forget about the velocity! I think this might be because it's rarely talked about. What are your thoughts about the rapid asset inflation (stocks/housing) vs the stable consumer goods side of things? Surely they can't stay disconnected forever?
  - arcticbull 6y ago
    These are challenging areas and I'm not an expert on all aspects of this however housing is one I've read a lot into. Housing on an inflation-adjusted dollars per square foot basis is exactly the same now as it was in the 1970s according to the BLS, on average, across the US. In fact, after the recent drops, it's probably more affordable per square foot. [1] There are some caveats, though! Housing is at the mercy of local ordinances. In major metros like SF and NY the city councils refuse to allow new construction, but the economies around them have been so strong that demand outstripped supply and prices skyrocketed. In suburban areas, setback rules, zoning rules, building codes and also tastes, have left houses twice as big on average now as they were in the 1970s [1]. This is a policy issue though, and it is truly problematic, although COVID seems to have been quite the equalizing force in a lot of ways. [edit] One way of solving it would be national zoning rules, and permitting the construction of housing in any zone (much like Japan does [2]). The other challenge is Americans need to come to terms with the fact that housing cannot be both affordable and an investment. Investments by definition are designed to become less affordable over time. As for the stock price explosion, I'll try and dig up an article I saw recently that attributed it to, roughly, poor folks are still poor (and so never really invested), but the wealthy and middle class have actually benefitted disproportionately from the COVID situation, PPP, stimulus, etc, and there's a lot more disposable income right now in the market. I'll mark that as a [citation needed] on myself as I try and dig it up. [1] https://fee.org/articles/new-homes-today-have-twice-the-square-feet-per-person-as-in-1973/ https://fee.org/articles/new-homes-today-have-twice-the-squa... [2] http://urbankchoze.blogspot.com/2014/04/japanese-zoning.html http://urbankchoze.blogspot.com/2014/04/japanese-zoning.html
  - ivanche 6y ago

larrysalibra 6y ago

And the ever classic: https://hodlroi.com/ https://hodlroi.com/

arcticbull 6y ago

> ...in terms of BTC and not USD (which has increased in supply > 25%) in the past year. It's just shocking to me how people here don't understand inflation. There's such a disconnect between economics education in school and where people end up in reality. Remember folks, supply is only half the picture. Velocity of money matters. They both matter. [1] Supply went up, velocity went down, net 2% inflation. The fed nailed their target. Once velocity goes up printing will slow, or reverse, to maintain the - wait for it - 2% target. 2%. Not 25%. I mean are you telling me you paid $4 for a loaf of bread last year and now it's 5 - and nobody noticed? Compare the performance of both BTC and other speculative assets, and stocks, in USD. That's the only one that matters, because taxes. > Another related one is: https://www.fiatmarketcap.com/ https://www.fiatmarketcap.com/ Holy moly is this one off base. This is not how you compare currencies. China has 4X as many people as America does. There's local and regional differences in the cost of goods in the area. You can compare currencies in a lot of reasonable ways but this sure ain't one of them. A good way is something like the way DXY (the Dollar Index) is calculated - it's based on the relative strength of the dollar compared to a basket of other foreign currencies. But this in and of itself is also not a meaningful number in the sense that the relative strength of a currency is a knob - turn it one way, and you favor exports over imports, and the other way, imports over exports. You can also convert to a neutral currency like USD then compare the PPP factor - which shows you how far a neutral dollar goes in one country vs another, and this varies based on market conditions, regional conditions and local conditions. In some island nations, the dollar won't go as far as goods are expensive. In Canada, it goes much longer. [2] Currencies. Do. Not. Have. Market. Caps. Equities have market caps. You measure market caps of companies in terms of currencies. Why? Because if you have a $1B market cap in equities and you start selling, you'll be left with way less than $1B in hand - selling increases supply. If you sell $1B in currency you get exactly $1B dollars. Comparing money supplies between different countries based on number of units issued, are you serious? It's an utterly and totally meaningless number. It means nothing. You've given me a headache. It's not often you see stuff just so plain wrong on HN. [1] https://www.investopedia.com/terms/v/velocity.asp https://www.investopedia.com/terms/v/velocity.asp [2] https://www.indexmundi.com/facts/indicators/PA.NUS.PPPC.RF/rankings https://www.indexmundi.com/facts/indicators/PA.NUS.PPPC.RF/r...

joe_91 6y ago
A great breakdown - thanks for the insight! I often panic when I look at the amount of money printing thats going on but I always forget about the velocity! I think this might be because it's rarely talked about. What are your thoughts about the rapid asset inflation (stocks/housing) vs the stable consumer goods side of things? Surely they can't stay disconnected forever?
- arcticbull 6y ago
  These are challenging areas and I'm not an expert on all aspects of this however housing is one I've read a lot into. Housing on an inflation-adjusted dollars per square foot basis is exactly the same now as it was in the 1970s according to the BLS, on average, across the US. In fact, after the recent drops, it's probably more affordable per square foot. [1] There are some caveats, though! Housing is at the mercy of local ordinances. In major metros like SF and NY the city councils refuse to allow new construction, but the economies around them have been so strong that demand outstripped supply and prices skyrocketed. In suburban areas, setback rules, zoning rules, building codes and also tastes, have left houses twice as big on average now as they were in the 1970s [1]. This is a policy issue though, and it is truly problematic, although COVID seems to have been quite the equalizing force in a lot of ways. [edit] One way of solving it would be national zoning rules, and permitting the construction of housing in any zone (much like Japan does [2]). The other challenge is Americans need to come to terms with the fact that housing cannot be both affordable and an investment. Investments by definition are designed to become less affordable over time. As for the stock price explosion, I'll try and dig up an article I saw recently that attributed it to, roughly, poor folks are still poor (and so never really invested), but the wealthy and middle class have actually benefitted disproportionately from the COVID situation, PPP, stimulus, etc, and there's a lot more disposable income right now in the market. I'll mark that as a [citation needed] on myself as I try and dig it up. [1] https://fee.org/articles/new-homes-today-have-twice-the-square-feet-per-person-as-in-1973/ https://fee.org/articles/new-homes-today-have-twice-the-squa... [2] http://urbankchoze.blogspot.com/2014/04/japanese-zoning.html http://urbankchoze.blogspot.com/2014/04/japanese-zoning.html
- ivanche 6y ago