Author Topic: What do you think of adding a low% of crypto allocation  (Read 80513 times)

talltexan

  • Walrus Stache
  • *******
  • Posts: 5057
Re: What do you think of adding a low% of crypto allocation
« Reply #1000 on: February 08, 2022, 07:00:49 AM »
Imagine wanting the cost of a new car to continue to go up, pricing people out of new cars because wages are sticky. Prices aren't static and they're set by markets. A deflationary monetary supply does not mean that goods will always be cheaper. That depends on supply and demand. If real estate is scarce (which it is), then that does not mean the price of new houses will go down. Value of goods are relative. A stable currency market will just mean that housing prices will remain stable given equal demand/supply of housing. Flooding the markets with large amounts of new cash means that housing costs sky rocket (just look at housing costs at the moment). If you have easy money, why wouldn't you throw it at things at harder to come by (real restate, assets, collectibles, etc). What do you think happens to the price of something that is scarce (housing) being purchased with easy (inflated) money? Having monetary policy skew market prices and flooding markets with extra money that people need to then throw at riskier and riskier endeavours is not the way.

No, the Great Depression was not caused by deflation, as I mentioned in my earlier post. Yes, definitely do read up on the Great Depression. Read up on the credit bubble of the 1920's that preceded the 1929 crash. Read up on the Smoot-Hawley tariffs that exacerbated already strained exports/imports. Read up on the widely understood sentiment shown in the public polls and markets at the time of FDR's policies killing investor confidence. Read about FDR's New Deal policies and how they exacerbated unemployment at the time. If anyone reading about what took place with the Great Depression and comes away with the conclusion of "deflation is bad", then I am questioning their understanding of what actually took place. Blaming the banks collapsing and 25% unemployment on deflation is an amazing rewriting of history.

Never mind the credit bubble in Japan that popped in the early 90's. Ever wonder why these dreaded periods of deflation that people always love to prop up as examples of why deflation is so horrible are always preceded by massive credit bubbles that popped? What goes up always comes down. Never mind the fact that Japan's deflation has always been under 1 percent and that it's economic performance was only outperformed by other developed nations from '92-'97 (GDP per capita).

Look, I am not advocating for deflation of 5%+ being good for the economy. As I said earlier, too much of something is not a good thing. Too much deflation/inflation is not good. My point was relevant in the scenario being that bitcoin is widely used in a circular economy, in which case bitcoin's deflation rate would probably be below 5% at that point (based on coins lost and GDP growth of bitcoin economy). For what it is worth, I don't think bitcoin would make a good monetary base if its volatility frequently is above 5%. But volatility would be greatly tamed in a circular and less speculative economy. In my opinion deflation in today's monetary environment of fast and easy money among many is widely demonised for being something it is not. It is especially surprising how demonised it is here on these Mustachian forums. In my opinion, given an economic climate of 2% deflationary money supply versus 2% inflationary money supply, I would take the former every time.

I suspect we'd wind up agreeing on most things, but a significant piece of the Great Depression puzzle that I don't see you mentioning here is the gold standard. If I believe that the gold standard was a problem in the 1930s, why should I be unafraid of a "Bitcoin Standard" in the near future?

StashingAway

  • Pencil Stache
  • ****
  • Posts: 743
Re: What do you think of adding a low% of crypto allocation
« Reply #1001 on: February 08, 2022, 08:08:50 AM »
Even if you were ultimately forced to convert your unspendable USD to BTC, at whatever exchange rate, the market would be setting the prices in BTC just as it now sets them in USD.
It's not like the price of a loaf of bread would suddenly go from I USD to 1 BTC. In all likelihood it would cost the same in real terms.
. . . .

Eventually, my teacher cousin goes to the the grocery store with his USD and they say, "hey, we only accept purple seashells now. that loaf of bread is worth 1 seashell". He says, "fine, I'll go transfer my shells", but by the time he transfers, he can convert 100USD to one seashell. Last week the grocery store bought a bunch of seashells at 2USD per seashell as did most of the other corporations (how do you think the price got to 100USD per?). While no $ was actually lost here, his net valuation has dropped to 1/50 of what it would have been under USD. [/b][/i]

. . . .

The scenario being discussed here is that of universal adoption of Bitcoin as the currency. Under those circumstances, where does the volatility come from ? Especially 50x / week volatility ! That's a pretty rough week even by today's standards !
Bitcoin's volatility would surely settle in proportion to it's wider adoption. If we approach universality, volatility should approach zero.

The metaphor was not meant to accurately depict timescales or prices. It was simply to demonstrate in simple terms how the transfer of wealth happens.

If the economy switches (slowly or quickly) from USD to Bitcoin, there is a very real possibility - and I say probability - that it will do so in a way that rewards corporations and early adopters and penalizes the general public. If national or global finances even HINT at crypto becoming king, then you can bet your rear end that large financial organizations will make sure that they are not left in the dust. There will be structural systems planned and executed so that they are not the greater fools, and lots of opportunity to work the system in a way that does this.

Shell or Kroger or Comcast or Lowes will higher teams of financial experts to devise policy that isn't possible for the lay CNC machinist in Detroit to come close to replicating on an individual level.

lifeanon269

  • Pencil Stache
  • ****
  • Posts: 552
Re: What do you think of adding a low% of crypto allocation
« Reply #1002 on: February 08, 2022, 08:11:57 AM »
I suspect we'd wind up agreeing on most things, but a significant piece of the Great Depression puzzle that I don't see you mentioning here is the gold standard. If I believe that the gold standard was a problem in the 1930s, why should I be unafraid of a "Bitcoin Standard" in the near future?

Contrary to popular belief, the monetary environment under the gold standard was not a deflationary environment. Bastardization between the relationship of the US dollar and gold reserves aside, the average annual money supply growth between 1879-1913 (gold standard) was 6.1% versus 5.7% in post-war US between 1946-1979. The production of gold sky-rocketed during that time frame. So anyone that hold's the "gold standard" as a reason for why "deflation is bad" isn't actually even using monetary deflation in their example.

The thing about bitcoin is it is completely predictable and stable. You can predict what the money supply will be 10, 20, 50 years into the future. One of the biggest detriments to a healthy market is poorly aligned expectations and uncertainty about what the future economic climate and monetary policies will be. Central banks tinkering with the money supply creates massive uncertainty in markets. Even in a perpetually inflationary environment, you can have that same uneasiness in spending mentioned earlier due to that uncertainty. If inflation is lower than expected, that can cause the same impacts on spending as heavy deflationary environments are said to cause due to that uncertainty. If inflation is expected to continue to fall and rates are expected to fall with it, why not hold off on purchasing that new house and see if you can get a better rate in the future?

Most of the problems with market instabilities, malinvestments, recessions, and market crashes leading to unemployment have much more to do with an unstable money supply and market uncertainties than it does with the specific rate of inflation/deflation. Inflation or deflation of 4% isn't inherently a bad thing. It is a bad thing when you have no idea when it is coming and markets are tepid about any fluctuations or tampering. Being unable to plan or adjust for future expectations appropriately is hugely detrimental to a healthy market. With bitcoin, it isn't so much that it is deflationary (its supply is actually inflationary until ~2140), but more about the fact that it is predictable and therefore is something the markets can depend on.

ChpBstrd

  • Magnum Stache
  • ******
  • Posts: 4207
Re: What do you think of adding a low% of crypto allocation
« Reply #1003 on: February 08, 2022, 10:24:57 AM »
Prices aren't static and they're set by markets. A deflationary monetary supply does not mean that goods will always be cheaper. That depends on supply and demand. ... If real estate is scarce (which it is), then that does not mean the price of new houses will go down. Value of goods are relative. A stable currency market will just mean that housing prices will remain stable given equal demand/supply of housing.
Flooding the markets with large amounts of new cash means that housing costs sky rocket (just look at housing costs at the moment). If you have easy money, why wouldn't you throw it at things at harder to come by (real restate, assets, collectibles, etc). What do you think happens to the price of something that is scarce (housing) being purchased with easy (inflated) money? Having monetary policy skew market prices and flooding markets with extra money that people need to then throw at riskier and riskier endeavours is not the way.
Wait a minute... in the first excerpt, you're saying that having a fixed supply / deflationary currency would not necessarily affect prices because prices are more about supply and demand. In the second excerpt, you're attributing rising asset prices to an increasing supply of US dollars. Which is it?
Quote
No, the Great Depression was not caused by deflation, as I mentioned in my earlier post. ... Blaming the banks collapsing and 25% unemployment on deflation is an amazing rewriting of history.
I'm not sure if you're arguing that deflation was an effect and not a cause of the GD or if you're arguing that deflation was not even a problem at the time. I'll address both positions, using only the most uncontroversial and universally-accepted accounts of the GD. 

