Bitcoin in a hyperbolic bubble

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Wasn't the 'Core CPI' measurement utilised for many years for general reporting purposes?

I think 'core CPI' and 'core inflation' are just different terms for the same thing, depending on audience / jurisdiction. Open to correction on that though.

Question, though. A bond offering that's inflation-linked is likely to be entered into by those that have an intimate knowledge of the applicable CPI measurement.

Yes, fair point. The 'market makers' of the bonds would understand exactly how CPI is calculated, and the consistency of it. The constituents and weighting of each are constantly reviewed, I remember a few years ago the Irish 'basket' was changed to better reflect the items households were actually buying.
Some of the criticism is that the basket doesn't reflect actual increases in household costs - as economies become more affluent, our tastes become more expensive (without talking about yachts!). However the CSO doesn't replace own brand goods with more expensive branded ones, although that might be what people are really buying.

 

[tecate]

I think you may be getting a bit too caught up with your metaphor. Physical printing presses are not the actual tool being used.

Duke, I'm aware that it's electronically created - they just add a couple of zeros on their centralised database - and voila. Not sure what your point is though?

The ECB will make monetary conditions as easy or tight as it thinks is required to achieve its targets, and thankfully I agree with its targets and I have a reasonable amount of confidence that they will achieve them, there or thereabouts.

You mean - as you stated many months ago - you're trusting that they've got it right. You can't demonstrate if they have and probably neither can they.

They have the tools to withdraw that so called "printed" money if they need to. As I say, this is not Zimbabwe. By contrast, Mugabe having literally printed zillions of Z$ could not withdraw them from circulation.

There are many Zimbabwe's - at any given time, there's a list of Zimbabwe's. When considering bitcoin, that includes all the zimbabwe's in the world also. You don't get to leave them out.

You are trying to simplify beyond the bounds of simplification.

No Duke....you can't answer the question - because you don't know. At what point do they print/issue/magic up too many euro? It's a very reasonable and important question. That its complex to answer is fair but not to know is dangerous as far as I can see.

Satoshi might have thought 21m was a nice round number to hard code for all time. The real world is not like that, and so you are destined to be frustrated in the search for the answer you are looking for.

That's both nonsense and a cop out. Bitcoin is an entirely different monetary system in its own right - by design. By 'real world', you mean this keynesian system we inherited? You've identified that Mugabe printed/issued too much currency. Why is it unreasonable of me to ask what's too much when it comes to other currencies? Your outlook/view here is completely faith based - faith.....the stuff of religions and cults. Is this the reason that they have 'In God We Trust' on the US dollar? Should I be saying a few 'our fathers'? Maybe divine intervention will provide me with an answer to my question.

I just checked. Bitcoin has increased in price 10 fold over the last 12 months. Gold is exactly at the same price as it was a year ago. So you are right. The fear of hyperinflation cannot be a factor at all. Muskie is good for some of the increase but please enlighten me as to the "other facets".

12 months you say? And yet around 6 months ago you claimed that bitcoin hadn't appreciated anywhere near as good as gold. There is another theory by the way - and that's that bitcoin is beginning to be seen to have certain qualities that are superior to gold.

Yes indeed, a very controversial area. By definition assets are not consumables so they do not enter the CPI. CPI is used for such things as pension planning and adjusting social welfare payments and informing collective wage bargaining. Arguably it is the cost of living that is relevant here and not the cost of assets. But there is no doubt that QE has led to inflation in asset prices and a consequent increase in wealth inequality. Is this deliberate CB policy or an unfortunate by product of the monetary easing? I do not accept Big Short arguments that it is a deliberate ruse to line the pockets of the elites. But the increased wealth effect may be a not unwanted side effect.

Wasn't 'Core CPI' used as the general reported measure of inflation for many years - introduced during a period of high inflation? It didn't include food, housing or energy.
I asked you the other day if the currently used measure - as generally reported - includes housing, health insurance and education?
What 'increased wealth effect'?

