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

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.