If you were a land owning farmer like millions of other Americans in the late 1920's and 1930's, you might take out loans each year that were paid back when the harvest was sold. If you were a manufacturer, you took out loans to buy equipment and hire workers, whose outputs were then used to pay back the loan. There were other business models whose growth depends on debt, but we'll focus on these big ones.

When the US government reduced the velocity of money through higher interest rates, tax hikes, tariffs, spending cuts, etc. and banks stopped lending, the result was falling prices - deflation. If you were a farmer or a manufacturer and you borrowed $100k that you intended to pay back when you sold your outputs for, let's say, $110k, then falling prices might mean your outputs could only be sold for $95k and therefore you defaulted on the loan. This is exactly why the banks stopped lending, why the banks started failing, and why there were runs on the banks. Now the farmers who remained solvent couldn't get loans any more (if their land had not been foreclosed) and the manufacturers were laying off workers. Idle fields and factories were the result, and deflation was the cause. This is why even well-run businesses went under during the GD. People's houses lost value because no buyers could get a mortgage, a situation that would repeat in 2008.

In the strictly supply-and-demand world envisioned by Andrew Mellon and Herbert Hoover, the collapse of supply they were witnessing / encouraging would offset the deflation and produce inflation because goods were becoming more "scarce". That didn't happen. Instead deflation fed on itself as banks, businesses, and consumers all scrambled to unload inventory and get ahold of scarce dollars, which made dollars even more scarce.
Quote
Never mind the credit bubble in Japan that popped in the early 90's. Ever wonder why these dreaded periods of deflation that people always love to prop up as examples of why deflation is so horrible are always preceded by massive credit bubbles that popped?
The burden of debt suddenly increases when deflation occurs. E.g. the real interest rate on your 5% car loan suddenly becomes 8% when the inflation rate is -3%. If you are a business, deflation reduces your margins as you are forced to cut prices while at the same time increasing the real burden of your debts. More importantly, as your customers and suppliers go bankrupt, your revenues evaporate, which is why even profitable, debt-free businesses get wiped out by deflation.

Under normal economic growth conditions, the amount of debt being used by businesses and consumers naturally increases. E.g. if we go from selling 20M cars to selling 30M cars, there will be more auto debt in the world. But this also means any downturn necessarily looks like a bubble popping, e.g. 2008. But then of course the trend recovers and nobody calls that a bubble until it ratchets down again on the next downturn. The key Econ 101 insight is that an increase in debt is a form of money supply, and when people and banks are suddenly focused on de-leveraging rather than spending it pulls monetary velocity down.
Quote
Look, I am not advocating for deflation of 5%+ being good for the economy. As I said earlier, too much of something is not a good thing. Too much deflation/inflation is not good. My point was relevant in the scenario being that bitcoin is widely used in a circular economy, in which case bitcoin's deflation rate would probably be below 5% at that point (based on coins lost and GDP growth of bitcoin economy). For what it is worth, I don't think bitcoin would make a good monetary base if its volatility frequently is above 5%. But volatility would be greatly tamed in a circular and less speculative economy. In my opinion deflation in today's monetary environment of fast and easy money among many is widely demonised for being something it is not. It is especially surprising how demonised it is here on these Mustachian forums. In my opinion, given an economic climate of 2% deflationary money supply versus 2% inflationary money supply, I would take the former every time.
When I was younger I spent some time with people who lived through times of 2% deflation. One story was that you'd open a can of beans in the morning and eat a third of them for breakfast. You'd eat another third for lunch, and the last third for dinner. People were hand-sewing clothing for their children from the burlap packaging for flour. These conditions were not directly caused by a credit bubble in the stock market that maybe 2% of the population was invested in at the time; they were caused by the collapse of businesses and farms. The thing that killed otherwise well-run factories, banks, and farms was deflation. A collapse in money supply is the linking factor between faraway credit bubbles with a farmer or small business going bankrupt. Experience shows that deflation is self-reinforcing, and if you don't increase money supply to offset this effect, you get a spiral.

Could a strong economy theoretically coexist with deflation? What would that look like? If inflation was -4%, would -1% be a fair mortgage rate? You'd be paid a little to take on the debt, even as the house lost value at a much faster pace? At some point the house would be worth less than the mortgage, so no bank would lend to you on those terms. Similarly, a factory making widgets they sell for 4% less each year would have a hard time paying off its debts, using debt to expand operations, or convincing its employees to take pay cuts year after year. People thinking about being landlords would build a spreadsheet that shows the burden of the debt increasing each year, and their rents decreasing each year. In a nutshell, a lot of basic things we take for granted would stop working if inflation went upside down.

The survivors of the GD would have happily traded places with someone living in a time of inflation. Lucky for you, you don't get to trade places. 

lifeanon269

  • Pencil Stache
  • ****
  • Posts: 552
Re: What do you think of adding a low% of crypto allocation
« Reply #1004 on: February 08, 2022, 01:06:14 PM »
Wait a minute... in the first excerpt, you're saying that having a fixed supply / deflationary currency would not necessarily affect prices because prices are more about supply and demand. In the second excerpt, you're attributing rising asset prices to an increasing supply of US dollars. Which is it?

Read what I wrote again. Nothing there was contradictory at all. Markets determine what the price of goods are and monetary supply can influence how much money people are willing to throw at goods in those markets. But there are a lot of other factors outside of monetary supply that influences the price of goods. Like I said, you can have an inflationary/deflationary money supply and have the price of goods still go in either direction in the markets of those goods. I was very specific to say monetary inflation/deflation so as not to get that confused with price inflation/deflation (ie, CPI). Case in point, with an inflationary monetary supply the cost of computers still goes down because the deflationary effects of new technology overcomes the effects of more money in circulation. Vice versa, you can still have the cost of valuable assets go up with a contracting money supply.

I feel like some of the confusion between you and I is in the differentiation between an expanding or contracting money supply (monetary inflation/deflation) and the price of goods going up or down (price inflation/deflation) as measured by something like the CPI. So I just want to make sure we're both on the same page there. If I fail to differentiate between the two, I apologize, but I try to make it a point.

I'm not sure if you're arguing that deflation was an effect and not a cause of the GD or if you're arguing that deflation was not even a problem at the time. I'll address both positions, using only the most uncontroversial and universally-accepted accounts of the GD.

What do you mean you're not sure what I was arguing? I said it right there in the sentence you quoted. "The Great Depression was not caused by deflation." Then you go on to not even address or counter the exact point I made in your post. The great market crash of the stock market in 1929 was absolutely not caused by deflation unless you're going to ignore everything that led up to that point in time. As I mentioned in my post there were a lot of interventions throughout the entire Great Depression and many of them did more harm than good. Deflation during that time period (a period where interest rates also dropped) did not help things either. What do you expect to happen after a massive stock market speculative bubble bursts and then in an attempt to correct that a massive contraction in the money supply takes place? That is like getting in a car accident after driving too fast and blaming your brakes for not stopping in time.

I feel like there is a disconnect between what I am arguing (stable monetary policy and deflation is not inherently bad) versus the point you're trying to argue that the Great Depression experienced heavy deflation, therefore deflation is bad. My argument isn't that deflation didn't make a bad situation worse during the depression. There are so many other things that also made what should've been a minor recession even worse. But I am arguing that the Great Depression was not caused by deflation and also that deflation is not inherently a bad thing (like so many today make it out to be). Like I said before, too much of something is not good and this goes for both an expanding and contracting money supply. It sounds like you're using debt deflation impacts as an argument against monetary deflation and I don't think that is a valid argument.

People's houses lost value because no buyers could get a mortgage, a situation that would repeat in 2008.

Not true. People's houses lost value because the prices of their homes were massively over-valued. Again, another case of a massive speculative bubble. The fact that people couldn't get a mortgage is quite literally the opposite of what happened. Everyone was given a mortgage. A bubble like that will eventually pop which is then what results in the pricing crash of houses.

You can't look at the downside of these bubbles and lay blame on the after debt deflation effects. To avoid such economic catastrophes in the first place we should be avoiding the bubbles all together. No doubt that there is pain felt in deflation after a bubble pops (ie, Great Depression and Great Recession). My argument was never being made there. But I can say empathically that deflation was not the cause of those bubbles and given your stance that deflation causes people to not want to spent money on anything, then I am not sure how you could argue that deflation would cause a bubble. The fact that you consider the housing bubble "normal economic growth" is quite the spin, in my opinion.

