Vish_ram

Agreed. Sorry I misunderstood

Bottomline you don't need inflation. The 2% inflation target is bogus. You need inflation to handle debt and fund govt programs. Inflation is a termite that eats into your wealth and destroys savers.

From Gemini If deflation is caused by increased productivity and technological advancements, it can lead to lower prices and higher living standards. In this case, spending may not necessarily decrease. Switzerland in the mid-2010s provides an interesting case study. During this period, Switzerland experienced mild deflation due to factors like a strong currency and increased productivity. However, consumer spending remained relatively stable. Here's why this occurred: Strong Economy: Switzerland has a robust economy with low unemployment and high disposable incomes. This allowed consumers to continue spending even as prices declined. Consumer Confidence: Despite deflation, consumer confidence in Switzerland remained high. This contributed to sustained spending levels. Wage Growth: Wages in Switzerland continued to grow, offsetting the effects of falling prices. This allowed consumers to maintain their purchasing power. It's important to note that this is a specific case and not a universal rule. In many other instances, deflation can lead to decreased spending as consumers delay purchases in anticipation of lower prices. However, the Swiss example demonstrates that under certain conditions, deflation can coexist with stable or even increasing consumer spending. Sources and related content

If the value of the money goes up, then the prices will drop proportionally. The productivity gets reflected into the MTC and it appreciates (right now USD depreciates as inflation squanders it). When it does, the paper clip's price drops. On supply side, goods and services are produced. On demand side you've needs and wants. Money is just a facilitator for this exchange. If too much is introduced then it just increases the prices of goods/services minus productivity. The ability to have fractions of MTC (Matoshis) help keep transacting without an issue. we can't do this with $1.00. I cant pay thousandth of a penny for reading an article. @Spekulatiuscommented something like if the money supply is fixed, then economy will collapse. Why would it? I have plenty of matoshis to go around. In MTC system, money gets more and more valuable as time goes on. Just owning MTC is sufficient and you don't have to invest in other nonsense. It becomes the pure play in capturing the value generated by the society. Now slowly replace MTC with BTC and things will start to get clearer.

What I find fascinating is that the BTC skeptics have done minimal reading on the subject of economics, monetary actions, human behavior, role of Fed/Govt etc, perfunctory at best. They want answers that they expect will seep thru layers of ignorance and make it click. Life doesn’t work that way. if someone had read several books on the subject and then asks appropriate Q I can then understand. subject of BTC isn’t something like doing DCF. Man with a hammer syndrome. This puzzle is like a lock. Some have to try a million keys and others just a key or two.

In a society that has a fixed money supply (coin divisible to nth degree), if you have a growing population, GDP, productivity then value of money keeps going up. Savers need to own just that money and it keeps appreciating in value (in terms of what can be bought). the increasing innovation, productivity will make money valuable. There’s no sinister Govt/Fed complex to usurp it. How do we make current system perfect. Imagine living in BTC world. 1) Owners of BTC capital lend it out for interest in BTC and use collateral (that can be converted to BTC) 2) the biz creates products/services sells them in BTC/satoshi and then pays back debt 3) if defaulted, then collateral is confiscated 4) Govt earns BTC from taxation and lives within the means. If it wants to borrow then it uses land/assets as collateral

money supply × velocity of money = price level × real GDP Assume in mars I can have increasing velocity that is frictionless as supply is fixed (mars token coin can have matoshi, 1 MTC = 100Million matoshi) As economy grows, the velocity goes up. (Even on Earth you can see it now, velocity is going up as supply reduces). https://fred.stlouisfed.org/series/M2V when you’ve GDP growth, basically value of money goes up. —————————————- in the current capitalistic system, under ideal circumstances you should have increasing value of money as productivity goes up. It gets usurped by money printing (inflation)

Almost everyone is against bitcoin before they are for it. I came to know about it 10 years ago when it was around $240. In my MBA class there was a guy from an exchange who explained it for an hour. I was incredulous. First I thought Govt will shut it down as it threatens dollar. I didn’t bother to spend time as I had such a negative reaction having been trained in value investing. I also thought that there will be others competing with it and it’ll be a passing fad. When Blackrock got involved I got in seriously. I read a few books, spent hours listening to podcasts etc. I still think all alt-coins are shit. Right now BTC has gained so much traction that it has become a self-fulfilling prophesy. I love to see skeptics. It shows that we are early. I live in Atlanta and visited Coca Cola museum few times. when it was introduced, there were many copy cats. Hundreds of them. Eventually they were beaten and driven out. I see the parallel in BTC too.

Thanks for the reply. Decades ago I had some interest in anthropology. Sometimes it took early mankind 300-400 years to make small improvements in stone tools. That was the pace of technological revolution. We live in an internet age. Newton said I can see farther because I stand on the shoulders of giants. Similarly Bitcoin stands on the shoulder of internet, connected devices, network etc. If Gold took few 100 years to be embraced by a kingdom, BTC took hardly a decade or two. Very astute observation about BTC used to fill cavities. Yes , we can send a few satoshis to the dentist to fill the cavity in a hyperbitcoinzation world.

