Bitcoin, The Purchasing Power Preserver

By Bitcoin Majalah - 1 year ago - Waktos maca: 13 menit
Salasa, 12 Juli 2022 2:00

Bitcoin, The Purchasing Power Preserver

When fiat money’s music finally stops, the inflationary pressure must go somewhere — and to bitcoin, the hardest asset, it will go.

This is an opinion editorial by Dan, cohost of the Blue Collar Bitcoin Podcast.

A Preliminary Note To The Reader: Ieu asalna ditulis salaku salah sahiji karangan nu geus saprak geus dibagi into three parts. Each section covers distinctive concepts, but the overarching thesis relies on the three sections in totality. Part 1 worked to highlight why the current fiat system produces economic imbalance. Part 2 and Part 3 work to demonstrate how Bitcoin may serve as a solution.

Eusi runtuyan

Bagian 1: Fiat Plumbing

perkenalan

Pipa Busted

Komplikasi Mata Uang Cadangan

The Cantillon Conundrum

Bagian 2: The Purchasing Power Preserver

Bagian 3: Dekompleksifikasi Moneter

The Financial Simplifier

The Debt Disincentivizer

A "Crypto" Awas

kacindekan

tingkat hutang unprecedented nu aya dina sistem finansial dinten ieu mantra hiji hal dina jangka panjang: debasement mata uang. Kecap "inflasi" ieu tossed sabudeureun remen jeung flippantly poé ieu. Sababaraha ngahargaan harti sabenerna, sabab leres atanapi implikasi nyata. Pikeun seueur, inflasi henteu langkung ti hiji harga di pompa bensin atanapi toko grosir anu aranjeunna ngawadul ngeunaan anggur sareng koktail. "Éta kasalahan Biden, Obama atanapi Putin!" Nalika urang ngazum leutik sareng mikiran jangka panjang, inflasi mangrupikeun masalah anu ageung - sareng kuring ngabantah teu tiasa direngsekeun - masalah matematika Fiat anu janten langkung hese sareng langkung hese pikeun reconcile nalika sababaraha dekade. Dina ékonomi kiwari, produktivitas lags hutang ka extent misalna yén sagala na sagala métode restitusi merlukeun perjuangan. Métrik konci pikeun ngalacak kamajuan hutang nyaéta hutang dibagi ku produk Doméstik bruto (hutang/PDB). Nyerna bagan di handap anu sacara khusus ngagambarkeun total hutang sareng hutang féderal umum anu aya hubunganana sareng GDP.

Lamun urang difokuskeun hutang féderal (garis biru), urang nempo yén dina ngan 50 taun urang geus Isro ti sub-40% hutang / GDP ka 135% salami pandémik COVID-19 - tingkat pangluhurna abad ka tukang. Perhatos ogé yén kaayaan ayeuna langkung dramatis tibatan bagan ieu sareng angka-angka ieu nunjukkeun sabab ieu henteu ngagambarkeun kolosal. Liabilities entitlement unfunded (nyaéta Jaminan Sosial, Medicare sareng Medicaid) anu diantisipasi salamina.

What does this excessive debt mean? To make sense of it, let’s distill these realities down to the individual. Suppose someone racks up exorbitant liabilities: two mortgages well outside their price range, three cars they can’t afford and a boat they never use. Even if their income is sizable, eventually their debt load reaches a level they cannot sustain. Maybe they procrastinate by tallying up credit cards or taking out a loan with a local credit union to merely service the minimum payments on their existing debt. But if these habits persist, the camel’s back inevitably breaks — they foreclose on the homes; SeaRay sends someone to take back the boat out of their driveway; their Tesla gets repossessed; they go bankrupt. No matter how much she or he felt like they “needed” or “deserved” all those items, the math finally bit them in the ass. If you were to create a chart to encapsulate this person’s quandary, you would see two lines diverging in opposite directions. The gap between the line representing their debt and the line representing their income (or productivity) would widen until they reached insolvency. The chart would look something like this:

Sareng enya, bagan ieu nyata. Éta mangrupikeun distilasi Amérika Serikat total hutang nagara (warna beureum) leuwih produk doméstik kotor, atawa produktivitas (warna biru). Kuring mimiti ningali bagan ieu dipasang dina Twitter ku well-dipikawanoh sora ngajengkeun duit jeung tech investor Lawrence Lepard. Anjeunna kalebet téks di handap ieu di luhur.

“Blue line generates income to pay interest on red line. See the problem? It's just math.”