When I was younger I spent some time with people who lived through times of 2% deflation.

Where was this?

Again, in all of your conjured scenarios you give, it seems like you always are looking at things from a consumer that perpetually decides to never buy anything and sells all of their belongings and I refuse to believe that would ever take place in a stable economy and I can't think of any historical examples of that. And if prices do fall because of a lack of demand because consumers are expecting further price drops, what about sellers? Wouldn't sellers drop prices quicker in an attempt to sell before their competitors. Why wouldn't consumers meet them to market under such a case? If a death spiral were to actually happen, why wouldn't wages follow? If every transaction is a buyer meeting a seller, then under a scenario where everyone is selling their possessions to buy back later, doesn't that mean someone is buying? Doesn't demand pick up the lower a price get in a stable economy? If producers are also expecting lower future costs, like buyers, don't they also adjust their prices so that they can expect to still produce a profit? What are people doing with all this money they're not spending. If a bitcoin economy consists of consumers, producers, and sellers, then investing in a business will still yield favorable returns denominated in that bitcoin. If investing is still taking place, then future productivity gains are still to be had. If future productivity gains can still exist then receiving a loan denominated in bitcoin could still fuel that expansion.

At the end of the day, if I am looking to buy a $20,000 car, I'm probably not going to hold off on that purchase just because I think I might be able to get it next year for $19,600 instead.

The point about bitcoin is that it isn't linked to debt as much as fiat monetary policy is. Debt is what largely fuels monetary policy today. Whether it is bonds, QE buybacks, reserve requirements, etc. These are all debt related instruments in tuning what the overall monetary policy is. That wouldn't necessarily be the case in a bitcoin economy. A bitcoin economy would largely decouple money and debt and so you'd have a much more temperate economic climate. Instead of massive amounts of debt fueling economic expansion and then experiencing the resulting bubble burst, you'd have debt allocated only where necessary and saving money would become much more normal. This is very similar to what MMM described in his post here:

https://www.mrmoneymustache.com/2012/04/09/what-if-everyone-became-frugal/

But even in a bitcoin economy there are no certainties. You could still have massive amounts of credit expansion. Especially if a majority of people hold bitcoin with custodians and those custodians loan with fractional reserves. The benefits of bitcoin provide no guarantees there. Governments could still practice quantitative easing during economic turmoil, but that QE would need to be funded through taxation rather than money printing which could be politically difficult. It could certainly play a role as a check on government spending.

There are absolutely a lot of questions as to what would take place and no one even fully understands economic outcomes in our world due to its complexity. But it is my opinion that monetary deflation is a bogey monster that has taken a lot of blame for things that it had nothing to do with and fails to get credit for other things. Having a hard rule of thumb that monetary deflation is always bad in a complex subject like economics is a poor stance to take and it surprises me there aren't more Mustachians agreeing on that. And I've yet to see an example of a deflationary spiral that wasn't preceded by a massive bubble. Humans just are consumerist by nature, given the chance.

waltworks

  • Walrus Stache
  • *******
  • Posts: 5299
Re: What do you think of adding a low% of crypto allocation
« Reply #1005 on: February 08, 2022, 01:10:46 PM »
People will absolutely hold off on buying something if they think it'll be a few hundred bucks cheaper next year. And if even just a few do that, the demand/price drops even more, which leads to...

-W

UltraStache

  • Stubble
  • **
  • Posts: 172
Re: What do you think of adding a low% of crypto allocation
« Reply #1006 on: February 08, 2022, 01:43:34 PM »
The Motely Fool recently purchased $5 million of Bitcoin

GuitarStv

  • Senior Mustachian
  • ********
  • Posts: 20015
  • Age: 41
  • Location: Toronto, Ontario, Canada
Re: What do you think of adding a low% of crypto allocation
« Reply #1007 on: February 08, 2022, 01:44:38 PM »
The Motely Fool recently purchased $5 million of Bitcoin

Hard to imagine a worse condemnation of the future of Bitcoin.  :P

lifeanon269

  • Pencil Stache
  • ****
  • Posts: 552
Re: What do you think of adding a low% of crypto allocation
« Reply #1008 on: February 08, 2022, 02:34:56 PM »
People will absolutely hold off on buying something if they think it'll be a few hundred bucks cheaper next year. And if even just a few do that, the demand/price drops even more, which leads to...

-W

A lower price simply opens the market to more buyers for new cars at a lower price. People that couldn't afford them can now do so. So demand doesn't necessarily drop. There might be some that opt to save instead, but consumerist instincts don't just halt. Any measurable increase in savings is offset by a larger market of potential buyers that all have consumerist lifestyles.

If wages fell, then that would offset the drop in prices. Wages are sticky though, so would you rather have wages sticky gaining purchasing power or wages sticky losing purchasing power over time? How much economic damage has been done due to the latter?

The decreasing cost of technology simply opened up the world to everyone being able to afford technology their grandparents could only dream of affording. At the end of the day, people have needs that need to be met and those purchases are never postponed and people also love cool stuff, so those purchases are almost never postponed either. I would love to see the world become more frugal and perhaps a deflationary economy could help induce that mildly, but human nature is inherently consumerist at heart.

Again, too much monetary inflation/deflation one way or the other is bad. But bitcoin has a stable, and thus predictable, supply schedule. That's a good thing as I believe a lot of economic hardships have been caused by faulty expectations and manipulation of the monetary supply throughout history. I'll ask again, are there any examples in history of a deflationary spiral that weren't preceded by a massive bubble that popped? I'm honestly curious here.

waltworks

  • Walrus Stache
  • *******
  • Posts: 5299
Re: What do you think of adding a low% of crypto allocation
« Reply #1009 on: February 08, 2022, 03:38:55 PM »
I guess we can find out, once BTC actually is used as currency on any meaningful scale. Which will be never, so we'll never know.

-W

ChpBstrd

  • Magnum Stache
  • ******
  • Posts: 4207
Re: What do you think of adding a low% of crypto allocation
« Reply #1010 on: February 09, 2022, 12:44:56 PM »
Like I said, you can have an inflationary/deflationary money supply and have the price of goods still go in either direction in the markets of those goods. I was very specific to say monetary inflation/deflation so as not to get that confused with price inflation/deflation (ie, CPI).
I see what you mean. Economists usually refer to "monetary inflation/deflation" as the "money supply" (and specifically M1 or M2 as measured at different points) to avoid confusion with inflation, which is defined as an increase in the average price of a large selection of goods over time.

You are correct that there are lots of factors disconnecting changes in money supply from changes in the inflation rate, which is why money supply has gone up so fast in recent decades without an equal-sized spike in inflation. For example, a lot of the dollars that have been produced ended up being exchanged for products from Asian manufacturers, who then put the dollars into US treasuries. It makes one wonder what would have happened if the money supply had been inflexible, such as if we were on a gold standard or if the design of our currency prohibited expansion of the money supply.

Quote
"The Great Depression was not caused by deflation." ... The great market crash of the stock market in 1929 was absolutely not caused by deflation unless you're going to ignore everything that led up to that point in time. As I mentioned in my post there were a lot of interventions throughout the entire Great Depression and many of them did more harm than good. Deflation during that time period (a period where interest rates also dropped) did not help things either. What do you expect to happen after a massive stock market speculative bubble bursts and then in an attempt to correct that a massive contraction in the money supply takes place?
If you want to say deflation was a way-down-the-line effect of a speculative bubble bursting, and not something that caused stock market losses to morph into the GD, the question remains: what did the stock market crash that involved a tiny minority of people who were invested in stocks at the time have to do with the price a farmer in Indiana could get for their corn, or a manufacturing plant's ability to borrow money for an expansion, or a small hometown bank's ability to write mortgages, or average wages across an entire country of mostly non-investors? How did some wealthy speculators in New York City losing some money lead to formerly profitable businesses shutting down and consumers clamping down on all spending? What does the price of shares in the stock market have to do with aggregate demand?

We could go back to first causes and debate preceding conditions that were established a century earlier, the gold standard, etc. but the stock market crash of October '29 would have been shrugged off and forgotten about by most people had it not affected the real economy. Once deflation was allowed to take hold - for all the government policy mistakes you cited - that's what turned a stock market correction into a GD. The money supply was allowed to contract and deflation took hold.

