Bitcoin in a hyperbolic bubble

[Duke of Marmalade]

@tecate so that is where the cult has got to. Bitcoin is to the dollar what the motor car was to the pony and trap. The cult has moved a long way from its modest aspiration to coexist with fiat supplying a niche demand.
@Dublinbay12 apologies for not engaging on the liquidity issue. As I understand your point, you are saying if there is mass corporate take up as a store of value/reserve ala Microstrategy/Tesla there won't be enough left to act as a medium of exchange. But please correct me if that is a misinterpretation.
The reason I find it hard to engage is that I can't see that mass take up and I certainly can't see it acting as a medium of exchange in any meaningful way.
But as a thought experiment let's consider that there is a massive demand for bitcoin on both fronts, store of value and medium of exchange. I suppose the straight answer is that the price will take up the slack. Bitcoin is valued at $1trn today but there is no substance to that, it is simply supply and demand. If there is a demand for $5trn on company's balance sheets and a similar demand as a medium of exchange then its price will increase 10 fold to $500k as some predict. There is as much sense to bitcoin being valued at $50k, $500k, $1.

 

[tecate]

@tecate so that is where the cult has got to. Bitcoin is to the dollar what the motor car was to the pony and trap. The cult has moved a long way from its modest aspiration to coexist with fiat supplying a niche demand.

You conspire to miss the point at every turn, your dukeness. And that point - in this instance - was a reference to the attitude of those that ignored innovation and change in the past and your attitude and resistance to change.
On a number of instances during the course of these discussions, Brendan has made a book recommendation - Extraordinary Popular Delusions & The Madness of Crowds. It's well worth reading. However, it's by far and away not the only thing that needs to be on the reading list for those with an interest in this subject area.
"Who Moved My Cheese?" - I'd cancel that IT subscription your dukeness and get on that one as soon as possible if I was in your shoes.
Like everything else, monetary systems evolve - and you can change with it or get left behind.
Oh, and incidentally, my belief that sovereign money will exist/compete alongside decentralised money has not changed. On the sustained 'cult' tar and feathering...
Fiat: “In God We Trust”
Bitcoin: “Don’t Trust, Verify”

 

[Duke of Marmalade]

@tecate Unlike some others, I actually take a positive view when people turn the debate into ad hominem insults against me, shows that I am winning the substantial debate. As a reminder this latest foray is in response to Wolfie asking rhetorically whether anybody believed in our monetary system any more. I think I answered that comprehensively by reference to what I see around me.

 

[tecate]

I actually take a positive view when people turn the debate into ad hominem insults against me, shows that I am winning the substantial debate.

I fail to see how you've been insulted and I reject the ad hominem charge. I also think that your approach is wayward. I'm here to discuss and to learn - not to 'win'.

As a reminder this latest foray is in response to Wolfie asking rhetorically whether anybody believed in our monetary system any more. I think I answered that comprehensively by reference to what I see around me.

And I maintain that there is plenty of food for thought for you in my response. There's a wealth of evidence that many intelligent people can't get their heads round digital assets because they can't deal with change. From millenials downward, those people are far more comfortable with digital/virtual assets/currencies than those older than them. More-so as you go further down the age range.
My post was written with this in mind. It was also written with an eye towards folks not seeing how something could have advantages over existing systems. You could ponder it in those terms or you can climb back into your bunker and decide to interpret that as an insult and plot on how you will 'win'. Your choice.

 

[Duke of Marmalade]

I fail to see how you've been insulted and I reject the ad hominem charge. I also think that your approach is wayward. I'm here to discuss and to learn - not to 'win'.


And I maintain that there is plenty of food for thought for you in my response. There's a wealth of evidence that many intelligent people can't get their heads round digital assets because they can't deal with change. From millenials downward, those people are far more comfortable with digital/virtual assets/currencies than those older than them. More-so as you go further down the age range.
My post was written with this in mind. It was also written with an eye towards folks not seeing how something could have advantages over existing systems. You could ponder it in those terms or you can climb back into your bunker and decide to interpret that as an insult and plot on how you will 'win'. Your choice.

