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Cryptocurrency Has Fallen 70% – When It Should Be Going Up. I Think.
Since “President” Biden “won” the last “election”, the economy has had some difficulties. Inflation is running rampant. It’s listed at around 8.5%, but the real cost of living for most people has gone up quite a bit more than that. With cash losing its value, you might expect people to invest their money in the stock market, hoping to keep up with inflation. This injection of cash would presumably inflate the value of the stock market. But the stock market has been dropping quickly, with the NASDAQ losing around 30% of its value so far this year. This has led many Democrats to criticize “President” Biden’s handling of the economy. And to demand more government spending. Simultaneously. Mysterious are the thoughts of Democrats…
I’ve never quite understood cryptocurrency, and have not invested in it. But one aspect of it that made sense to me was to protect oneself from the vagrancies of the fiscal policies of misguided politicians. The value of the dollar is at least partially dependent on the fiscal responsibility of whoever is in power in the American government at the time. If all your money is in dollars, and then Democrats are elected to office, your dollars will lose value.
Bored Ape Yacht Club
But crypto is free from such concerns. It doesn’t matter how much money the government prints – the value of cryptocurrency is not affected by political winds the way national currencies are. And as more and more people become concerned about our economy, they would run to invest in crypto, which would then continue its remarkable increase in value over the past 10 years. Except that crypto has suddenly lost around 70% of its value so far this year. Which seems counter-intuitive.
So inflation is reducing the value of the dollar (at this rate, the value of your dollars will be cut in half in about 8 years – possibly much faster if the real inflation rate is higher than the reported inflation rate). As the dollar falls, people invest to try to keep up with inflation. But the stock market is falling. So people flee conventional markets and invest in crypto. But crypto is falling even faster. All at the same time.
I don’t understand.
I’m not a financial guy, and my understanding of all this is obviously extremely rudimentary. Although I suspect I may have a better understanding of finance (and perhaps a few other things) than some “Presidents”.
But still, I feel like I’m missing something big, here. I just don’t understand how these trends fit together.
Can any of our financial gurus here explain this to a novice like myself?
Published in General
Mises proved that that is false. There are no empirical causal constants in the field of human action.
If anyone wants to really understand this and is willing to spend the time, I recommend starting with the first few chapters of Mises, Human Action; Hayek, “Prices and Production” lecture series from Mises.org’s bookstore; and Hoppe, “Economic Science and the Austrian Method”
I wish I could give a quick summary of the theorem, but it requires that you basically throw away everything you know about economics from being exposed to nothing your whole life but pure post-scientific Progressive-motivated doctrine. This dogma is propagated continuously by academia, the political leaders, and the media.
You must then learn a new, scientific way of thinking, and re-learn economics from scratch.
I corrected it to store. My apple pencil doesn’t read my cursive scribbling very well.
Another part of why I moved from 1,000 sq ft to 4,500. :-)
The TP is self explanatory. I need paper towels to drain all my bacon.
Just two of the shelf units in my new place:
TP, laundry soap, bleach, zip-lock storage bags, sets of dishes… even two (so far) spare toasters! I’m also going to be getting spare microwave ovens and a few other things. Lots of space, I won’t even notice them.
Cook the eggs in the bacon grease. Chop the bacon up and lay the eggs on the chopped bacon. MMMMM!
All of which highlights how hard it is to imagine true deprivation here in America. Frankly, I can’t either. And I don’t really believe we will see it.
To be fair, disasters are made of not believing that true need will come.
I know. And I own two generators and a ridiculous amount of ammunition. But I still really don’t expect America to descend into chaos. (I’m not worried about global warming, either.)
Yes and no. American currency has value all over the world, because other people all over world will take it. Try spending some Swedish Krona in Argentina. That said, a better crypto (like Etherium) could displace Bitcoin.