We had an almost identical setup to 1929 in 2008/09, the government responded in the exact opposite way, and as a result we look back on those days as a buying opportunity, not a generational disaster. In 1987, the stock market crashed 22.6% in one day, compared to the 23% loss on 10/28/29 and 10/29/29 combined. Somehow these massive losses did not lead to a 2nd GD, at a time when a much larger percentage of Americans were exposed to the markets. Government actions to prop up banks and prevent deflation had a lot to do with that.

I'd say bursting bubbles can start a process of money supply contraction, but as long as government can expand the supply of money in response, it turns out all right. It turned out all right in 2020, 2009, 1987, and previous 25%+ corrections for exactly this reason. Few people have ever heard of the Kennedy Slide of 1962, for example. But as the GD started the government could not / would not expand money supply, and allowed a deflationary spiral to occur.
Quote
I am arguing that the Great Depression was not caused by deflation and also that deflation is not inherently a bad thing (like so many today make it out to be).
Don't take my word for it that deflation demolishes economies. Here are a wide range of legitimate sources describing the problem more succinctly than I can. All these diverse sources agree with the consensus in economics that deflation is some bad juju:

https://www.economicshelp.org/blog/978/economics/definition-of-deflation/
https://www.cbsnews.com/news/explainer-why-is-deflation-so-harmful/
https://www.frbsf.org/education/publications/doctor-econ/2003/may/deflation-risks/
https://www.investopedia.com/articles/personal-finance/030915/why-deflation-bad-economy.asp

Quote
People's houses lost value because no buyers could get a mortgage, a situation that would repeat in 2008.

Not true. People's houses lost value because the prices of their homes were massively over-valued. Again, another case of a massive speculative bubble. The fact that people couldn't get a mortgage is quite literally the opposite of what happened. Everyone was given a mortgage. A bubble like that will eventually pop which is then what results in the pricing crash of houses.
Were home values in a massive speculative bubble in 1929? Did they go back into a speculative bubble when they recovered in 1940 and continued zooming up from there?

If home values in 2007 were a speculative bubble, were they a speculative bubble again in 2012 when prices returned to their 2007 levels and continued zooming up from there?

Another view of a deflationary economy:

"Between 1929 and 1933, construction of residential property fell 95 percent. Repair expenditures decreased from $50 million to $500,000. In 1932 between 250–275,000 people lost their homes to foreclosure. In comparison, 68,000 homes suffered foreclosure in 1926. By 1933 foreclosures reached the appalling rate of more than a thousand each day. Housing values dropped by approximately 35 percent. A house, worth $6,000 before the Depression, was worth approximately $3,900 in 1932. " Source: https://www.encyclopedia.com/education/news-and-education-magazines/housing-1929-1941

Quote
When I was younger I spent some time with people who lived through times of 2% deflation.
Where was this?

Again, in all of your conjured scenarios you give, it seems like you always are looking at things from a consumer that perpetually decides to never buy anything and sells all of their belongings and I refuse to believe that would ever take place in a stable economy and I can't think of any historical examples of that. And if prices do fall because of a lack of demand because consumers are expecting further price drops, what about sellers? Wouldn't sellers drop prices quicker in an attempt to sell before their competitors. Why wouldn't consumers meet them to market under such a case? If a death spiral were to actually happen, why wouldn't wages follow?
This was in the United States, based on conversations I had with numerous family members, neighbors, and acquaintances that lived through the GD. They all told me the same story, which agreed with the accounts in history and economics textbooks I would read later. There are documentaries, statistics, contemporary accounts, etc. and everything tells the same story. The effects of deflation during the GD are not fake news or spin, it was well documented, and led to an economic consensus that deflation is public enemy #1.

Yes, people were selling all their belongings, refusing to buy things they wanted no matter how cheap these things got, putting cardboard in their shoes when the soles wore through, and yes, wages were falling at the same time. That's the consistent story told by the statistics, the textbooks, the economists, and the survivors.

Quote
If a bitcoin economy consists of consumers, producers, and sellers, then investing in a business will still yield favorable returns denominated in that bitcoin. If investing is still taking place, then future productivity gains are still to be had. If future productivity gains can still exist then receiving a loan denominated in bitcoin could still fuel that expansion.

At the end of the day, if I am looking to buy a $20,000 car, I'm probably not going to hold off on that purchase just because I think I might be able to get it next year for $19,600 instead.
On a supply-demand curve, each incremental price increase reduces the number of buyers. The marginal buyer is the one who is barely willing to buy at $X, and will walk away from the deal at $X+$1. So yes, some percentage of people will keep their beater car for another year if car prices are falling, or even if they are not rising. Car dealerships spend billions of dollars yelling in ads about how there is a temporary "liquidation event" to convince people that prices have fallen and will likely be higher in the future if they "miss out on these deals". They're going after marginal consumers who are very much on the fence.

When we flip this logic around in a deflationary economy, and consumers start to expect that prices will be lower the longer they wait, then there's a lot less incentive to buy today. Consumers are essentially getting paid for delaying their purchase. Marginal buyers will continue driving their beater car for another few months or make repair-instead-of-replace decisions in exchange for future savings. Some people who want a car will essentially be paid to go without for some period of time. The longer they hold out, the lower the price gets.

The spiral happens when consumers' wages start falling at the same time (recall that every one of our expenses is someone else's revenue). Suddenly, consumers lost as much purchasing power as they were going to save on the new car. The absolute worst thing they could do in this situation is to buy the car, which is depreciating more rapidly than usual, and try to pay for it with their future wages, which are decreasing. The optimal strategy in an deflationary economy is to not buy, because you'll soon need your falling wages for rent, bills, and other prices that are contractually set or don't immediately fall with deflation. 

Quote
The point about bitcoin is that it isn't linked to debt as much as fiat monetary policy is. Debt is what largely fuels monetary policy today. Whether it is bonds, QE buybacks, reserve requirements, etc. These are all debt related instruments in tuning what the overall monetary policy is. That wouldn't necessarily be the case in a bitcoin economy. A bitcoin economy would largely decouple money and debt and so you'd have a much more temperate economic climate. Instead of massive amounts of debt fueling economic expansion and then experiencing the resulting bubble burst, you'd have debt allocated only where necessary and saving money would become much more normal. ...

But even in a bitcoin economy there are no certainties. You could still have massive amounts of credit expansion. Especially if a majority of people hold bitcoin with custodians and those custodians loan with fractional reserves. The benefits of bitcoin provide no guarantees there. Governments could still practice quantitative easing during economic turmoil, but that QE would need to be funded through taxation rather than money printing which could be politically difficult. It could certainly play a role as a check on government spending.

I think in a bitcoin economy, if one could ever exist, there's no technical reason other than deflation why banks couldn't continue to make loans, stocks couldn't continue to be bought on margin, governments couldn't go into debt, and speculative bubbles couldn't form.

Even today in the dollar economy, a fixed number of dollars (e.g. your paycheck) is counted as an asset both by you and by the person who borrowed money from your bank to start a business (the same money that was your paycheck) and purchased a bunch of inventory from another business (whose assets track back to your paycheck) which becomes another person's paycheck. The average speed at which dollars are being transacted in this way is referred to as monetary velocity, and velocity is a key component of inflation/deflation. Faster velocity = consumers are desperate to get goods and services, so growth and inflation occur. Slower velocity = consumers are desperate to hoard cash, so economic decline and disinflation occur.

In today's dollar economy, it would be very easy to curtail lending if we wanted to. The government can raise bank reserve requirements, remove dollars from the economy through asset sales, raise interest rates, raise margin requirements, raise the requirements for subsidized mortgages, change the tax deductibility of interest, or increase bank regulation. The issue is that we the voters don't want to curtail lending (or cut government spending) because these actions reduce economic growth and raise unemployment. Switching to bitcoin wouldn't give us any new tools and if a deleveraged economy was the goal we aren't using the tools we have. In a crisis, funding QE with taxes would be an expansionary act paid for with a contractionary act.

I had these exact same discussions with gold bugs ten years ago. They often advocate a return to the gold standard like we had during the GD to reduce distortions in the economy that they attributed to government money-printing. In their minds, a fixed supply of money in the world would lead to 0% inflation but somehow not ever tip into deflation, would force the government to balance its budget (a policy voters have been rejecting for decades), and not result in any other distortions such as a large % of GDP being allocated to extracting the last bits of gold from the Earth's crust.