 

[Duke of Marmalade]

Duke, I'm aware that it's electronically created - they just add a couple of zeros on their centralised database - and voila. Not sure what your point is though?

My point is that if you physically print money ala Zimbabwe, Lebanon, Venezuela, there is no way back. If you buy up long bonds by injecting money you can reverse that by selling back the long bonds you bought. Japan has been operating QE on and off for many yonks now, and no sign of it going badly wrong.

You mean - as you stated many months ago - you're trusting that they've got it right. You can't demonstrate if they have and probably neither can they.

Trusting and hoping. Human behaviour, which is the real focus of monetary policy, cannot be predicted with certainty by anyone.

There are many Zimbabwe's - at any given time, there's a list of Zimbabwe's. When considering bitcoin, that includes all the zimbabwe's in the world also. You don't get to leave them out.

Well I do from my narrow personal perspective. I foresee no circumstance where I will be exposed to a Zimbabwe like syndrome.

No Duke....you can't answer the question - because you don't know. At what point do they print/issue/magic up too many euro? It's a very reasonable and important question. That its complex to answer is fair but not to know is dangerous as far as I can see.

I can't answer the question in the sense that I can't give you a figure, I know you would like me to. I can give you the conditions. They will stop "printing" when in their expert view it is no longer conducive to their targets. As explained, if they decide that it would be better to reverse the "printing" they have the tools to do that. (forget the metaphor, tecate, they do not have to go sucking notes out of people's pockets.

That's both nonsense and a cop out. Bitcoin is an entirely different monetary system in its own right - by design. By 'real world', you mean this keynesian system we inherited? You've identified that Mugabe printed/issued too much currency. Why is it unreasonable of me to ask what's too much when it comes to other currencies? Your outlook/view here is completely faith based - faith.....the stuff of religions and cults. Is this the reason that they have 'In God We Trust' on the US dollar? Should I be saying a few 'our fathers'? Maybe divine intervention will provide me with an answer to my question.

No comment

12 months you say? And yet around 6 months ago you claimed that bitcoin hadn't appreciated anywhere near as good as gold.

You're wrong on that. I pointed out that bitcoin had well outpaced gold. That scenario is even more pronounced now.

There is another theory by the way - and that's that bitcoin is beginning to be seen to have certain qualities that are superior to gold.

What are those "other facets" by the way?

Wasn't 'Core CPI' used as the general reported measure of inflation for many years - introduced during a period of high inflation? It didn't include food, housing or energy.
I asked you the other day if the currently used measure - as generally reported - includes housing, health insurance and education?
What 'increased wealth effect'?

There are many definitions of CPI in many jurisdictions, all for different but valid purposes in their own right and not a tool kit for the elite to hoodwink the hoi polloi.
I am based in Ireland, possibly you are not. I showed the constituents of Irish CPI. It includes housing, insurance and education and of course food and energy. I leave you to cherry pick the definition of CPI that suits the cult's narrative.

 

[tecate]

My point is that if you physically print money ala Zimbabwe, Lebanon, Venezuela, there is no way back. If you buy up long bonds by injecting money you can reverse that by selling back the long bonds you bought. Japan has been operating QE on and off for many yonks now, and no sign of it going badly wrong.

Right - so it's all in the hands of the humans that run governments and central banks. They screw up, your savings are toast, etc. I accept that some economies are more professionally managed than others but it still boils down to human judgement. I recall the former US president meddling with the Fed and putting political pressure on them re. interest rates. There are all sorts of stakeholders who may not have the best interests of citizens as their first motivation.

Trusting and hoping. Human behaviour, which is the real focus of monetary policy, cannot be predicted with certainty by anyone.

See above.

You're wrong on that. I pointed out that bitcoin had well outpaced gold. That scenario is even more pronounced now.

No. In August you claimed that gold was comparatively a much better performer than bitcoin.

What are those "other facets" by the way?