A load of not very clever not very funny baloney about ponies and traps does not add to the debate as to whether folk still have confidence in the monetary system.

 

[tecate]

A load of not very clever not very funny baloney about ponies and traps does not add to the debate as to whether folk still have confidence in the monetary system.

What it does do, your dukeness, is inform the discussion that people can often have issues in mapping out where an innovative technology can take us. It speaks to exactly that.

 

[DublinHead54]

I'm sorry @tecate @Duke of Marmalade this thread is not a debate or a place that welcomes discussion and an environment to learn. It revolves around you two trying to outsmart each other with overly long posts.

The other side is one that doesn't welcome discussion and any slight critique or questioning is shot down.

In the last few days I've posted questions about liquidity issues hoping to discuss that. I've used the same source as @tecate has used previously as evidence. Yet nobody wants to discuss this topic, and it's just been ignored.

Would it not be better for this forum if you moved your discussion to a private message?

You've clearly lost the crowd here and what ever interesting developments you want to advertise is lost in the rest of your messages trying to outsmart each other.

 

[WolfeTone]

Wolfie I don't know where you live but are you seeing folk in your neighbourhood with wheelbarrows of € notes? Everything looks very normal in these parts.

No wheelbarrows full of € Duke, not yet anyway. I'm watching an interview with LaGarde on Bloomberg. "Whatever it takes" economic policy is alive and well and will be here for quite some time yet.
Worth a watch on YT.
Now I accept I tend to come at these things with a view heavily dosed in scepticism. But I qualify that scepticism against 20yrs or so of observing these central bankers talking a lot of nonsense and spouting delusion after delusion.

"We are guided by persevering favourable financing conditions" - LaGarde.
It is an impressive hook-line for sure, but she then explains that the policy is to apply the €1.8trn ECB purchasing program partially, in whole, or even more if needed!
This is not policy, this is make-it-up-as-we go along.

The interviewer asks "Draghi never got to hike rates, can you imagine yourself in the same position?"
LaGarde "We shall see... I hope... we are not seeing conditions yet to raise rates for some time"
I translate that to mean the 'policy' doesn't work.

Shopkeepers are happy with the fiat and as far as I know most people are happy to work for fiat and will even let any surplus accumulate in their current accounts earning nothing.

Duke, the shopkeepers and retailers are happy because the shopkeepers and retailers cannot be allowed to be anything but happy. Why borrow from a bank to cover wage bill paying interest rates when the Revenue can help you out for free?
If the retailers, and by extension the consumers are not happy, then the resulting consequences spell trouble.
It is why the chaos is occuring in asset markets. Bonds yields at record lows and stock markets at record highs, property prices at near all times highs again, and the customary anecdotal stories of art works going for ridiculous prices.
Bitcoin at $50,000 is also part of this chaos.

But of course if you enjoy wallowing in a belief that the whole caboodle is a sham

It is not a sham, it is very real. People actually believe the ECB can manage and monitor an entire monetary and economic union of diverse ecomonies and provide stability.

 

[Duke of Marmalade]

In the last few days I've posted questions about liquidity issues hoping to discuss that. I've used the same source as @tecate has used previously as evidence. Yet nobody wants to discuss this topic, and it's just been ignored.

I did make a belated attempt to address your liquidity point.
I don't think you are using the usual definition of liquidity but correct me if I am wrong.
Your definition: will there be enough bitcoin to serve the twin demands of balance sheet and medium of exchange?
Conventional definition: how much* can be offloaded at current prices without affecting the price?
The answer to both is all in the price and the reality (some will say the beauty) with bitcoin is that it can be any price that its users make it.
Now when it cost 10,000 btc to buy 2 pizzas, even if the whole 21m were in circulation their combined value would just about buy a middle range car. And I guess the guy who sold the 2 pizzas, if he tried to cash them in immediately would find he got maybe half the dollar value that he thought he was selling them for.
Or maybe you are focussed on the quantity of bitcoin. 21m does not sound like a lot but that is 2,100 trillion satoshis if viewed from the smallest unit.
* The expression "how much?" implies a numeraire, which is usually the operating currency of the person asking the quastion.

