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I prefer to own an asset with high volatility that gets more valuable over time than an asset with low volatility that gets less valuable over time.

adventured 6y ago
You're talking about something entirely different from what the parent comment is. What you're talking about is a long-term investment.
edgyquant 6y ago
We aren’t talking about assets and what you’ve just said is the reason we have controlled inflation. Currency isn’t supposed to incentivize hoarding it, quite the opposite in fact.
- vntok 6y ago
  Not everyone agrees with that view. I for one would rather people spent their hard-earned money in a smart, slow and well-thought way than feel compelled by inflation to do so fast and lose.
  - pertymcpert 6y ago
    Yeah but that disincentivizes investments.
    - vntok 6y ago
      Another way of looking at it: that incentivizes better investments.
      - edgyquant 6y ago
        Not really. If you can earn risk free appreciation on a currency the smart thing to do is not spend it. This incentivizes hoarding money, not making smarter investments.
        vntok 6y ago
        Nope, you are therefore incentivized to spend that money in objects or services that will bring in more value to you than the risk-free "interest" or gains brought by the mere deflation. Ergo, smarter investments.
        pertymcpert 6y ago
        No, it disincentivizes investments full stop. People aren’t making dumb investments deliberately. You don’t get any new information about whether an investment is smart or not based on your currency being deflationary.
        vntok 6y ago
        In developed countries (ex in Europe), fiat currency officially loses at least 2% of its worth each year on average (or you yourself lose 2% worth of purchasing power every year, depending on how you see it). In reality it's much more of course. Bitcoin gains 200% of its worth each year on average. Owning bitcoin, any investment you make that brings home more than 200% a year (+ fin. taxes - fiat inflation) when risk-adjusted is worth making. Anything else is an objective loss, so you want to really assess what it will bring you subjectively before making it. In other words, "given that you are basically paid by the financial system to hold bitcoin, any bitcoin you spend should be for something that you value more than what it pays", i.e a smarter investment.
  - edgyquant 6y ago
    They may not agree, but currency isn’t supposed to be an investment it’s supposed to be a rationing device.
  - lmm 6y ago
    People should spend or invest thoughtfully, but they should spend or invest - if people are encouraged to hoard a pile of wealth so they can live off the labour of others while contributing nothing themselves, that's bad for society. So central banks tend to aim for low but nonzero inflation (e.g. the Fed's 2% target).
  - arnavs 6y ago
    One reason I dislike inflation is that I don't want my currency -- a utility object -- having opinions about my financial life. Inflationary monetary policy and its consistent 'nudge' to spend is the economic equivalent of the pop-up. Of course, you could argue that a hard cap is equally opinionated. But I think it's a much more 'neutral' position, where it deflates because of real economic growth, and you spend it because of your own time preference.
- ur-whale 6y ago
  >we have controlled inflation We do not have controlled inflation (I'm assuming you're talking about USistan). Please remember that the fed is an independent institution which refuses to get audited.
  - kelnos 6y ago
    It absolutely is controlled[0], just perhaps not controlled in a way you would personally like. (Also, I recommend you quit it with the "USistan" stuff. It comes off as childish and detracts from the point you're making.) [0] Maybe "strongly influenced" is a better framing when talking about the Fed.
  - edgyquant 6y ago
    I am beyond sick of this Libertarian lie that has somehow gone mainstream. The Federal Reserve is audited bi-annually by both a public and private commission https://www.newyorkfed.org/aboutthefed/fedpoint/fed35.html https://www.newyorkfed.org/aboutthefed/fedpoint/fed35.html https://www.federalreserve.gov/faqs/about_12784.htm https://www.federalreserve.gov/faqs/about_12784.htm In regards to your first point, inflation is targeted at ~2.5% a year. Some years do better and some do worse but on average that is the inflation rate. I challenge you to look at the inflation rates (provided below) in the first half of last century and provide a reasoned argument for why having years with +16% inflation (and years with -10% inflation) is a better system of currency than what we have now where people freak out if the deviation is over 2%. The gold standard provided a volatility that only hurt those with less money, and the argument your making is a fallacy (and is the reason I left the Libertarian party four years ago.) https://inflationdata.com/Inflation/Inflation_Rate/HistoricalInflation.aspx https://inflationdata.com/Inflation/Inflation_Rate/Historica...
- panarky 6y ago
  Inflation is only "controlled" for some baskets of goods. If your basket of goods consists of salty snacks and consumer electronics, then yes, inflation is controlled. But if your basket of goods consists of Hamptons real estate and fine art, then your inflation rate feels a lot steeper. Investors are finding it very difficult to discover investments that don't depreciate with respect to that second basket of goods. That's why institutions, family offices and high net worth individuals are shifting single-digit percentage allocations into Bitcoin.
  - edgyquant 6y ago
    I’m talking about currency not appreciating commodities, assets or investment. The US dollar, and the currencies of most western nations, is/are in fact controlled and inflate at a targeted rate.
    - panarky 6y ago
      When I think about inflation, I think about the purchasing power of money for the basket of goods I'm likely to purchase. I'm less interested in theoretical or academic concepts like the rate of growth of M2 or the velocity of money. Preserving purchasing power over time is my priority.
      - MrMan 6y ago
        But the people who run the euro zone and the dollar zone have it setup for (they hope) constant mild inflation. This incentivizes a search for productive investments like ycombinator instead of hoarding treasure, which is not a productive investment
  - IgorPartola 6y ago
    Where have you seen real estate get cheaper over time? NYC? SF? Somewhere else? Also when it comes to setting up an economic system, high net worth individuals are the last people we should be worrying about, not the first.