You know them well after three years of this Duke. It can be used as a base settlement layer - gold cannot. It's divisible - gold isnt. It is decentralised ( whereas gold is largely held within a centralised system and manipulated accordingly). It's censorship resistant - allowing value to be transmitted digitally anywhere in the world by anyone that wants to send/receive it. It's perfectly finite - whereas gold isn't. If the price of gold rises, the level of extraction increases with that.

There are many definitions of CPI in many jurisdictions, all for different but valid purposes in their own right and not a tool kit for the elite to hoodwink the hoi polloi.

So was it wrong that Core CPI was introduced in the middle of a highly inflationary period - and continued to be used up until more recent times?

I am based in Ireland, possibly you are not. I showed the constituents of Irish CPI. It includes housing, insurance and education and of course food and energy. I leave you to cherry pick the definition of CPI that suits the cult's narrative.

Again, for the purposes of how this all affects bitcoin, then other jurisdictions count.

Well I do from my narrow personal perspective. I foresee no circumstance where I will be exposed to a Zimbabwe like syndrome.

You are dependent upon 'In God We Trust' on that one. I favour the 'Don't Trust, Verify' approach.

 

[Duke of Marmalade]

@tecate you got me on the gold comparison there. The thread is getting very long. Maybe @Dublinbay12 is right, time to give it a rest.

 

[joe sod]

Once again, my understanding is that technology is driving a deflationary environment but that doesn't mean that every category/item is immune from inflation eg. there may well be considerable asset price inflation.

This is a very interesting discussion now and I know has sidetracked to the wider topic of the link between deflation and technology. Has technology now reached the limits of its deflationary effects and is now inflationary. Technology has increased the demand for materials and commodities now especially rare ones needed for the manufacture of technology goods. At the same time the world is actually running short of "virgin materials" , the corona actually caused people to shift their spending from holidays and experiences like pubs and restaurants to goods and stuff. World shipping tonnage has increased significantly over the last year which explained why the blockage of the suez canal was so serious.
Calls into question the whole narrative that technology is good for the environment, it is anything but, people are consuming more stuff than ever before and that stuff can no longer be produced cheaply.

 

[tecate]

This is a very interesting discussion now and I know has sidetracked to the wider topic of the link between deflation and technology. Has technology now reached the limits of its deflationary effects and is now inflationary. Technology has increased the demand for materials and commodities now especially rare ones needed for the manufacture of technology goods. At the same time the world is actually running short of "virgin materials" , the corona actually caused people to shift their spending from holidays and experiences like pubs and restaurants to goods and stuff. World shipping tonnage has increased significantly over the last year which explained why the blockage of the suez canal was so serious.
Calls into question the whole narrative that technology is good for the environment, it is anything but, people are consuming more stuff than ever before and that stuff can no longer be produced cheaply.

I'm glad you bought this up, Joe. So....many folks are critical of bitcoin when thinking of it as a monetary system as they say that we have to have growth. If we don't have growth, then economically, we're dead. That's based on the current keynesian model. The upshot of that is that we encourage people to be up to their eyeballs in debt and to be the ultimate consumers - buying all manner of plastic crap from China. Most of it, they don't need. Bitcoin gets dragged over the coals for boiling the oceans when its this current economic model that's doing that.

Economic activity wouldn't have to fall apart under a bitcoin model. At the end of the day, people buy into innovation and things that they need. So economic life will go on. The difference is that they won't be induced to be rampant consumers as they are now. As responsible savers, they wont have their savings robbed through ongoing inflation either. That's another aspect of central bank digital currencies - they can manipulate the populace much more using CBDCs - and they'll manipulate them into spending more to get their damned growth rates so that the carnival keeps going. At the moment responsible savers get punished whilst those in debt are rewarded.

My understanding is that technology is advancing exponentially - and with that, its going to drive deflationary forces further. AI is finally coming into its own and that's going to have major implications. From what I've been led to believe, they won't be able to win that war against deflation in the long run.

(Just in case anyone is wondering why I've concerns about inflation given what I've stated above, both can play out - we can have a bad bout of inflation first if they get things wrong).

 

[Duke of Marmalade]

@tecate you will have noticed a plea from @Dublinbay12 to engage on her liquidity point. I tried but no response. Clearly it is engagement with yourself that she pines for.