The math is catching up to sovereign nation states too, but the way the chickens come home to roost looks quite different for central governments than for the individual in the paragraph above, particularly in countries with reserve currency status. You see, when a government has its paws on both the supply of money and the price of money (i.e. interest rates) as they do in today’s fiat monetary system, they can attempt to default in a much softer fashion. This sort of soft default necessarily leads to growth in money supply, because when central banks have access to newly created reserves (a money printer, if you will) it’s incredibly unlikely debt service payments will be missed or neglected. Rather, debt will be monetized, meaning the government will borrow newly fabricated money1 from the central bank rather than raising authentic capital through increasing taxes or selling bonds to real buyers in the economy (actual domestic or international investors). In this way, money is artificially manufactured to service liabilities. Lyn Alden nempatkeun tingkat hutang sareng monetisasi hutang dina konteks:

“When a country starts getting to about 100% debt-to-GDP, the situation becomes nearly unrecoverable ... a diajar ku Hirschman Capital nyatet yén kaluar tina 51 kasus hutang pamaréntah megatkeun luhur 130% GDP saprak 1800, 50 pamaréntah geus defaulted. Hiji-hijina iwal, sajauh ieu, nyaéta Jepang, nyaéta nagara creditor pangbadagna di dunya. Ku "defaulted," Hirschman Capital included nominal default and major inflations where the bondholders failed to be paid back by a wide margin on an inflation-adjusted basis … There’s no example I can find of a large country with more than 100% government debt-to-GDP where the central bank doesn’t own a significant chunk of that debt.”2

Kakuatan moneter inordinate bank sentral fiat jeung treasuries mangrupakeun kontributor badag kana ngungkit kaleuleuwihan (hutang) buildup di tempat munggaran. Kontrol terpusat kana artos ngamungkinkeun para pembuat kabijakan pikeun ngalambatkeun nyeri ékonomi ku cara anu terus-terusan, sababaraha kali ngirangan masalah jangka pondok. Tapi sanajan niat murni, kaulinan ieu teu bisa lepas salawasna. Sajarah nunjukkeun yén niat anu saé henteu cekap; lamun insentif anu improperly Blok, instability awaits.

Lamentably, anceman debasement mata uang ngabahayakeun sarta inflasi nyirorot naek salaku tingkat hutang jadi leuwih unsustainable. Dina taun 2020an, urang mimiti ngaraosan épék ngarusak tina percobaan fiat pondok ieu. Jalma anu ngalaksanakeun kakuatan moneter memang gaduh kamampuan pikeun ngaleungitkeun nyeri ékonomi anu pencét, tapi dina jangka panjang éta pendapat kuring yén ieu bakal ngagedékeun karusakan ékonomi, khususna pikeun anu kurang mumpuni di masarakat. Nalika langkung seueur unit moneter asup kana sistem pikeun ngagampangkeun ngarareunah, unit anu tos aya kaleungitan daya beuli relatif ka anu bakal kajantenan tanpa ngalebetkeun artos sapertos kitu. Tekenan pamustunganana ngawangun nepi dina sistem ka extent misalna yén éta kudu kabur wae - yén klep ngewa teh mata uang debasing. padagang beungkeut karir-lila Greg Foss nempatkeun éta kawas kieu:

“In a debt/GDP spiral, the fiat currency is the error term. That is pure mathematics. It is a spiral to which there is no mathematical escape.”3

bentang inflasi Ieu hususna troublesome ka anggota kelas menengah jeung handap pikeun sababaraha alesan konci. Mimiti, sakumaha anu urang bahas di luhur, demografi ieu condong nahan langkung sakedik aset, boh dina total sareng salaku persentase tina nilai bersihna. Nalika mata uang ngalebur, aset sapertos saham sareng perumahan cenderung naek (sahenteuna rada) sareng suplai artos. Sabalikna, tumuwuhna gaji jeung gajih kamungkinan underperform inflasi jeung jalma kalawan tunai kirang bébas gancang mimiti treading cai. (Ieu katutupan panjang dina Part 1.) Kadua, anggota kelas menengah jeung handap, sacara umum, demonstrably kirang melek finansial sarta nimble. Dina lingkungan inflasi, pangaweruh sareng aksés mangrupikeun kakuatan, sareng sering peryogi maneuver pikeun ngajaga daya beli. Anggota kelas luhur jauh leuwih gampang boga pajeg jeung investasi apal-kumaha, kitu ogé egress kana instrumen finansial pilihan, luncat kana rakit hirup salaku kapal mana handap. Katilu, loba earners upah rata leuwih reliant on rencana benefit tangtu, jaminan sosial atawa strategi pangsiun tradisional. Parabot ieu nangtung squarely dina lingkup regu firing inflasi. Salila période debasement, aset jeung payouts dinyatakeun denominated dina mata uang fiat inflating paling rentan. Masa depan finansial seueur jalma rata-rata gumantung pisan kana salah sahiji ieu:

The lesson here is that the everyday worker and investor is in desperate need of a useful and accessible tool that excludes the error term in the fiat debt equation. I am here to argue that nothing serves this purpose more marvelously than bitcoin. Although much remains unknown about this protocol’s pseudonymous founder, Satoshi Nakamoto, his motivation for unleashing this tool was no mystery. In the blok génis, kahiji Bitcoin block ever mined on January 3, 2009, Satoshi highlighted his disdain for centralized monetary manipulation and control by embedding a recent London Times cover story:

"The Times 03 / Jan / 2009 Canselor dina bailout kadua pikeun bank."

The motivations behind Bitcoin’s creation were certainly multifaceted, but it seems evident that one of, if not the, primary problem Satoshi set out to solve was that of unchangeable monetary policy. As I write this today, some thirteen years since the release of this first block, this goal has been unceasingly achieved. Bitcoin stands alone as the first-ever manifestation of enduring digital scarcity and monetary immutability — a protocol enforcing a dependable supply schedule by way of a decentralized mint, powered by harnessing real world energy via Bitcoin mining and verified by a globally-distributed, radically-decentralized network of nodes. Roughly 19 million BTC exist today and no more than 21 million will ever exist. Bitcoin is conclusive monetary reliability — the antithesis of, and alternative to debasing fiat currency. Teu aya anu sapertos anu kantos aya sareng kuring yakin yén mecenghulna pas pikeun seueur umat manusa.

Bitcoin is a profound gift to the world’s financially marginalized. With a small amount of knowledge and a smartphone, members of the middle and lower class, as well as those in the developing world and the billions who remain unbanked, now have a reliable placeholder for their hard earned capital. Greg Foss often describes bitcoin as “portfolio insurance,” or as I’ll call it here, hard work insurance. Buying bitcoin is a working man’s exit from a fiat monetary network that guarantees depletion of his capital into one that mathematically and cryptographically assures his supply stake. It’s the paling hese duit umat manusa geus kungsi katempo, bersaing jeung sababaraha duit lemes dina sajarah manusa. Kuring ajak pamiarsa pikeun heed kecap Saifedean Ammous tina buku mani na "nu Bitcoin standar: "

"History shows it is not possible to insulate yourself from the consequences of others holding money that is harder than yours."

On a zoomed out timeframe, Bitcoin is built to preserve buying power. However, those who choose to participate earlier in its adoption curve serve to the benefit the most. Few understand the implications of what transpires when exponentially growing network effects meet a monetary protocol with absolute supply inelasticity (hint: it might continue to look something like the chart below).

Bitcoin has the makings of an innovation whose time has come. The apparent impenetrability of its monetary architecture contrasted with today’s economic plumbing in tremendous disrepair indicates that incentives are aligned for the fuse to meet the dynamite. Bitcoin is arguably the soundest monetary technology ever discovered and its advent aligns with the end of a siklus hutang jangka panjang when hard assets will plausibly be in highest demand. It’s poised to catch much of the air escaping the balloons of a number of overly monetized4 asset classes, including low- to negative-yielding debt, real estate, gold, art and collectibles, offshore banking and equity.

It’s here where I can sympathize with the eye rolls or chuckles from the portion of the readership who point out that, in our current environment (July 2022), the price of Bitcoin has plummeted amidst high ICC prints (inflasi tinggi). Tapi kuring nyarankeun urang ati-ati sareng ngagedekeun. dinten ieu capitulation was pure euphoria a little over two years ago. Bitcoin ngabogaan dinyatakeun "maot" leuwih sarta leuwih deui ngaliwatan taun, ngan pikeun possum ieu deui muncul leuwih badag sarta healthier. Dina urutan cukup pondok, hiji titik harga BTC sarupa bisa ngagambarkeun duanana karanjingan ekstrim na salajengna sieun ekstrim di jalan -na pikeun escalating nilai newak.

History shows us that technologies with strong network effects and profound utility — a category I believe Bitcoin fits in — have a way of gaining enormous adoption right underneath humanity’s nose without most fully recognizing it.

