4 ms·

I have read a lot of crypto articles recently, and yet the community cannot answer this: How do you account for the global population growth (and consequently G

by mgh2 5y ago

I have read a lot of crypto articles recently, and yet the community cannot answer this: How do you account for the global population growth (and consequently GDP growth) that is constantly in need for a relatively stable exchange medium for value of goods produced? Cycle: More people > more production > more money Money is a tool to fuel production. Controlled inflation/devaluation fuels growth, as long as it is backed by actual production (tied to economic output). Counter this with popular examples given: Germany (WWI), Venezuela, Greece, Argentina, Lebanon, etc. dramatically devalued their currency without an increase in production. The problem with any limited supply is that it benefits and incentivizes hoarders and non-producers, having nonbeneficial effects for society as a whole. Beware: The poor & needy are always the most vulnerable victims for manipulation by the rich. For all we know, the "crypto helping the unbanked poor" narrative might just be another marketing stunt by speculators. Please provide a nonpaywall version (I bypass w/ Pocket app) and more information to answer this question. I am still researching, trying to approach this without bias Note: I have inquired about this before (with more context) without answers https://news.ycombinator.com/item?id=27498190 https://news.ycombinator.com/item?id=27498190

jl2718 5y ago
So glad you asked... > Controlled inflation/devaluation fuels growth Sure - if you measure 'growth' in terms of the inflated asset. However, well, just look at this chart: https://fred.stlouisfed.org/graph/?g=ERzc https://fred.stlouisfed.org/graph/?g=ERzc Take a good look. That's what total failure of an economic theory looks like. Edit: I do think you are way off on your points, but I am actually a believer in 'controlled inflation' for totally different reasons. But how to distribute new money creation? Here's a terrible idea: let the most powerful decide (fed/govt). Better idea: allow anybody to work for it (Bitcoin).
- mgh2 5y ago
  Screenshot link please? the graph does not load for me.
  - tolbish 5y ago
    Try using desktop mode on your browser.
  - jl2718 5y ago
    https://imgur.com/a/EgRehxM https://imgur.com/a/EgRehxM Spoiler: 80% drop in US GDP relative to monetary base.
    - deleted 5y ago
      [deleted]
- NicoJuicy 5y ago
  > That's what total failure of an economic theory looks like Giving graphs with a clearly opinionated statement is not what i call an answer/explanation. > in recent decades, research has shown that the relationship between growth in the money supply and the performance of the U.S. economy is becoming weaker. https://www.investopedia.com/ask/answers/070615/what-correlation-between-money-supply-and-gdp.asp https://www.investopedia.com/ask/answers/070615/what-correla... I'm not really sure why you think "this" graph is "that" important? I'm not even sure why it would help the use-case for Bitcoin and "decentralization". Bitcoin is a bad implementation if you want controlled inflation. It doesn't respond to any actual economic incentives that have to be done. It's like resetting everything we learned in the last 100's of years. And yes, a centralized structure is how things like that are decided. Here's a crypto bank run of 4 days ago - https://finance.yahoo.com/news/iron-finance-details-defi-bank-052135662.html https://finance.yahoo.com/news/iron-finance-details-defi-ban... Crypto has a long way to go and currently it's full of fraud. ( Or greed) And if I'm not mistaking. I think crypto is going to start it's fast decline cycle again, just like in 2017-pandemic. Ps. Crypto is owned by whales and not even possible to regulate. It's ridiculous trying to adopt it as a country. Lightning network breaks it's core utility ( on chain transactions & decentralization) while fixing something else ( expensive and slow transactions) And don't get me started on stable coins :)
  - jl2718 5y ago
    This is just some guy’s pontification. The chart I gave is the exact relationship asked in the question. Your “100s of years” of economics is just a bunch of powerful people deciding how to spend less powerful people’s money. Bitcoin turned into hydroelectric dams, solar panels, geothermal, and 5nm chips years ahead of the M1. Amazing how the free market can do all that with something intended to be wasteful, while the centralized authority produces economic disasters with the best of intentions. Comments about fraud are non-sequitur. 0.1% of Bernie Madoff, former Chair of NYSE. But of course we all want to do better, and that’s why we will. They don’t and won’t.
ItsMonkk 5y ago
I've built up an intuition that the money supply should match changes in productivity, and that if it doesn't it will eventually lead to problems. But it's also notable that the trend is extremely important. If you do match, everything should be fine and this can last forever. But as soon as that trend switches, the money managers work it out, and the system destabilizes and a crash occurs. (I'm like 40% sure this is why a yield curve inversion causes stock market crashes.) If the money supply rises faster than productivity, that money has to go somewhere. It can either go into income and goods prices(CPI) or it can go into stocks and houses. It chooses where to go based on who was given that money, and following the Cantillion Effect will flow throughout the economy. If you give money to a company through a bond, and that company uses that money to buyback their own stock, then the person who holds that stock is going to want a better price for it as the demand for the stock his risen and the supply is shrinking(stocks are in this regard in fact much worse than Bitcoin!). That person, is then likely to either hold the money in their account, or invest it in some other stock. So long as a majority of it stays within the financial system, the CPI stays constant. What we've seen these past 50 years since we've been off the gold standard is a huge surge in asset prices. But if productivity rises faster than the money supply like with Bitcoin or the gold standard, people flee assets and into money. This is called a Deflationary Spiral. But the opposite state is basically an Inflationary Spiral, with people unwilling to spend their assets. Both are problems because when the money supply increases faster than productivity, people are forced to invest in companies while the opposite they hoard money, which in the case of Bitcoin is Bitcoins. Meanwhile the companies aren't using that money for investment, they are using their money to buy their own stock. The fundamentals of valuing a company based on net future risk adjusted cashflow is removed. A stock has a price given their net future risk adjusted cashflow, and anything higher than that is speculation. That speculation can go to the world's best companies, like AAPL, or it can go to some nearly dying companies, like GME. It's a carnival game. The world's best marketer wins. So both the Fed and Bitcoin are wrong. Both trap value and drive out productive investment. This is why productivity growth went from 10% 50 years ago down to almost nothing. We're investing in fat companies that don't need to try hard to stay afloat.
FabHK 5y ago
flexible money supply (well managed) > fixed money supply > flexible money supply (badly managed)