Run a thought experiment where you go back in time 5000 years. You see in your kingdom Gold has been slowly introduced. The sharp buckeye calls it shitty metal due to its color. He rebukes it by saying it is too soft and useless. The Red guy is genuinely puzzled by the price and wonders how supply and demand affects it. The shitty coin despised by many is embraced by some die hards and call it Gold. They like the monetary aspect of it as the King was pushing more beads and diluting the purchasing power. Over time more and more people hoard it and it as a store of wealth. The increase in GDP/wealth of the kingdom got reflected into the price of the Gold (dont ask me how)

No offence. I like your Q's and keep them coming. It helps me too. We've an asset like Gold that trades far higher than the value attributed to its industrial use and jewelry. The reason is that it is perceived as inflation hedge (for right reasons as it is less inflationary compared to Fiat). Gold is at 17.5T. The mass cultish collective of BTC thinks that Gold is inferior and BTC should be valued far higher than Gold. So we're having a ramp up to catch up to Gold first. The relegation of all metals will result in BTC moving higher. Right now the appropriate value of BTC could be 2-3X of Gold and then keeps moving higher as Fiat is slowly displaced. Fiat will be a transactional currency to some extent (for taxation purposes). BTC will use L2 for that too.

this was in the context of Mars example. assumptions being tokens are indestructible and non-inflationary. Assume tokens are the only way to sell/buy anything.

Yes, yes. cyberphunks orange pilled early adopters, then came elite valley guys, then more retail, more venture capitalists, finally Blackrock, Saylor etc. Now they’re forcing down the throat of US Govt, corp, and everyday folks. it’ll be relentless and will continue until Fiat is relegated. it is a virus. You can run but can’t hide.

We’re in price discovery mode. Given Golds inadequacies vis a vis BTC, it should be valued above Gold.

The monetarily oppressed society searches the world for a solution. It found that BTC has the right attributes and started embracing it. It could be the African farmer or Argentinian who wants to escape the triple digit inflation and buys satoshis to protect himself. The belief in BTC (backed by largest hash power, fungibility, adoption, lack of inflation, trustless thing, de-centralized and 1000 others) that it protects the owner gives it credence. The wealth & gdp of the world backs the BTC (and other assets too).

Let's assume we setup a civilization on Mars. We create a million Mars tokens and distribute them. The tokens have decimals for purchasing smaller denominations. Assume we have a costless exchange of tokens. Now people produce goods and services and exchange between them. They use Mars tokens as a medium of exchange. Value of all tokens =Total money supply = value of all goods and services exchanged. If no more tokens are issued (zero inflation) and if productivity/population goes up, then the value of tokens go up to reflect increase in production of goods and services. We'll have an appreciating token. Assume in this mythical country, there are no assets like land (say all are free), art, precious metals etc. All surplus, profits etc will be stored in Mars token. This becomes their wealth too. Now Mars token value has wealth component. In the end, how do we measure it? The idealized way is all wealth, GDP is reflected in Mars Tokens. ================================= On Earth, we can apply this analogy in a less perfect way. We've leakage of wealth application as we've gold, stocks and other assets.

You've hit the nail on the head. The rules for store of value are different from those of other assets that produce income etc. The metrics for those that produce dividends/income/profit are like P/E, P/S etc. or use IRR, TWR etc Since Gold we've not had a global asset in last few millennia. The valuation of such an asset is always tricky and not discussed much in mainstream.

how do you do liquidation? who do you sell the company to? i'm sure you're selling it to other firms. This is ponzi. If you're the only owner of the asset and entire population perishes, then the value of what you own is zero. There are good ponzi's and bad ponzis (value destructive)

I think @Buckeye brings a great point that I never gave much credit before. The vigor, vitality and cultishness of BTC owners. Their steady influence over others and bringing more and more evangelists into the fold. This is like religion. Now in the end, even the skeptics will end up inadvertently owning it when it becomes part of indices. The greatest ponzi ever. In fact everything that involves human is a ponzi. You need more folks to join to make it work. Costco is a ponzi, the valuation inherently assumes that the kid born today will shop there after 25 years. So is soc sec, medicare, all corp etc.

BTC is anti-Fed, anti-liquidity, anti-US debt and anti-dollar. if market is shut down I’ll know that real inflation for middle/upper class is 7% and BTC goes up by that. say you’ve a Picasso painting. The increased value over time is a function of wealth creation, inflation etc. Not just increased interest. It also helps though. when a CoBF bear starts buying BTC we are probably in the 9th innings. My thoughts on cryptocurrencies.pdf

Bitcoin - Store of human economic wealth. For everything else you’ve fiat

It is wheel, fire, oil, steam & IC engine, electronics, internet, AI, innovation, human ingenuity, US constitution, free trade, low taxes, Guns & God, Hope combined.

I did both CFA and MBA. I was an industry outsider (Engineering background) without any knowledge of economics, finance, accounting etc. I’ve been an investment advisor of my own firm I had cofounded. on the plus side it adds a ton of credibility. It adds to your confidence, if I put in effort I can easily understand anything. without the formal approach I may have lacked the discipline to learn them all. All knowledge is cumulative. It sure has helped me with the returns. As most know knowledge, intellect, education may account for 10% of returns.

Bitcoin standard