Don, you could well be making a point here that I’m missing, but I don’t see any contradiction between what I wrote and what you wrote in response. Yes, American dollars are more spendable in lots of places than are other foreign currencies, and for a couple of reasons: sometimes they’re perceived as more stable; often they’re recognized because they’re the world’s alternative currency and there are a lot of them, whereas people may not know exchange rates for other currencies.
Also, how do you use bitcoin in a place that doesn’t have widespread internet service and few people have fancy computers etc?
Don’t do this so you stay off the government’s radar. lol
I am glad to see that the Libertarian Party continues to strive for relevance.
Just kidding.
Let me try again. With American currency, there is a network effect. People all over the world take US dollars, because people all over the world take US dollars. This is like people joining Facebook, because that’s were everyone else is. Stability is a small part of it (crypto is wildly unstable), but for dollars, it is more a matter of it works, because it works.
And if people around the world ever STOP trusting US dollars, it could collapse very quickly.
Everything is going down in real terms. The only folks whose assets are growing are a tiny bunch who don’t understand much and the Chinese. The Chinese don’t understand that without the US driving production and innovation they will eventually go down with the rest of us unless they free their people which isn’t likely, and who knows what free Chinese will do? The folks making billions will do well probably for as long as they live, except for those of them who have to be squeezed out to assure position for others. Their kids will be part of the subsequent decline. Folks don’t understand that the US drove the west’s industrialization, which spread to everyone else as they had to emulate to remain in the game. Think pre US, that’s where we’re heading but what on earth modern technology means in such a world is beyond me. Even modern technology requires constant innovation and ground up freedom which they will not get except by accident. Accidents are all we have going for us unless we change where we’re headed. War is the other option. That always makes big changes. I’m afraid that is probably among the options as well. Weak, stupid and rich is inviting.
There’s always the option War AND Decline. Churchill comes to mind.
Ah, thanks for the clarification. Yes, absolutely, with U.S. dollars there is a network effect. (Whether that’s as important as the stability issue — being backed by the world’s most stable and prosperous nation — I don’t know.) In one of my earlier drafts of one or another comment here I’d mentioned dollars as a store of value, but decided that it was too much unlike physically/mathematically scarce commodities to be used as an example.
As a practical matter, a merchant in Ghana is only going to want to accept so many foreign currencies — if only because it’s a pain to keep up with exchange rates, pay exchange fees, etc. It makes sense that he’d accept cedis and maybe U.S. dollars and Euros, but probably not đồng or rupee or pesos.
Incidentally, there’s a broad misunderstanding about the relationship between a typical holder of cryptocurrency and the cryptocurrency he holds, which I wrote about here.
To do what?
To use a hula-hoop.
I think this is right, and it’s a real bitch to do anything about it for a variety of reasons.
2%iFlAtIoN mAKeS ouR lIveS bEtTer
cEntRal pLAnNing MakEs oUr liVEs beTTEr
2%iFlAtIoN mAKeS ouR lIveS bEtTer
cEntRal pLAnNing MakEs oUr liVEs beTTEr
Pension funds get destroyed because they don’t fund them enough and then interest rates get artificially suppressed to grow government and keep the bubbles intact.
Then you get mafia communism:
Things we depend on like pensions and insurance just don’t work when they blow up the interest bearing side of the investment frontier. The little guy and the unconnected get steamrollered.
I see silver is down to $19. Time to buy some silver rounds.
For werewolves?
Generic one ounce silver coins. I think they are kind of cool because they stamp, for some reason, some random stuff on them that doesn’t give them any numismatic value. It’s like when we had free banking.
Recycled silver bars are really cool because they have an antique look, but I doubt you can sell those without getting nicked for the lack of standardization.
I am sorry, RJ, but your answer is incorrect. The correct answer was “Yes, for werewolves.”
It’s true.
I still think that pre-64 dimes and quarters will be accepted no matter what because everyone knows and accepts them as real. (And since their content is sure, and they have the anti-chisel serrated edge, etc.)