Oh, and in that scenario of course the collector coins they bought from people running Fox News commercials would be each be worth millions. When asked how they would handle the GD, their responses were right out of Herbert Hoover and Andrew Mellon's playbook. When I'd point this out, they'd wave away the critique and say this time would be different because GOLD. Um... maybe the consensus of tens of thousands of economists, investors, and business people is wrong or maybe goldbugs got conned by crackpot social media theories, information bubble hype, and marketing.

lifeanon269

  • Pencil Stache
  • ****
  • Posts: 552
Re: What do you think of adding a low% of crypto allocation
« Reply #1011 on: February 09, 2022, 03:59:32 PM »
It makes one wonder what would have happened if the money supply had been inflexible, such as if we were on a gold standard or if the design of our currency prohibited expansion of the money supply.

Well generally you wouldn't have massive bubbles to begin without without easy money and easy credit available. Also, with larger cash reserves across the economy, the economy has an easier time absorbing shock during rough periods. Contrast that when everything is built up on credit. When things crash, they crash hard and no one has cash reserves to be able to absorb any shock. It ends up being a cascade of failures. One bank failure leads to another.


If you want to say deflation was a way-down-the-line effect of a speculative bubble bursting, and not something that caused stock market losses to morph into the GD, the question remains: what did the stock market crash that involved a tiny minority of people who were invested in stocks at the time have to do with the price a farmer in Indiana could get for their corn, or a manufacturing plant's ability to borrow money for an expansion, or a small hometown bank's ability to write mortgages, or average wages across an entire country of mostly non-investors? How did some wealthy speculators in New York City losing some money lead to formerly profitable businesses shutting down and consumers clamping down on all spending? What does the price of shares in the stock market have to do with aggregate demand?

It wasn't just a stock market crash. It wasn't just wealthy Wall Street speculators that lost money in the market crash. Consumers also lost a great deal of wealth in the crash. Furthermore, one-third of banks failed directly proceeding the cash. The reserve requirements of the banks at the time was only 10%. Loans that couldn't be repaid caused banks to fail and an ensuing bank run to occur. Even if you had no money in the stock market doesn't mean you weren't impacted. There was also a massive drought at the time from the Dust Bowl. It was quite the cluster of events. So yes, I stand by the statement that deflation was absolutely not the cause of the great depression. Any time you build up an fragile economy built on easy credit and loose money, it is bound to crash and crash hard. Calling the resulting deflation that was a result of this massive bubble crash of a fragile economy a cause is a twisting of order of events for sure.

Don't take my word for it that deflation demolishes economies.

I'm not going to appeal to authority in this regard. There are plenty of economists that continue to debate both side of our argument here to this day.


If home values in 2007 were a speculative bubble, were they a speculative bubble again in 2012 when prices returned to their 2007 levels and continued zooming up from there?

No, they were a bubble because people who wouldn't ever be able to normally afford the homes they were buying were given "free" money in the form of sub-prime mortgage and the entire housing market was built up on fragile credit. The price/value of a home is arbitrary and just what the market decides. What makes it a bubble is that there was just easy money being pumped into the economy in the form of these bad loans. It was bound to crash. Again, another case of a massive bubble popping. And you know what took place following that crash? A minor period of deflation. Are you going to blame deflation for all the woes of the 2008 recession as well? And yes, the government had to step in here and prop the market up once again. I fail to see why you consider that a benefit? It is just another band-aid on top of a broken system. A system that just enriches the few that can easily ride out such crashes time and time again and enrich themselves during a fire sale while all the people that don't have cash reserves suffer through stagnant wages, unemployment, and more inflation future inflation because the economy takes on more and more debt.

This was in the United States

I'll ask again, are there any examples in history of a deflationary spiral that weren't preceded by a massive bubble that popped? I'm honestly curious here.

I quite literally asked for examples of deflation that weren't preceded by a massive bubble that popped and your example in response was once again the Great Depression.

I think in a bitcoin economy, if one could ever exist, there's no technical reason other than deflation why banks couldn't continue to make loans, stocks couldn't continue to be bought on margin, governments couldn't go into debt, and speculative bubbles couldn't form.

I fully agree and that was never a point I made. If fact I mentioned a couple times that these things would still be true under a bitcoin economy. Just because bitcoin is used in the economy doesn't mean there won't be crazy speculators looking at the next Gamestop to gamble their money on. Like I said, people love to gamble! Along those same lines, I'm not sure how you argue that there could still be bubbles under deflationary money supply but also say that people wouldn't be spending their money. Either people love to spend money and exhibit their natural consumerist tendencies (which I agree with), or they don't and we all plummet toward the inevitable deflationary spiral. Which is it? Whenever you provide your hypothetical scenarios, it is always following the former path to doom and gloom.

But a deflationary environment does mean there are more cash reserves on hand and bank reserve requirements would be much higher and therefore any speculative bubble crash would be much more tame and the economy would have an easier time absorbing such shocks. Debt wouldn't be as easy to come by and so the economy would absolutely grow slower, people would save money more, and the booms and busts that we see today would be fewer and further between and not as steep. It would be an economy that would look...how do I say...more Mustachian!

I had these exact same discussions with gold bugs ten years ago. They often advocate a return to the gold standard like we had during the GD to reduce distortions in the economy that they attributed to government money-printing. In their minds, a fixed supply of money in the world would lead to 0% inflation but somehow not ever tip into deflation, would force the government to balance its budget (a policy voters have been rejecting for decades), and not result in any other distortions such as a large % of GDP being allocated to extracting the last bits of gold from the Earth's crust.

I'm not a gold bug by any means. I don't own any. I even mentioned earlier in this post that the "gold standard" era was not even a deflationary era (6.1% monetary expansion versus 5.7% in the proceeding post-war era). But I absolutely am someone who thinks our economy should not be built on easy credit, the money supply should be less expansionary, people should save more money and work less hours, and if possible, the people should be able to have access to a global currency that no corporation or government can censor them from. If that's bitcoin, then so be it.
« Last Edit: February 09, 2022, 05:48:31 PM by lifeanon269 »

ChpBstrd

  • Magnum Stache
  • ******
  • Posts: 4207
Re: What do you think of adding a low% of crypto allocation
« Reply #1012 on: February 09, 2022, 09:30:14 PM »
@lifeanon269 you're saying that you want an economy where people/corporations/governments are discouraged from using debt, because "easy money" necessarily leads to speculative bubbles which lead to recessions/depressions. A currency system that forces deflation upon the economy is your preferred solution to accomplish this, because deflation discourages people from going into debt. Fair summary?

I mentioned many other ways to reduce the amount of debt used by people/corporations/governments that would not necessarily involve deflation - higher reserve ratios for banks, removing government backing for mortgages, higher margin requirements, higher federal funds rates, reducing the tax deductibility of interest, etc. Wouldn't these things be easier or more likely to implement than a new world currency that has major speed, security, scalability, and energy consumption challenges? Wouldn't these tweaks to the existing system also be safer than wandering into deflation-land, just in case you're wrong, the economists are right, and deflation does actually reduce aggregate demand?

If you want to reduce consumer, corporate, and government debt why don't these ideas excite you?

May I suggest that the reason we don't have these easy-to-implement policies already is because people don't want them?

Consumers and corporations could always voluntarily de-leverage, but they don't. If consumers de-leveraged, they would have a lower standard of living. For example, in a world where debt is hard to get or service, one might rent for 20 years while saving up the entire purchase price of a house, or work 20 years to save 4 years of college tuition or enough money to start a business. This is the way it is in many countries, and their residents very much wish they could get a faster start on their life goals. If corporations de-leveraged, their shareholders would have a lower Return On Equity. Governments could de-leverage but almost every time someone runs for office on a platform of higher taxes and lower spending, they lose. Voters have consistently rejected deficit scolds and balanced budget amendment ideas for decades now.

So the point of proposing a "hard money" currency like gold or limited-supply crypto is to bypass the will of the people consuming goods and services, running their own corporations, or voting, and to force them to manage their affairs in a different way than they would choose for themselves.

I'm not going to appeal to "freedum!" or cry "socialism!" here because there are lots of rules in our economy designed to protect people from themselves, protect bystanders, and restrict economic choices. Not all of these restrictions are bad ideas either.

Instead I'll argue that most individuals and investors in corporations are very interested in maximizing their outcomes and not losing their money. The people making the decisions have skin in the game and motivation. A brutal evolutionary process ensures that the ones who tend to make good choices become a bigger part of the economy, and vice versa.

