Crypto however has not. It has spent a comparatively tiny fraction of its time at ATH as one would expect for a speculative bubble. In fact, it spent the last 3 years way below its ATH.
But the ATH increases often. Yes it crashes from these peaks, but never to below the starting point. Bitcoin bought anytime and held for a sufficient length of time would have always made money. If you can hold it for 5+ years you will make money.
You're comparing a speculative mania in fictional crime-bucks to a speculative mania in a car company worth more than Facebook while simultaneously selling just 4% as many cars as Toyota. Tesla's price to earnings ratio is 1500 meaning it would take until the year 3521 for it to earn back its market cap.
The fact you're even making this assessment tells me this isn't going to end well for anyone.
Heed my warning: The bubble pops when the last bear dies.
You could also call gold "speculative mania in shiny trinkets with little utility", but that one has lasted thousands of years so far. Describing something in colorful language doesn't make it a strong argument.
Being so sure that BTC is a bubble is just as naive as being completely sure it's going up to a million dollars per coin. It's just speculation either way, and there is no fundamental law of nature (or even principle of economics) preventing either outcome.
> Being so sure that BTC is a bubble is just as naive as being completely sure it's going up to a million dollars per coin. It's just speculation either way, and there is no fundamental law of nature (or even principle of economics) preventing either outcome.
Which is why I'm not playing. And why I don't have any gold.
I'd love a citation on that if you have one, I have seen no evidence the two are connected. The money was printed to counter deflationary pressure. This succeeded, and the rate of inflation is tracking at 2% per expectations.
Replace Tesla with Facebook, or a fraction of one large tech company, or less than the $900B stimulus bill that was just passed.
My point was only that it’s a currently a small fraction of the overall US equity market, and if it becomes increasingly widely accepted as a reserve currency comparable to the dollar or an inflation protected asset like gold then there’s no reason why it shouldn’t be worth trillions.
What makes you think the amount someone is willing to pay for something at any given moment is a proxy for its intrinsic value? Enron traded sky high until it didn't. Tulip bulbs traded sky high until they didn't.
That people are willing to pay for it doesn't mean it should be worth anything. Worth is not price. And a high price certainly doesn't mean something is good for the world. If I offered $1,000,000 for each silverback gorilla pelt you procure, (a) is that a proxy for its worth and (b) is that good for the world?
The market tends to conform to my personal biases, my personal investing account just crossed 14X what it was on 3/20. I tend to short irrationality but in this case I have no interest in shooting dice in a rigged casino.
It's most definitely true, especially my biggest expenses of taxes, real estate, education, and healthcare.
Savings (for retirement or otherwise) is probably the other big expense, which you could classify as "stocks", but if you predict more volatility in the future, therefore needing to save more now, then that is also increasing in price.
Taxes are a function of income, so irrelevant [edit] and either factored into CPI or again, not monetary policy. That's fiscal policy. Take it up with congress, not the fed.
Real estate, while down, is a supply and demand function. In big cities, supply is artificially constrained to the benefit of existing landowners. On average across the US housing, on an inflation-adjusted dollars per square foot basis, is actually exactly the same as its been since the 1970s. [1]
Education and healthcare are social and fiscal policy issues and not connected to monetary policy at all.
Taxes paid can go up even if your income does not. Tolls, car registration fees, property taxes, etc are all taxes. Therefore, they are very relevant when discussing CPI, as it directly affects your bottom line.
I specifically wrote the "goods and services I want" so real estate that I'm not interested in doesn't concern me. I have to plan my life around buying real estate that I want, and so if the price of that real estate is increasing, then it's once again affecting my bottom line.
Education and healthcare being social and fiscal policy issues is irrelevant to me for budgeting purposes. All I am concerned with is the price to achieve the life I want for myself and my kids.
I am predicting that the items I am interested in buying are worth $x in year 2021, but will be worth $y in year 2030, and the difference in $x and $y will be more than what is predicted by official CPI numbers. This has proven true for the last 15 to 20 years for me.
That's all fair but not relevant to monetary policy, the Fed, bitcoin or anything else in this thread. That's a matter of fiscal and social policy and something you should take up with Congress and not the Fed.
My original comment was tongue-in-cheek about how CPI is irrelevant to day to day life for many people and the disconnect people feel from what CPI versus what they experience (or they believe they experience).
I assume it's all wrapped up in the widening income/wealth divides, rewards of automation and outsourcing going to capital owners, and reduced opportunities or perceived opportunities for many resulting in lower quality of life than they expected. That's not going to be captured by any numbers, especially not in a single number nationwide for a place as big as the US.
CPI measures something, and perhaps it's useful for economists or policymakers, but it has been useless as a predictor for how much income I will need to keep up with expenses in day to day life.
I'd like to know more about this. I always equated printing money to inflation. Why isn't this the case? Can you point me to some good books for the same? Thanks!
The value of the dollar in terms of a constant basket of goods is a function of both supply and of "velocity." Money is only worth something if it changes hands.
Let's say the Fed prints 1 quintillion dollars, and then gives it to me. I then put it under my very big mattress. I will never spend a single one of those dollars. Has this quintillion dollar print changed the value of the dollars that are actually changing hands? It has not.
Obviously that's a contrived example but it does demonstrate the principal. If economic environmental factors are causing people to spend less money, such as unemployment or a global pandemic, then the velocity of money goes down. This in turn causes merchants to lower prices to incentivize spend. This is how deflation materializes. If they cannot lower prices fast enough to actually incentivize a consistent level of spending you enter a deflationary spiral.
Printing new money offsets the reduction in velocity, and staves off a deflationary spiral. It doesn't however guarantee a commensurate level of inflation.
You can see this on a macro scale. Since the 1970s the M2 money supply has increased 15X however inflation has only increased 7X.
Because the Fed, like most central banks, exercises a positive control mechanism, once velocity is restored, printing will slow or even go negative to ensure a consistent, predictable level of inflation.
> Let’s say the Fed prints 1 quintillion dollars, and then gives it to me. I then put it under my very big mattress. I will never spend a single one of those dollars. Has this quintillion dollar print changed the value of the dollars that are actually changing hands? It has not.
Probably, very slightly, because even if you plan to never spend them, the fact that you have a quintillion of them in your mattress probably changes the value you attach to other dollars (because, in extremis, you could break into that stash), which has an effect on the overall value of dollars (but only imperceptibly, because you are a very small part of the market.)
>Let's say the Fed prints 1 quintillion dollars, and then gives it to me. I then put it under my very big mattress. I will never spend a single one of those dollars. Has this quintillion dollar print changed the value of the dollars that are actually changing hands? It has not.
But of course no one is stupid enough to put their dollars on a mattress. They will, like everybody else, try to find a way to run from inflation, be it investing on stocks or any other assets. So your point is of course true but irrelevant.
Not at all. Its fine if that money makes its way into assets because assets are not a necessity for life. CPI is a proxy for necessity for life. If it makes its way into stocks, that's just an ROI.
Further, if that money starts making its way back out, towards CPI, the fed will stop printing or even take the money back out of the system. That's why we have a Fed.
And that's fine, because the fed can and will simply slow down printing to compensate in the future. The supply of money is very well controlled in the US and in most other centrally banked economies.
