Well, the Austrian Business Cycle Theory [0] has shown that the continuous, never ending increase in the money supply is actually responsible for greatly exacerbating the boom and bust cycle, so there are in fact many losers of this (people who invested money thinking it was safe when in reality it was a highly speculative market, eg real estate in 2007, internet stocks in 2001, etc).
Increasing the money supply ultimately leads to a decrease in purchasing power, which is stealing from savers.
If the market (individuals cooperating with one another voluntarily) valued a continuously inflated currency, then fiat currency will win and crypto will fail. I suspect the market values a fixed or slow-increase-in-the-money-supply version of money like gold as they demonstrated with their money preferences before governments used coercion to stop it, one of the biggest reasons crypto is so popular is because people can’t use gold as money, but governments can’t effectively stop people from using crypto.
Bitcoin, Ethereum, and cryptocurrency spawn a generation of people who worship Austrian economics. This ETH upgrade is making ETH even more deflationary. People are obsessed with price and want to pump the numbers. These wars are not doing anything to advance adoption and bring freedom to people. Crypto builders are pumping the coins under the banners of freedom and decentralization.
The problem with crypto is volatility. The whole market moves in one direction or another, usually with Bitcoin. Scarcity is not the only thing that makes up the economy. We need also need inflation. Stop engaging in these ideological wars. Let's fix the problem and drive adoption.
Don't blame "the people". The vast amount of money printing by central banks are the cause that holding onto cash and saving has become a high risk operation. The solution is going back to the gold standard.
The economist is owned by the same people that own your central bank. If they write about the "detrimental effects" of crypto, crypto must be really good.
I invested, work in, and continue to believe in bitcoin / Ethereum / crypto ecosystem because of my beliefs in exactly those things. Austrian economics made so much sense to me the first time I sat down and properly studied it. Keynesian / mainstream economics was always shoved down my throat but it came down to “there is a man with a money printer and when shit gets bad he will print money” which made no sense to me logically. I think many of society’s problems come down to easy money which has caused enormous malinvestment and warped incentives.
I didn’t buy crypto as a Ponzi. I bought it because it makes perfect sense if you have a libertarian / Austrian / free market / individualist / free people mindset. Which I do!
That might all well be true, but how do you explain its popularity[+]? Someone should do a sociological analysis of the rise of cryptocurrency. Each generation picks its bubbles, for social signaling and competition. For millenials and the like, expensive houses and expensive cars etc (the old world's bubbles) are useless, and they re just baiting us to sustain them. We are increasingly aware of how pensions and social security are also unsustainable bubbles (at least here in yurop). So we bubble up the things that cater to new lifestyles, the phones, the airbnbs, some possibly unsustainable but cool bubbles like tesla. But if we really don't want to cater to the old plutocracy, we bubble up imaginary coins and thin air promises like NFTs. Why? because it's ours , not theirs and it's visibly possible that our bubbles will cause their bubbles to deflate , and we ll be free of the leashes that 90genarians are holding on the economy. So , as a signaling and generational wealth vehicle cryptocurrency can and will work, because it s a tool, and it doesnt matter if it's imperfect.
[+] No, people who bought into crypto didn't suffer a massive stroke that dropped their IQ to 20
I don't think cryptocurrencies are a solution to anything, but saying that the current system is «working» is dubious to say the least: the Fed has been controlling the money supply by targeting low inflation but the money supply grew much quicker than growth nonetheless (probably linked with the decline in money velocity, probably caused by the concentration of wealth. Disclaimer, this is a personal interpretation, not a fact). Inflation for consumption goods was kept low, but the asset prices grew up a lot in the past decades : in the late 90s the stock market was inflated and collapsed (the internet bubble), in the mid 2000s the overpricing of real estate in the US was responsible for the financial crisis, nowadays the stock market is inflated again, how bad will it end this time ?
Crypto cannot create wealth, only move it around. If too many people become crypto-rich and try to spend it on real-world assets, the assets will just inflate in price.
What can happen is that crypto could replace other forms of money. Governments will likely fight this tooth and nail however, because crypto is currently an anti-government technology.
this reminds me a bit of 'not real communism' or 'not really free market.'