The benefit of all this is living in a society where economic growth is optimized, though at the cost of an occasional recession that erases a couple years of gains. How bad was the Great Financial Crisis? At the lowest point, Q2 2009, Real GDP dropped to levels not seen since... a whopping three and a half years earlier! That's all! Real GDP completely recovered just 5 quarters later (Source: https://fred.stlouisfed.org/series/GDPC1 ). That's not a strong case for experimenting with a permanently deflationary system. If that's as bad as it gets, our back is not exactly against the wall. Growth is the story and the blips are distractions.

Also I'll argue that if most people clearly don't want lending restrictions, then why should we believe they would accept a currency that would impose lending restrictions? E.g. If banks would lend you 80% of a home's value in dollars, but only 40% in bitcoin, which currency would you use to buy your home? Most buyers can't afford a 60% down payment, which means it's probably pointless for the seller to even list a price in bitcoin. Similarly, if a politician says we will make the transition to a bitcoin economy, but taxes will have to go up because we no longer print fiat currency and can no longer borrow as much scarce bitcoin, then that politician would lose the election to an opponent saying let's go back to the dollar standard and pass both a tax cut and a spending bill at the same time. People simply don't want a de-leveraged, deflationary economy or else they'd have already made it happen.

So a deflationary bitcoin economy is a non-starter. Why not just advocate for a tighter monetary policy in the dollar economy, using the existing, tried-and-true levers of control? Maybe also consider tighter bank regulation like reinstating the Glass-Stegal Act?

Quote
There are plenty of economists that continue to debate both side of our argument here to this day.

The only "economists" I can think of who don't think deflation is a problem are maybe adherents to the old Austrian school or Marxists. "Austrian economists," who are usually neither professional economists nor from Austria, make a living writing blog posts and making YouTube videos about how economic collapse is nigh, and have been saying those kind of things for decades as economic growth and living standards have marched forward. They have not revised their position after decades of being wrong, so they're more like a literary genre or cult rather than a serious field of study. Lots of gold bugs fell into this trap, and because gold yields nothing they must work as social media influencers until the day of rapture when all the fiat money goes poof and they get rich. Then there are the Marxists, whose real-world economic track record speaks for itself and whose perspective is that a capitalistic economy must be destroyed rather than improved upon, so it's probably irrelevant for our question anyway. I'd love to learn about any examples you can find of professional economists working in academe, government, or industry as economists who aren't from one of these two ideological camps and who do not think deflation is a Very Bad Thing. This isn't an appeal to authority, it's an appeal to expertise.   

talltexan

  • Walrus Stache
  • *******
  • Posts: 5057
Re: What do you think of adding a low% of crypto allocation
« Reply #1013 on: February 10, 2022, 06:58:02 AM »
@ChpBstrd , thank you for a series of excellent arguments.

lifeanon269

  • Pencil Stache
  • ****
  • Posts: 552
Re: What do you think of adding a low% of crypto allocation
« Reply #1014 on: February 10, 2022, 07:19:18 AM »
If you want to reduce consumer, corporate, and government debt why don't these ideas excite you?

They do. Where did I ever say they didn't? I fully support many of those things. I support higher reserve requirements for banks or how about we at least have any reserve requirement for banks considering the fact that there isn't any currently? I support higher interest rates, and many of the other policies you listed and more. Not sure why you assume otherwise.

May I suggest that the reason we don't have these easy-to-implement policies already is because people don't want them?

Absolutely people don't want them. Because, as I said, people are inherently consumerist in nature. I find it odd that in one breath you argue that people would horde money in a deflationary stable economy leading to a never-ending death spiral, but then next you're seemingly admitting that people love spending. The thing about deflation is that it doesn't prevent people from spending money now like I feel like you're claiming. What your prior deflationary spiral hysterics were claiming is that people would voluntarily not spend for the sake of saving money. My claim was that we have absolutely zero historical precedent nor sociological evidence that would ever actually happen. And despite my numerous requests, you've never actually presented real world examples of such a deflationary spiral as you've described.

Our economy is structured around a debt-based system. I am in no way disagreeing that there wouldn't be pain if there ever were a transition from an inflationary and debt fuel economy to a deflationary one. It would be unavoidable. I absolutely agree that any politician that were to suggest such a thing would be committing political suicide. That's painfully obviously and that is a big reason why we continue down the ever-growing debt cycle. It is why economists today agree deflation is bad because of the fact that it would crush our current economy. Deflation would be nothing but pain given they way our economy is currently fueled. Politicians and economists know this and that is why deflation is always considered bad. It is also bad geo-politically. No nation is going to voluntarily induce austerity measures when other competing nations injecting economic steroids through monetary policy. Any politician that does enforce austerity measures is immediately voted out. I'm in no disagreement with you there.

I definitely recommend this article on monetary policy over the last century by Lyn Alden, a well respected macro-economist.

https://www.lynalden.com/fiscal-and-monetary-policy/

Game theory goes both ways though. While economists and politicians around the world continue to push unsustainable debt fueled growth leading to more and more currency collapses, citizens will voluntarily find an alternative in the aftermath.

EDIT: Adding a link to this short video that mentions some of the same ideas that I've talked about:

https://www.youtube.com/watch?v=avLhoBIE9qk
« Last Edit: February 10, 2022, 07:35:57 AM by lifeanon269 »

LateStarter

  • 5 O'Clock Shadow
  • *
  • Posts: 91
  • Location: UK
Re: What do you think of adding a low% of crypto allocation
« Reply #1015 on: February 10, 2022, 07:39:28 AM »
@ChpBstrd , thank you for a series of excellent arguments.

And, for the sake of balance . . .  :-)

@lifeanon269 , thank you for a series of excellent arguments.


A good discussion - following with interest.

ChpBstrd

  • Magnum Stache
  • ******
  • Posts: 4207
Re: What do you think of adding a low% of crypto allocation
« Reply #1016 on: February 10, 2022, 02:42:32 PM »
As a certifiable Cheap Bastard(R), I definitely agree that most people spend too much and save too little. Those people might disagree and consider my life to be pitifully frugal. Oh well. My portfolio grows and supports me thanks to their dedication to work until 65 or 70 and their tendency to spend everything they earn at the businesses I own. It's like they are serfs paying taxes to me, their nobility.

Unlike the Middle Ages, only a tiny percentage of today's economy is about producing bare necessities like food, shelter, toilet paper, utilities, shoes, medical care, etc, and the majority is about luxuries such as cars, entertainment, electronics, fashion, restaurants, airlines, vacations, boats, decor, etc. 200 years ago, almost everyone was employed making bare necessities, but industrialization reduced the amount of workers required to produce just about anything. Fortunately, the rest of the population found work making non-essentials.

One person's spending is always another person's paycheck. So if we did something to reduce people's spending/borrowing on stupid stuff in an effort to make them save more, we'd be putting a lot of people out of work, especially those in the massive retail, food service, consumer discretionary, or service sectors. What good would it do, in the aggregate, if the average American saved 20% of their pay, but the unemployment rate was 10-15% like it is normally in Europe. What good would it do for corporations to be debt-free if that slowed down their ability to grow? How would a nation full of such savers invest, when their corporations' prospects are so bleak and there are so few bonds available to buy?

Given the choice, would we accept a decade of GDP growth at a 0.5% slower pace than otherwise would have happened if that could allow us to avoid a -3.5% severe recession somewhere in that decade? American consumers, corporate boards, and voters have consistently chosen to accept more volatility in exchange for more growth.

Quote
No nation is going to voluntarily induce austerity measures when other competing nations injecting economic steroids through monetary policy. Any politician that does enforce austerity measures is immediately voted out.

So which of the following will happen?

a) People will refuse to use bitcoin as a currency because it will force austerity upon them, or
b) Austerity sneaks in the back door under the guise of changing currencies, and nobody notices? 

I suppose we could say (b) will happen but nobody will be able to stop the momentum. That's problematic at the microeconomic level, such as for the home buyer who cannot get a 20% equity mortgage in a deflationary currency, or the corporation that still has the option to borrow in dollars, etc. All these problems with deflationary crypto push people back into inflationary dollars one transaction at a time.

It's not up to me which currency my serfs choose to use, but what they want to do is take out 7-year loans on third-row SUVs and put trips to Disney on credit cards. If bitcoin makes those things prohibitively expensive, they'll consume with dollars.

dreadmoose

  • Bristles
  • ***
  • Posts: 278
  • Age: 34
  • Location: Canada
  • Compounding
Re: What do you think of adding a low% of crypto allocation
« Reply #1017 on: February 10, 2022, 03:48:48 PM »
Umm in case anyone believes the above... Lyn Alden is not a well respected macro-economist but an engineer with no formal economics training that appears to have pivoted to shilling bitcoin as an alternative investment.