 

[DublinHead54]

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.

I'm sorry, I missed your earlier response? The only person who engaged was Dazed in Pontoon who has since not responded. What was your earlier point?

You've gotten mistaken, I was not defining liquidity...I was making a point raised by the research by glassnode. 1 bitcoin is 1 bitcoin, the USD price is irrelevant in the context of liquidity. I believe BTC is a store of value which means as it is held as a reserve and adoption increases there is less circulating. This dynamic may drive up the $ value, but I don't think it will work the same as the gold market.

I am figuring this is why the pro bitcoin posters are not responding. This is a genuine issue the network will need to overcome for long term growth as a store of value. It has been repeated by tecate many times that we are just starting to see adoption happening

What is very concerning is that the research indicating 4m liquid btcs means that only 55 companies could purchase the same amount of BTC as MicroStrategy. This is far from mass adoption.

 

[Duke of Marmalade]

I'm sorry, I missed your earlier response? The only person who engaged was Dazed in Pontoon who has since not responded. What was your earlier point?

You've gotten mistaken, I was not defining liquidity...I was making a point raised by the research by glassnode. 1 bitcoin is 1 bitcoin, the USD price is irrelevant in the context of liquidity. I believe BTC is a store of value which means as it is held as a reserve and adoption increases there is less circulating. This dynamic may drive up the $ value, but I don't think it will work the same as the gold market.

I am figuring this is why the pro bitcoin posters are not responding. This is a genuine issue the network will need to overcome for long term growth as a store of value. It has been repeated by tecate many times that we are just starting to see adoption happening

What is very concerning is that the research indicating 4m liquid btcs means that only 55 companies could purchase the same amount of BTC as MicroStrategy. This is far from mass adoption.

I know you are waiting for @tecate's response but meanwhile I have dived further into your query as you obviously rate it seriously. I read all the Glassnode stuff including their interesting logistic approach for smoothing the transition between the various liquidity classifications.
I also read @DazedInPontoon's reply to your OP. I agree 100% with DiP, which is rare since I suspect he is tr*lling me. Basically there is no issue, any slack will be taken up by the price. There is absolutely no constraint on the price of bitcoin, it is totally determined by supply and demand. A decrease in liquidity as you describe it is simply a fall in supply. This is quite unlike something like gold which has to bear some relationship to its intrinsic value or even its historic value. Bitcoin isn't anywhere near that - it is not held hostage to any intrinsic value or historic value, people don't give two hoots that a short time ago it cost 5,000 btc for a pizza.
I refer to the following follow up response you gave to DiP.

Can you explain what you mean here? A bitcoin is a bitcoin, the equivalent dollar value doesn't impact the liquidity of the asset. If there were 8m Bitcoin in circulation vs 4 million then by a matter of fact the 8m had more liquidity.

You are defining the liquidity of bitcoin in terms of the quantity of coins being transacted. Clearly this will decline if the effective supply declines. But what does that matter? What matters is the liquidity in the numeraire of the person transacting, which is invariably their operating currency. Muskie was able to put $1.5bn on his balance sheet without any noticeable shift in price at the time of the transaction (clearly it impacted the price subsequently but that is not a liquidity point). This would have been impossible when there were 8m in circulation but the price was a fraction of what it is today.

 

[tecate]

Coinbase reported Q1 revenue of $1.8 billion yesterday. The company is due to get listed within 10 days - with a valuation of $100 billion.

 

[tecate]

..

 

[DublinHead54]

They are making a lot of money from a system that is meant to bring about financial inclusion.

Unfortunately due to the backwards US markets, only the wealthy can participate in the IPO.

 

[tecate]

Just to put Coinbase's direct listing in context, that will see it achieve a market capitalisation greater than that of Goldman Sachs. That's how far this market has come.

 

[Sunny]

Just to put Coinbase's direct listing in context, that will see it achieve a market capitalisation greater than that of Goldman Sachs. That's how far this market has come.