 

[tecate]

No wheelbarrows full of € Duke, not yet anyway.

No wheelbarrows but its a heck of a low bar if that's what's deemed to be a success in the world of fiat! There's plenty of stealth taxing that can be done without the wheelbarrows. And of course, there's never a year where there isn't a need for those wheelbarrows of worthless paper somewhere on the planet. I get that hard money can be a lot more appreciated in countries with greater risk of monetary/fiscal mismanagement but any assessment of it has to go beyond what it can/can't do for the individual as its available globally - not just in Ireland.

"Whatever it takes" economic policy is alive and well and will be here for quite some time yet.

Indeed it is. Fiat money is the grander experiment here - not bitcoin. People seem to forget that unbacked sovereign currency is a relatively recent phenomenon. As regards 'whatever it takes', whenever I ask anyone how much money printing is too much money printing, nobody seems to have an answer.
I put this to the Duke some months back and he said he was concerned about the rampant money printing but that he'd have to have faith in the central bankers. Bitcoin comes at this from the polar opposite corner (don't trust, verify) - so people can decide which lends itself to cult-like behaviour.

This is not policy, this is make-it-up-as-we go along.

Yup, which is why nobody has an answer here or anywhere else. Nobody knows because fiat money is the bigger experiment.

Bitcoin at $50,000 is also part of this chaos.

Very much so. I came across this tweet the other day. I think its very poignant in this regard (and in relation to a discusion around the accuracy of CPI in recent days):

https://twitter.com/x/status/1377309612823740422

 

[Duke of Marmalade]

No wheelbarrows full of € Duke, not yet anyway.

You live in hope.

Duke, the shopkeepers and retailers are happy because the shopkeepers and retailers cannot be allowed to be anything but happy.

I presume you are referring to the fact that by fiat shopkeepers are required to accept euro. I often wonder do you actually believe this stuff. Do you really think that my local shopkeeper would prefer I paid him with vegetables from the garden or maybe bitcoin?
In any case if he is so reluctant to accept euro hasn't he the obvious remedy. It's called bitcoin. Remember it's censorship free. He could every hour bank his dud euros by topping up his bitcoin account. Maybe this is indeed happening on a grand scale. Have you any evidence that this is happening?

I see some cult propaganda from @tecate. It predicts money supply up 24%. That is hardly rampant printing.

 

[tecate]

I see some cult propaganda from @tecate. It predicts money supply up 24%. That is hardly rampant printing.

Increasing money supply by a quarter isn't rampant money printing? If you say so, Dukey. Here's a WP article that puts things in perspective:





(on the cult reference...

Fiat: “In God We Trust”
Bitcoin: “Don’t Trust, Verify” )

 

[WolfeTone]

You live in hope

Not at all, Duke. But just in case I have purchased a small amount of bitcoin to protect myself.
It would appear I'm not alone in that line of thinking.

I presume you are referring to the fact that by fiat shopkeepers are required to accept euro.

No, what I'm referring to is the price stability of essential goods, like food.

The too-big-to-fail approach of saving financial institutions has now extended, because of Covid, to every man, woman and child and business.
It is an honourable approach, but it is not borne out of political altruism, it is borne out of political necessity. Because if too many Joe & Josephine Public go under then that is recipe for chaos.
So asset prices are completely skewed and make little sense. Price discovery is being tarred over, so that bread and butter remains stable.

I hope you get to watch the LaGarde interview from yesterday. She certainly delivers the soundbites, but more significant is the line of questioning from the interviewer. The questions offer more insight than the answers.

 

[Duke of Marmalade]

Increasing money supply by a quarter isn't rampant money printing? If you say so, Dukey. Here's a WP article that puts things in perspective:





(on the cult reference...