The basic concept was that mathematical limits made crypto fundamentally anti-inflationary: you can't debase the currency by minting more of it in response to exigent circumstances (you could wonder whether some inflation should exist to account for population growth and the demand that goes with it, but that kinda presumes universal adoption),
The problem was that while the minting of a cryptocurrency can be mathematically self-regulating, there's no barrier to just setting up more cryptocurrencies. A big reason I have not become more heavily involved/invested in crypto was that everyone I asked about the utility of having ~15,000 different virtual currencies hurriedly changed the subject. How is a rational investor supposed to choose between the proliferating altcoins and shitcoins...and why? The only honest answer I ever got was 'throw money at a bunch of cheap things and then shill the fuck out of them in the hope that they become expensive.'
Crypto just swapped inflation in the currency supply for inflation in the number of currency instruments.
That is the best argument so far. The money system is a monopoly and competition fosters innovation. The problem is that cryptocurrencies are bad competitors.
In this way it's like the stock market to the Nth power.
As money accumulates in larger and larger sums, and is abstracted farther and farther from tangible real-world power and resources, you get this. Things get increasingly weird.
There's got to be some kind of equilibrium point between this stuff, and your basic anti-fiat-currency gold bug, but I'm not sure what it is, particularly since modern macroeconomics acknowledges the capacity to just print money and make it up pretty quickly in the increased economic activity that makes possible: austerity isn't really a functional solution. This crypto stuff really works by the same principle: if you get enough people into it, they CAN'T crash because the important people are too deeply enmeshed in the system and will cheat to any degree to preserve the value of their properties.
I think it depends what is done with it. With macroeconomics, you can have entire countries spurred to activity and producing goods and services because they can transact with resources. With this crypto stuff, I very much wonder if it ends up being a small number of very privileged people demanding rights to increasingly silly abstractions that are said to be the value of entire cities, or countries.
I'm not sure that's sustainable, politically. I'd ask, how convenient is it for the first crypto trillionaires to buy real-world mercenaries? Things could get very dark, albeit in a peculiarly cyberpunk sort of way that might appeal to some.
Right... I was thinking the other day, crypto ain't no solution for everything, so is no gold and fiat is just bad in long-term. The entiry economy is so broken, corrupt and one big scam and only the rich get richer and the poorer get poorer. I'm in crypto since 2015, so with gold and stocks. Made tons of money and yet I still think that the economy is one big scam. I don't trust money, I don't trust gold and neither do I trust crypto, and whilst we can say that these resources are very secure, they can be manipulated with very badly.
Crypto would possibly be great, not until the big players got in and now it no longer is money but rather investement thing. (Hold for 5 years get rich!) wtf?
Right, I also hold bags, but it has just taken very different approach.
To start with, I'll say that I agree with the mainstream view that cryptocurrency isn't actually creating wealth, in the sense of non-financial real goods that improve people's lives. It's redistributing it. Everybody's crypto gain comes at the expense of somebody else's crypto loss.
I'll also throw in that folks who say "HFSP" are often the losers, because they're the ones who FOMO in because of greed and ego at the top of the cycle and then panic-sell at the bottom when they actually become poor. The folks who are making millions in crypto are the ones who buy at cyclical bottoms - 2012, and 2015, and 2019 - and hold on to sell at the tops, when everybody else is making fun of the folks sitting on the sidelines.
However, they're on to something. Imagine that you're inside a group with superior military technology - the Mongols in 1200, for example, or an American settler in 1840 - and you're looking at the people you are about to conquer. Or less bloodily, you're going into software in 2002, aware that a computer program will replace the jobs of whole industries, and trying to figure out which profession to go into. It's much better to be on the inside of change than on the outside.
They aren't necessarily wrong, either - they're correctly perceiving that the fiat currency system is unsustainable and is its own Ponzi scheme, and creating an alternative Ponzi scheme to recruit participants into. Game theoretically, if you have an inflationary currency and a deflationary currency, it makes sense for everybody to spend the inflationary currency and save the deflationary currency (Gresham's Law) which further drives up the relative price of the deflationary currency so long as there's an excess of savings available. If we enter a time of shortages (which we might), then the value of the deflationary currency will collapse (since everybody needs to spend money, and merchants are accustomed to taking the inflationary currency) - but if that happens, Bitcoin and its electricity & Internet demands are screwed anyway. In the meantime, as long as labor and savings both remain abundant, holders benefit at the expense of new adopters.