adventured 6y ago

You're talking about something entirely different from what the parent comment is. What you're talking about is a long-term investment.

edgyquant 6y ago

We aren’t talking about assets and what you’ve just said is the reason we have controlled inflation. Currency isn’t supposed to incentivize hoarding it, quite the opposite in fact.

vntok 6y ago
Not everyone agrees with that view. I for one would rather people spent their hard-earned money in a smart, slow and well-thought way than feel compelled by inflation to do so fast and lose.
- pertymcpert 6y ago
  Yeah but that disincentivizes investments.
  - vntok 6y ago
    Another way of looking at it: that incentivizes better investments.
    - edgyquant 6y ago
      Not really. If you can earn risk free appreciation on a currency the smart thing to do is not spend it. This incentivizes hoarding money, not making smarter investments.
      - vntok 6y ago
        Nope, you are therefore incentivized to spend that money in objects or services that will bring in more value to you than the risk-free "interest" or gains brought by the mere deflation. Ergo, smarter investments.
        pertymcpert 6y ago
        No, it disincentivizes investments full stop. People aren’t making dumb investments deliberately. You don’t get any new information about whether an investment is smart or not based on your currency being deflationary.
        vntok 6y ago
        In developed countries (ex in Europe), fiat currency officially loses at least 2% of its worth each year on average (or you yourself lose 2% worth of purchasing power every year, depending on how you see it). In reality it's much more of course. Bitcoin gains 200% of its worth each year on average. Owning bitcoin, any investment you make that brings home more than 200% a year (+ fin. taxes - fiat inflation) when risk-adjusted is worth making. Anything else is an objective loss, so you want to really assess what it will bring you subjectively before making it. In other words, "given that you are basically paid by the financial system to hold bitcoin, any bitcoin you spend should be for something that you value more than what it pays", i.e a smarter investment.
- edgyquant 6y ago
  They may not agree, but currency isn’t supposed to be an investment it’s supposed to be a rationing device.
- lmm 6y ago
  People should spend or invest thoughtfully, but they should spend or invest - if people are encouraged to hoard a pile of wealth so they can live off the labour of others while contributing nothing themselves, that's bad for society. So central banks tend to aim for low but nonzero inflation (e.g. the Fed's 2% target).
- arnavs 6y ago
  One reason I dislike inflation is that I don't want my currency -- a utility object -- having opinions about my financial life. Inflationary monetary policy and its consistent 'nudge' to spend is the economic equivalent of the pop-up. Of course, you could argue that a hard cap is equally opinionated. But I think it's a much more 'neutral' position, where it deflates because of real economic growth, and you spend it because of your own time preference.
ur-whale 6y ago
>we have controlled inflation We do not have controlled inflation (I'm assuming you're talking about USistan). Please remember that the fed is an independent institution which refuses to get audited.
- kelnos 6y ago
  It absolutely is controlled[0], just perhaps not controlled in a way you would personally like. (Also, I recommend you quit it with the "USistan" stuff. It comes off as childish and detracts from the point you're making.) [0] Maybe "strongly influenced" is a better framing when talking about the Fed.
- edgyquant 6y ago
  I am beyond sick of this Libertarian lie that has somehow gone mainstream. The Federal Reserve is audited bi-annually by both a public and private commission https://www.newyorkfed.org/aboutthefed/fedpoint/fed35.html https://www.newyorkfed.org/aboutthefed/fedpoint/fed35.html https://www.federalreserve.gov/faqs/about_12784.htm https://www.federalreserve.gov/faqs/about_12784.htm In regards to your first point, inflation is targeted at ~2.5% a year. Some years do better and some do worse but on average that is the inflation rate. I challenge you to look at the inflation rates (provided below) in the first half of last century and provide a reasoned argument for why having years with +16% inflation (and years with -10% inflation) is a better system of currency than what we have now where people freak out if the deviation is over 2%. The gold standard provided a volatility that only hurt those with less money, and the argument your making is a fallacy (and is the reason I left the Libertarian party four years ago.) https://inflationdata.com/Inflation/Inflation_Rate/HistoricalInflation.aspx https://inflationdata.com/Inflation/Inflation_Rate/Historica...
panarky 6y ago
Inflation is only "controlled" for some baskets of goods. If your basket of goods consists of salty snacks and consumer electronics, then yes, inflation is controlled. But if your basket of goods consists of Hamptons real estate and fine art, then your inflation rate feels a lot steeper. Investors are finding it very difficult to discover investments that don't depreciate with respect to that second basket of goods. That's why institutions, family offices and high net worth individuals are shifting single-digit percentage allocations into Bitcoin.
- edgyquant 6y ago
  I’m talking about currency not appreciating commodities, assets or investment. The US dollar, and the currencies of most western nations, is/are in fact controlled and inflate at a targeted rate.
  - panarky 6y ago
    When I think about inflation, I think about the purchasing power of money for the basket of goods I'm likely to purchase. I'm less interested in theoretical or academic concepts like the rate of growth of M2 or the velocity of money. Preserving purchasing power over time is my priority.
    - MrMan 6y ago
      But the people who run the euro zone and the dollar zone have it setup for (they hope) constant mild inflation. This incentivizes a search for productive investments like ycombinator instead of hoarding treasure, which is not a productive investment
- IgorPartola 6y ago
  Where have you seen real estate get cheaper over time? NYC? SF? Somewhere else? Also when it comes to setting up an economic system, high net worth individuals are the last people we should be worrying about, not the first.