No disrespect to engineers but it looks a lot from her self-written bios that she's "done her own research" on economics... and landed on Bitcoin.

Let's try someone without an agenda to learn from if we're going to start pointing to data sources to read up on.

lifeanon269

  • Pencil Stache
  • ****
  • Posts: 552
Re: What do you think of adding a low% of crypto allocation
« Reply #1018 on: February 10, 2022, 04:10:18 PM »
One person's spending is always another person's paycheck. So if we did something to reduce people's spending/borrowing on stupid stuff in an effort to make them save more, we'd be putting a lot of people out of work, especially those in the massive retail, food service, consumer discretionary, or service sectors. What good would it do, in the aggregate, if the average American saved 20% of their pay, but the unemployment rate was 10-15% like it is normally in Europe. What good would it do for corporations to be debt-free if that slowed down their ability to grow? How would a nation full of such savers invest, when their corporations' prospects are so bleak and there are so few bonds available to buy?

What good does it do for society that we produce so much stupid stuff? It doesn't make anyone happier that we have so much stupid stuff. It destroys our environment. "GDP go up" for the sake of "GDP go up" is a silly way to measure economic success in our world and I really think we need to think differently there.

https://www.mrmoneymustache.com/2012/04/09/what-if-everyone-became-frugal/

It may seem idealistic given the current state of our debt fueled society and with debt-to-GDP ratios at excessive levels, but I do think in the long run society will be better for it. If we didn't spend so much money on so much stupid stuff, yes that does mean that the economy wouldn't grow so fast, but so what? That also means that people wouldn't need to work so much and they'd save more and could retire earlier. The environment would benefit. We'd become healthier mentally without feeling the constant need to declutter our lives of all this unnecessary stuff.

Given the choice, would we accept a decade of GDP growth at a 0.5% slower pace than otherwise would have happened if that could allow us to avoid a -3.5% severe recession somewhere in that decade? American consumers, corporate boards, and voters have consistently chosen to accept more volatility in exchange for more growth.

I think first and foremost we need to be having more conversations (like this one) about how our economy works and why it is so unsustainable. I think if people understood the trade-offs and understood the benefits that could come from a more frugal and deflationary society/economy, then I think we could make a transition that would be less of a shock to people. If instead we continue to treat deflation as a bogey man and continue thinking that GDP is the end all be all measure of a successful society, then yes, any transition to a deflationary and frugal economy will be met with pain. If society transitions gradually however and more and more people begin to understand the benefits, then I think it is possible to get there without so much pain. After all, it seems the older you get in your later years, you don't spend as much. So if we can just teach our younger generations about frugality, then I think it can be a generational transition that gets everyone "in sync". ...Wishful thinking, I know!

So which of the following will happen?

a) People will refuse to use bitcoin as a currency because it will force austerity upon them, or
b) Austerity sneaks in the back door under the guise of changing currencies, and nobody notices? 

I suppose we could say (b) will happen but nobody will be able to stop the momentum. That's problematic at the microeconomic level, such as for the home buyer who cannot get a 20% equity mortgage in a deflationary currency, or the corporation that still has the option to borrow in dollars, etc. All these problems with deflationary crypto push people back into inflationary dollars one transaction at a time.

I'm glad we can agree that people are habitual spenders. No doubt that taking the consumer out of consumerists is nigh impossible.

I don't think bitcoin forces austerity on anyone. At the end of the day it is a voluntary system (unless government forces it on people). The only thing that would force austerity on people is the resultant crashes that come from unsustainable growth. At some point there needs to be a reckoning that puts a check out our current monetary policies around the world. The number of nations currently experiencing currency and debt distress is at some very concerning levels. The US, given its economic status in the world can ride out some turbulence, but not so for many countries in the world at the moment. Covid absolutely didn't help matters. Austerity will be forced on a lot of people, but it won't be because of bitcoin.

It's not up to me which currency my serfs choose to use, but what they want to do is take out 7-year loans on third-row SUVs and put trips to Disney on credit cards. If bitcoin makes those things prohibitively expensive, they'll consume with dollars.

But if things continually get cheaper in a deflationary world and the price of goods isn't artificially inflated and we're actually able to reap the benefits of a more productive economy, then maybe people won't need to take out so many loans to afford a new car.

Umm in case anyone believes the above... Lyn Alden is not a well respected macro-economist but an engineer with no formal economics training that appears to have pivoted to shilling bitcoin as an alternative investment.

No disrespect to engineers but it looks a lot from her self-written bios that she's "done her own research" on economics... and landed on Bitcoin.

Let's try someone without an agenda to learn from if we're going to start pointing to data sources to read up on.

Not sure why the hate for Lyn Alden. She actually is well respected among macro-economists. If you listen to MacroVoices at all, she's had many conversations with other well respected macro-economists and she definitely knows her stuff and is very well researched. Rather than push ad hominems as a means of discrediting, let's stick to debating actual content.

DiscoverJupiter

  • 5 O'Clock Shadow
  • *
  • Posts: 10
Re: What do you think of adding a low% of crypto allocation
« Reply #1019 on: February 10, 2022, 05:28:39 PM »
Btc vs. government case study may soon be commencing. This will set the precedence for the government-resistant talking points for crypto.
https://www.zerohedge.com/political/ontario-premier-orders-givesendgo-freeze-funds-anti-mandate-protesters

I believe it will come out as the winner, but it will be interesting to see how many new IRS audits take place in the US (and whatever is the Canadian equivalent) for those that donated btc to this cause without first washing through a privacy-oriented coin or non-centralized tumbler.
« Last Edit: February 10, 2022, 05:30:24 PM by DiscoverJupiter »

ChpBstrd

  • Magnum Stache
  • ******
  • Posts: 4207
Re: What do you think of adding a low% of crypto allocation
« Reply #1020 on: February 10, 2022, 09:52:04 PM »
What good does it do for society that we produce so much stupid stuff? It doesn't make anyone happier that we have so much stupid stuff. It destroys our environment. "GDP go up" for the sake of "GDP go up" is a silly way to measure economic success in our world and I really think we need to think differently there.
An economist might say that without so much stuff available to buy, people would not be motivated to work as hard as they do or take the risks inherent with starting businesses. Also, with more variety in the things we can buy, we're more likely to find things that are a "perfect fit" for our needs and interests so we're more likely to spend money rather than hoard it. Our spending = someone's paycheck. This is part of the story of how economic growth accelerates itself. The process has been economically sustained for a couple hundred years.

Now, in an ecological sense, you have a point. But I think a lot of the ecological damage is a result of cultural norms about the sort of things we should want to buy. In the U.S. people are motivated to work hard so that they can own a big house full of unused rooms with a big lawn they pay someone else to mow and a V8 powered crew cab pickup truck that is used to commute to work in a manly way. This is essentially status-seeking through conformity. I can imagine another culture where everyone wants the most fashionable clothes, to live on the highest floor of a building, to have exotic bonsai trees, and to manage fancy snail terrariums to impress their friends. The things-to-want in this imaginary culture are no less useless than the things we're supposed to want in today's U.S. culture, but they are a lot less ecologically damaging.

The point of this comparison is to show the non-essential things we learn to want are culturally determined, not inherently valuable. A couple of generations from now people might not want the things people want today. Look at how attitudes about cars shifted between the era of teenage baby boomers and gen Z. There's hope on the ecological front, even if economic growth continues forever. One thing I like about MMM is that he face punches people for conforming to the culture, and points out more intrinsically valuable things we should want, like more time with our kids or less stress.

Quote
I don't think bitcoin forces austerity on anyone. At the end of the day it is a voluntary system (unless government forces it on people). The only thing that would force austerity on people is the resultant crashes that come from unsustainable growth. At some point there needs to be a reckoning that puts a check out our current monetary policies around the world. The number of nations currently experiencing currency and debt distress is at some very concerning levels. The US, given its economic status in the world can ride out some turbulence, but not so for many countries in the world at the moment. Covid absolutely didn't help matters. Austerity will be forced on a lot of people, but it won't be because of bitcoin.
I think the world you describe where debt is much harder to obtain would reduce consumption, as you hope it would, but that reduced aggregate demand is essentially the definition of a recession/depression. All the businesses that currently sell things on credit would sell less things if they didn't offer credit. Otherwise there'd be no incentive for them to take the risk of extending loans to customers. If those business models no longer worked, neither would many of those employees, and the demand shock would be felt further down the line by suppliers, manufacturers, transporters, manufacturers, and resource extractors.