Yeah, that's a positive alright. Everyone pile in to an IPO of a company that has announced that it has made more money in Q1 this year then it did all last year.....And to think they warn against the volatility of trading revenues for investment banks....

 

[WolfeTone]

Everyone pile in to an IPO of a company that has announced that it has made more money in Q1 this year then it did all last year.....And to think they warn against the volatility of trading revenues for investment banks....

That's the insanity of these stock markets, for sure.
They like to peddle a myth that they are driven on sound economic and monetary principles, but in reality we all know it is the biggest Ponzi scheme of all.

 

[DublinHead54]

Given that GS produced 10x Revenues than that of Coinbase in the last Quarter it would suggest that either Coinbase is way over valued or GS is undervalued based on the metric Tecate chose to promote.

Nonetheless coinbase has done exceptionally well and those in at the bottom stand to make a substantial life-changing amount of money. I actually interviewed last year with Coinbase in Ireland, this IPO showing it would have been a risk worth taking.

 

[tecate]

Yeah, that's a positive alright.

You're the first person I've heard to suggest that this isn't a milestone event. The bitcoin project was started 12 years ago with no seed capital, no investors, no marketing dept, no offices - just lines of code. Today it's got a trillion dollar market cap. Coinbase growing to this sort of size is equally impressive. I say that even though personally I don't much like the company or their offering.

Everyone pile in to an IPO of a company..

You might want to work on the facts part of your salty comments. Firstly, it's not an IPO - its a direct listing. Secondly, I never suggested that anyone 'pile in' to said direct listing. I wasn't posting that info on that basis. I was acknowledging a landmark event in the industry.

...that has announced that it has made more money in Q1 this year then it did all last year

Really, Sherlock? This surprises you given the way the cryptocurrency market has developed in this particular market cycle? Quite the relevation.

And to think they warn against the volatility of trading revenues for investment banks....

Yeah, clearly what suits you better is a nice respectable investment bank like Credit Suisse, right? I mean there's nothing wrong with them partnering with a convicted fraudster leading to a margin call mess that has cost it billions. Not one mention of it here but you can be sure if it was crypto-related, we'd be opening up dedicated threads for it.

 

[Sunny]

You're the first person I've heard to suggest that this isn't a milestone event. The bitcoin project was started 12 years ago with no seed capital, no investors, no marketing dept, no offices - just lines of code. Today it's got a trillion dollar market cap. Coinbase growing to this sort of size is equally impressive. I say that even though personally I don't much like the company or their offering.



You might want to work on the facts part of your salty comments. Firstly, it's not an IPO - its a direct listing. Secondly, I never suggested that anyone 'pile in' to said direct listing. I wasn't posting that info on that basis. I was acknowledging a landmark event in the industry.


Really, Sherlock? This surprises you given the way the cryptocurrency market has developed in this particular market cycle? Quite the relevation.

Yeah, clearly what suits you better is a nice respectable investment bank like Credit Suisse, right? I mean there's nothing wrong with them partnering with a convicted fraudster leading to a margin call mess that has cost it billions. Not one mention of it here but you can be sure if it was crypto-related, we'd be opening up dedicated threads for it.

Relax. Sorry if I personally insulted you by daring to comment on the craziness of a company with Q1 earnings equal to their last year earnings and people comparing them to Goldman Sachs. I should remember that anyone that disagrees with you is basically insulting your mother. At least that is what it seems like looking at your posts.....

 

[tecate]

@Sunny - Disagree on what? I offered up this information as recognition of a milestone in the industry. I acknowledged the scale of that growth via the market cap comparison with Goldman Sachs. That's where it ends. I made no suggestion as to whether anyone should invest in Coinbase.
Lastly, I don't feel in any way insulted by your post or point of view. However, if you're going to have an issue with my responses, I'd suggest you have a look at the sarcastic twist you've put on that post starting with the opening sentence. Next maybe you should read the posts of others a couple more times before responding because i wasn't offering any recommendation as regards the suitability or otherwise of Coinbase as an investment.