Di handap ieu cutatan ti Vijay Boyapati urang ogé dipikawanoh “Bullish Case for Bitcoin" essay5 explains this well, particularly in relation to monetary technologies:

"Nalika daya beuli barang moneter naek kalawan ngaronjatna nyoko, ekspektasi pasar naon constitutes "mirah" jeung "mahal" shift sasuai. Nya kitu, nalika harga hiji ngadat moneter alus, ekspektasi bisa pindah ka kapercayaan umum yén harga saméméhna éta "irasional" atawa overly inflated. . . . Kabeneran aya anggapan "mirah" sareng "mahal" dasarna henteu aya artina pikeun ngarujuk kana barang moneter. Harga barang moneter sanés mangrupikeun cerminan aliran kas na atanapi kumaha mangpaatna, tapi, mangrupikeun ukuran kumaha lega diadopsi pikeun sababaraha peran artos.

If Bitcoin does one day accrue enormous value the way I’ve suggested it might, its upward trajectory will be anything but smooth. First consider that the economy as a whole is likely to be increasingly unstable moving forward — systemically fragile markets underpinned by credit have a propensity to be volatile to the downside in the long run against hard assets. Promises built on promises can quickly fall like dominoes, and in the last few decades we’ve experienced increasingly regular and significant deflationary episodes (often followed by stunning recoveries assisted by fiscal and monetary intervention). Amidst an overall backdrop of inflation, there will be fits of dollar strengthening — we are experiencing one currently. Now add in the fact that, at this stage, bitcoin is nascent; it’s poorly understood; its supply is completely unresponsive (inelastic); and, in the minds of most big financial players, it’s optional and speculative.

Nalika kuring nyerat ieu, Bitcoin is nearly 70% down from an all-time high of $69,000, and in all likelihood, it will be extremely volatile for some time. However, the key distinction is that BTC has been, and in my view will continue to be, volatile to the upside in relation to soft assets (those with a subjective and expanding supply schedules; i.e. fiat). When talking about forms of money, the words “sound” and “stable” are far from synonymous. I can’t think of a better example of this dynamic at work than gold versus the German papiermark during the hyperinflation di Républik Weimar. Soak dina bagan di handap pikeun ningali kumaha tremendously volatile emas dina mangsa ieu.

Dylan LeClair boga ceuk patalina jeung bagan di luhur:

"Anjeun bakal sering ningali grafik ti Weimar Jerman harga emas dina tanda kertas bade parabolic. Anu henteu ditingalikeun dina bagan éta nyaéta drawdowns anu seukeut & volatilitas anu kajantenan salami periode hiper-inflasi. Spekulasi ngagunakeun leverage parantos musnah sababaraha kali. ”

Despite the papiermark inflating completely away in relation to gold over the long run, there were periods where the mark significantly outpaced gold. My base case is that bitcoin will continue to do something akin to this in relation to the world’s contemporary basket of fiat currencies.

Ultimately, the proposition of bitcoin bulls is that the addressable market of this asset is mind numbing. Staking a claim on even a small portion of this network may allow members of the middle and lower classes to power on the sump pump and keep the basement dry. My plan is to accumulate BTC, batten down the hatches and hold on tight with low time preference. I’ll close this part with the words of Dr. Jeff Ross, former interventional radiologist turned hedge fund manager:

“Checking and savings accounts are where your money goes to die; bonds are return-free risk. We have a chance now to exchange our dollar for the greatest sound money, the greatest savings technology, that has ever existed.”6

In Part 3, we’ll explore two more key ways in which bitcoin works to rectify existing economic imbalances.

Footnotes

1. Although this is often labeled as “money printing,” the actual mechanics behind money creation are complex. If you would like a brief explanation of how this occurs, Ryan Deedy, CFA (an editor of this piece) explained the mechanics succinctly in a correspondence we had: “The Fed is not allowed to buy USTs directly from the government, which is why they have to go through commercial banks/investment banks to carry out the transaction. [...] To execute this, the Fed creates reserves (a liability for the Fed, and an asset for commercial banks). The commercial bank then uses those new reserves to buy the USTs from the government. Once purchased, the Treasury's General Account (TGA) at the Fed increases by the associated amount, and the USTs are transferred to the Fed, which will appear on its balance sheet as an asset.”

2. Tina "Naha Hutang Nasional Pentingna" ku Lyn Alden

3. Ti "Why Every Fixed Income Investor Needs to Consider Bitcoin as Portfolio Insurance” ku Greg Foss

4. When I say “overly monetized,” I’m referring to capital flowing into investments that might otherwise be saved in a store of value or other form of money if a more adequate and accessible solution existed for retaining buying power.

5. Ayeuna a buku ku judul sarua.

6. Ceuk mangsa a panel ékonomi makro at Bitcoin 2022 Konperénsi

Ieu pos tamu ku Dan. Pamadegan dikedalkeun sagemblengna sorangan sarta teu merta ngagambarkeun pamadegan BTC Inc atanapi Bitcoin majalah.

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