The actual claim isn't that crypto is going to make everybody's life better. The claim is that it's going to make the life of holders better, at the expense of late adopters. People can't come out and say that directly - "Hi, I'm going to fuck you over and take all your wealth". I'm sure that'd go over great with the general public. So they say it in coded egoisms like "have fun staying poor", where you can write it off as somebody blowing off steam.
The problem with cryptocurrencies is not hyperinflation in the same sense. It is that they are being treated as speculative assets, not currencies, and are thus subject to the same wild swings in value.
This makes them terrible for use as an actual currency, which must be reasonably stable in order for people to use it in safety and comfort.
I think we really need to start talking about the broader "why" of why crypto. There's a good reason that we're seeing /r/antiwork and people throwing their last pennies into crypto. People have seen that those with assets got rich and those that work get poorer. There's no point aspiring to a better life through work. In reality what has happened is inflation that we don't measure. Assets are inflated by easy money but the government thinks this is apparently a good thing. Now inflation in the broader economy is coming, and the government response is going to be push us into a recession. So in the boom times the rich get richer, and during the bust the poor get poorer. This is not a sustainable economic settlement.
The deflation problem is easily solved by creating more cryptocurrencies. A crypto world isn't like a new gold standard, it's more like the system of competing private currencies advocated by Hayek, who claimed it would naturally lead to stability.
A lot of people are not comfortable with the fact that a secretive club of bankers can produce more of these at will, and give them to who they like. The moral hazard here is off the charts, and it's too much to expect that they won't keep producing more and more until it's worthless as has happened to every fiat currency in history. See the current prices of stocks, bonds, real estate, and education for examples, and yes even the current crypto market.
Crypto may not be the answer, personally I'm sure Bitcoin is not. But the problem is real.
Shouldn't one question the current monetary paradigm if it has such a terrible track record. Why are people doubling down on the very same system through cryptocurrency?
I can't help but feel cryptocurrency is a fad. The technology seems sound but the economic policy isn't. There's a reason we don't use the gold standard.
Fiscal policy is an important tool and I just don't see a future where the world's nations give that up.
Crypto is the opposite of the gold standard. Instead of backing currency with a physical object with inherent value, it's backed by absolutely nothing and grows at a pace governed by people whose primary goal is to benefit off a pyramid scheme.
Fiat currency gets a bad rap because it can be mismanaged, but a metal backed currency isn't compatible with rapid growth and we've yet to find a better alternative.
My issue isnt it's volatility, which is dramatic and a barrier to adoption. But it's inherently deflationary -- we know how deflationary currency works, and it's a nightmare. The only people able to spend on luxuries are those who have so much wealth that holding it has lower marginal utility than the luxuries they want.
Everyone else spends only when they absolutely have to on necessities, as everything else is irrational. It's just better to hold the currency. This is the poverty trap of human history.
Crypto will never be a currency because it is designed as a speculative asset which transfers wealth to early adopters, in the manner of a bigger-fool scam. The early buyers paid $10/coin, and the fools paying $100k/coin will be the ones funding the cash-out by providing that USD liquidity just before the collapse.
If it collapses to $1k/coin, the early adopters will make their 10,000% return, second phase 100%, and the vast majority of people will be running at -100000%+
You could not design a worse system to be used as actual currency. It is incredibly slow, incredibly inefficient, a handful of early adopters hold all the power, etc. etc.
Increasing the money supply ultimately leads to a decrease in purchasing power, which is stealing from savers.
If the market (individuals cooperating with one another voluntarily) valued a continuously inflated currency, then fiat currency will win and crypto will fail. I suspect the market values a fixed or slow-increase-in-the-money-supply version of money like gold as they demonstrated with their money preferences before governments used coercion to stop it, one of the biggest reasons crypto is so popular is because people can’t use gold as money, but governments can’t effectively stop people from using crypto.
[0] https://en.m.wikipedia.org/wiki/Austrian_business_cycle_theo...
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