Fiat: “In God We Trust”
Bitcoin: “Don’t Trust, Verify” )

Effect of the pandemic on Money Supply so far
$ MS up from 15.5 to 19.4
£ MS up from 2.5 to 2.8
€ MS up from 12.8 to 13.8
Actually I was pleasantly surprised by these figures. The following is how the professionals view the outlook for medium term inflation in the eurozone.

This is from the French market. The inflation breakeven is where the gnomes of Paris and Zurich are placing their trillions of € on inflation rates out to 2028. Their estimate: 0.8%. I can live with that though Mme Lagarde may have something to say about it as she targets a massive 2%.
Caution: the above chart is absolutely useless for those who measure their inflation expectations in terms of the price of yachts or who believe the official calculation of inflation is completely crooked.

 

[Duke of Marmalade]

No, what I'm referring to is the price stability of essential goods, like food.

Not sure I understand the point. We are discussing the rhetorical question you raised as to whether anybody trusts the monetary system any more. I argued that from my own experience most people seem to have no difficulty in using euro as they always had. Price stability of core goods is certainly part of that. Are you now answering you own question that folk are happy with the euro but only because they have to be happy? Stability is a good thing and if we have stability because folk want it, I can't see what the problem is. Are you saying that deep down everyone knows, like you, that the monetary system is a complete can of worms but have formed a sort of implicit consensus not to open that can?

The too-big-to-fail approach of saving financial institutions has now extended, because of Covid, to every man, woman and child and business.
It is an honourable approach, but it is not borne out of political altruism, it is borne out of political necessity. Because if too many Joe & Josephine Public go under then that is recipe for chaos.

I agree that altruism is a very rare commodity restricted to those who follow saintly lives. But still I am glad that I live in a system where the selfish interest of the "elites" is to keep Joe and Josephine on side.

So asset prices are completely skewed and make little sense. Price discovery is being tarred over, so that bread and butter remains stable.

Agree with the first point. Not sure I understand the second point.

 

[tecate]

Are these the ECB's projections? Can you provide a link to that data please?

Do you see yacht price inflation itemised in post # 511 above? (oh, and congratulations once again on your conversion to socialism!). I don't see that listed but I do see a whole host of commodities skyrocketing in price - and food up 25%. You know....things that people need to live.
Message received on not daring to question official figures - I guess this is in line with your hoping that the ECB can fix their mess. Accepting official data unquestioningly is in line with your cultist ways.

 

[RedOnion]

Are these the ECB's projections? Can you provide a link to that data please

No, not ECB projections.
The chart is based on the yields on inflation linked bonds. It just infers the market expectations of inflation by looking at the difference in yield on OATi bonds Vs normal government bonds.
So for bonds with a 2028 maturity, the money markets are pricing an inflation expectation of 0.7%

 

[Duke of Marmalade]

This is the source of the figure in #515. It is an official website of the French government. But the inflation expectations have nothing to do with any official projections. It is what the gnomes are betting their very considerable trillions on the outlook for official inflation. I personally give it more credibility than a tweet from Reddit investors.
It is clear now that the fear of hyperinflation is partly behind the btc surge, although the Muskie effect has also been enormous. If the gnomes are right or even if Mme Lagarde has her wicked way and gets inflation up to 2% I can't see the hyperinflation insurance aspect of btc lasting till 2028.

 

[RedOnion]

I personally give it more credibility than a tweet from Reddit investors

You mean a tweet that shows the prices of a select number of commodities, some of which have recovered back to the levels they were a few years ago, before falling sharply?

 

[WolfeTone]

Agree with the first point. Not sure I understand the second point.

Bond yields are being driven to zero by ECB to facilitate cheaper (free) borrowing.
Without it interest rates rise, inflation etc.

But if this was a panacea against long-term economic instability then it would be permanent policy, would it not?
But the CBs are clear, these are not permanent measures... why? Well, because it is not sustainable. And if it is not sustainable, then there has to be consequence.
How, when, or in what form, those consequences emerge nobody knows.