by mgh2 5y ago

jl2718 5y ago

So glad you asked... > Controlled inflation/devaluation fuels growth Sure - if you measure 'growth' in terms of the inflated asset. However, well, just look at this chart: https://fred.stlouisfed.org/graph/?g=ERzc https://fred.stlouisfed.org/graph/?g=ERzc Take a good look. That's what total failure of an economic theory looks like. Edit: I do think you are way off on your points, but I am actually a believer in 'controlled inflation' for totally different reasons. But how to distribute new money creation? Here's a terrible idea: let the most powerful decide (fed/govt). Better idea: allow anybody to work for it (Bitcoin).

mgh2 5y ago
Screenshot link please? the graph does not load for me.
- tolbish 5y ago
  Try using desktop mode on your browser.
- jl2718 5y ago
  https://imgur.com/a/EgRehxM https://imgur.com/a/EgRehxM Spoiler: 80% drop in US GDP relative to monetary base.
  - deleted 5y ago
    [deleted]
NicoJuicy 5y ago
> That's what total failure of an economic theory looks like Giving graphs with a clearly opinionated statement is not what i call an answer/explanation. > in recent decades, research has shown that the relationship between growth in the money supply and the performance of the U.S. economy is becoming weaker. https://www.investopedia.com/ask/answers/070615/what-correlation-between-money-supply-and-gdp.asp https://www.investopedia.com/ask/answers/070615/what-correla... I'm not really sure why you think "this" graph is "that" important? I'm not even sure why it would help the use-case for Bitcoin and "decentralization". Bitcoin is a bad implementation if you want controlled inflation. It doesn't respond to any actual economic incentives that have to be done. It's like resetting everything we learned in the last 100's of years. And yes, a centralized structure is how things like that are decided. Here's a crypto bank run of 4 days ago - https://finance.yahoo.com/news/iron-finance-details-defi-bank-052135662.html https://finance.yahoo.com/news/iron-finance-details-defi-ban... Crypto has a long way to go and currently it's full of fraud. ( Or greed) And if I'm not mistaking. I think crypto is going to start it's fast decline cycle again, just like in 2017-pandemic. Ps. Crypto is owned by whales and not even possible to regulate. It's ridiculous trying to adopt it as a country. Lightning network breaks it's core utility ( on chain transactions & decentralization) while fixing something else ( expensive and slow transactions) And don't get me started on stable coins :)
- jl2718 5y ago
  This is just some guy’s pontification. The chart I gave is the exact relationship asked in the question. Your “100s of years” of economics is just a bunch of powerful people deciding how to spend less powerful people’s money. Bitcoin turned into hydroelectric dams, solar panels, geothermal, and 5nm chips years ahead of the M1. Amazing how the free market can do all that with something intended to be wasteful, while the centralized authority produces economic disasters with the best of intentions. Comments about fraud are non-sequitur. 0.1% of Bernie Madoff, former Chair of NYSE. But of course we all want to do better, and that’s why we will. They don’t and won’t.

ItsMonkk 5y ago

I've built up an intuition that the money supply should match changes in productivity, and that if it doesn't it will eventually lead to problems. But it's also notable that the trend is extremely important. If you do match, everything should be fine and this can last forever. But as soon as that trend switches, the money managers work it out, and the system destabilizes and a crash occurs. (I'm like 40% sure this is why a yield curve inversion causes stock market crashes.) If the money supply rises faster than productivity, that money has to go somewhere. It can either go into income and goods prices(CPI) or it can go into stocks and houses. It chooses where to go based on who was given that money, and following the Cantillion Effect will flow throughout the economy. If you give money to a company through a bond, and that company uses that money to buyback their own stock, then the person who holds that stock is going to want a better price for it as the demand for the stock his risen and the supply is shrinking(stocks are in this regard in fact much worse than Bitcoin!). That person, is then likely to either hold the money in their account, or invest it in some other stock. So long as a majority of it stays within the financial system, the CPI stays constant. What we've seen these past 50 years since we've been off the gold standard is a huge surge in asset prices. But if productivity rises faster than the money supply like with Bitcoin or the gold standard, people flee assets and into money. This is called a Deflationary Spiral. But the opposite state is basically an Inflationary Spiral, with people unwilling to spend their assets. Both are problems because when the money supply increases faster than productivity, people are forced to invest in companies while the opposite they hoard money, which in the case of Bitcoin is Bitcoins. Meanwhile the companies aren't using that money for investment, they are using their money to buy their own stock. The fundamentals of valuing a company based on net future risk adjusted cashflow is removed. A stock has a price given their net future risk adjusted cashflow, and anything higher than that is speculation. That speculation can go to the world's best companies, like AAPL, or it can go to some nearly dying companies, like GME. It's a carnival game. The world's best marketer wins. So both the Fed and Bitcoin are wrong. Both trap value and drive out productive investment. This is why productivity growth went from 10% 50 years ago down to almost nothing. We're investing in fat companies that don't need to try hard to stay afloat.

FabHK 5y ago

flexible money supply (well managed) > fixed money supply > flexible money supply (badly managed)