It comes down to every payment by one person being another person's paycheck. So yes, any change in the system that forced deflation would reduce lending, and reduced lending would reduce aggregate demand. Reduced AD = recession and higher unemployment.

What supports the assumption that economic growth cannot go on for the foreseeable future? The world economy and living standards have been growing for centuries, and if anything this growth is accelerating. Meanwhile, most of the world still lives in poverty. Most kids still don't get the equivalent of a US high school education. An unimaginable fortune in talent and intelligence is still wasting away in economic backwaters every day, but less and less so every day. Meanwhile, science and technology are expanding our knowledge at a pace that keeps speeding up. War has been in decline for centuries (Steven Pinker makes a good case with piles of data in The Better Angels of Our Nature). GDP growth, and especially GDP per capita growth, matters a lot when it comes to putting shoes on barefoot children and giving families the jobs they need to sent those kids to school. It's not just ever-more-expensive sugar drinks from Starbucks; it's life-vs-death somewhere down the supply chain.

Quote
It's not up to me which currency my serfs choose to use, but what they want to do is take out 7-year loans on third-row SUVs and put trips to Disney on credit cards. If bitcoin makes those things prohibitively expensive, they'll consume with dollars.

But if things continually get cheaper in a deflationary world and the price of goods isn't artificially inflated and we're actually able to reap the benefits of a more productive economy, then maybe people won't need to take out so many loans to afford a new car.
You don't reap the benefits if your wages fall alongside the price of goods. I.e. if other people are paying cheaper and cheaper prices for the goods you produce, then your paycheck gets smaller and smaller. In an industrial economy, deflation looks more like layoffs because a business' sales cannot cover the salaries of employees. If you think you might be next in the unemployment line, the sensible thing to do is hoard cash and hold off on the new car. When everybody reacts that way, it's a depression.

Btc vs. government case study may soon be commencing. This will set the precedence for the government-resistant talking points for crypto.
https://www.zerohedge.com/political/ontario-premier-orders-givesendgo-freeze-funds-anti-mandate-protesters

I believe it will come out as the winner, but it will be interesting to see how many new IRS audits take place in the US (and whatever is the Canadian equivalent) for those that donated btc to this cause without first washing through a privacy-oriented coin or non-centralized tumbler.

Dude. Zerohedge?
Really?
Zero? Hedge?
LOL. https://adfontesmedia.com gives them a reliability score of 24 and a bias score of 16 which puts them in the "some reliability issues and extremism" category. I think that's being very generous. The site doesn't appeal to anyone not suffering from paranoia.

WRT the sometimes-stated claim that the source doesn't matter and we should evaluate all messages with equal respect, that's a proven way to end up misinformed. A politically motivated hack making up facts is a hack. A social media influencer is an attention-getter selling ads. And financial advisors writing scare articles to get subscribers or sell front-loaded hedge fund shares are shills. Stuff doesn't just appear on the internet at random, with no agenda driving it and nobody spending something to put it there. The source matters big time if you're going to accept any word they say as a fact.

DiscoverJupiter

  • 5 O'Clock Shadow
  • *
  • Posts: 10
Re: What do you think of adding a low% of crypto allocation
« Reply #1021 on: February 11, 2022, 11:19:59 AM »
Dude. Zerohedge?
Really?
Zero? Hedge?
LOL. https://adfontesmedia.com gives them a reliability score of 24 and a bias score of 16 which puts them in the "some reliability issues and extremism" category. I think that's being very generous. The site doesn't appeal to anyone not suffering from paranoia.

WRT the sometimes-stated claim that the source doesn't matter and we should evaluate all messages with equal respect, that's a proven way to end up misinformed. A politically motivated hack making up facts is a hack. A social media influencer is an attention-getter selling ads. And financial advisors writing scare articles to get subscribers or sell front-loaded hedge fund shares are shills. Stuff doesn't just appear on the internet at random, with no agenda driving it and nobody spending something to put it there. The source matters big time if you're going to accept any word they say as a fact.


I quite enjoy ZeroHedge because the comments are sassy. But here is a more mainstream article saying the same thing:
https://www.washingtonexaminer.com/news/ontario-court-freezes-crowdsourced-donations-to-freedom-convoy

The message is the same: government attempts to freeze legally donated funds because they don't like how the money is being spent. Crypto is a product which advertises resistance to government censorship through collusion with the financial gatekeepers.

Givesendgo claims Canada has no jurisdiction over them so the battle may not be fully fought, but the courts are trying wholeheartedly to freeze the assets, so we may get a true showdown proving the oft-touted crypto use case.
https://ottawa.citynews.ca/local-news/givesendgo-alleges-canada-has-no-jurisdiction-over-truck-convoy-fundraising-after-ontario-government-freezes-access-5053122

ChpBstrd

  • Magnum Stache
  • ******
  • Posts: 4207
Re: What do you think of adding a low% of crypto allocation
« Reply #1022 on: February 11, 2022, 11:49:53 AM »
Dude. Zerohedge?
Really?
Zero? Hedge?
LOL. https://adfontesmedia.com gives them a reliability score of 24 and a bias score of 16 which puts them in the "some reliability issues and extremism" category. I think that's being very generous. The site doesn't appeal to anyone not suffering from paranoia.

WRT the sometimes-stated claim that the source doesn't matter and we should evaluate all messages with equal respect, that's a proven way to end up misinformed. A politically motivated hack making up facts is a hack. A social media influencer is an attention-getter selling ads. And financial advisors writing scare articles to get subscribers or sell front-loaded hedge fund shares are shills. Stuff doesn't just appear on the internet at random, with no agenda driving it and nobody spending something to put it there. The source matters big time if you're going to accept any word they say as a fact.


I quite enjoy ZeroHedge because the comments are sassy. But here is a more mainstream article saying the same thing:
https://www.washingtonexaminer.com/news/ontario-court-freezes-crowdsourced-donations-to-freedom-convoy

The message is the same: government attempts to freeze legally donated funds because they don't like how the money is being spent. Crypto is a product which advertises resistance to government censorship through collusion with the financial gatekeepers.

Givesendgo claims Canada has no jurisdiction over them so the battle may not be fully fought, but the courts are trying wholeheartedly to freeze the assets, so we may get a true showdown proving the oft-touted crypto use case.
https://ottawa.citynews.ca/local-news/givesendgo-alleges-canada-has-no-jurisdiction-over-truck-convoy-fundraising-after-ontario-government-freezes-access-5053122

That I can agree with. Governments* are at least treating crypto as a form of currency when it comes to law enforcement, which negates much of the benefit. It's no different than if I was arrested laundering Mexican Pesos, except that there is a neat electronic record of all my transactions that can be subpoenaed. I'd be genuinely shocked if the CIA/FBI was collecting all our emails but not watching all the crypto ledgers.

So there's the worst of both worlds: It's not an anonymous system free of government influence AND it can't be used as a currency to buy anything.

*the ones that haven't outright banned crypto.

Sorry if I was harsh about zero hedge. I just think the concept of MMM face punches has to extend to the information economy and not just purchases.

GuitarStv

  • Senior Mustachian
  • ********
  • Posts: 20015
  • Age: 41
  • Location: Toronto, Ontario, Canada
Re: What do you think of adding a low% of crypto allocation
« Reply #1023 on: February 11, 2022, 12:07:04 PM »
Dude. Zerohedge?
Really?
Zero? Hedge?
LOL. https://adfontesmedia.com gives them a reliability score of 24 and a bias score of 16 which puts them in the "some reliability issues and extremism" category. I think that's being very generous. The site doesn't appeal to anyone not suffering from paranoia.

WRT the sometimes-stated claim that the source doesn't matter and we should evaluate all messages with equal respect, that's a proven way to end up misinformed. A politically motivated hack making up facts is a hack. A social media influencer is an attention-getter selling ads. And financial advisors writing scare articles to get subscribers or sell front-loaded hedge fund shares are shills. Stuff doesn't just appear on the internet at random, with no agenda driving it and nobody spending something to put it there. The source matters big time if you're going to accept any word they say as a fact.


I quite enjoy ZeroHedge because the comments are sassy. But here is a more mainstream article saying the same thing:
https://www.washingtonexaminer.com/news/ontario-court-freezes-crowdsourced-donations-to-freedom-convoy

The message is the same: government attempts to freeze legally donated funds because they don't like how the money is being spent. Crypto is a product which advertises resistance to government censorship through collusion with the financial gatekeepers.

Givesendgo claims Canada has no jurisdiction over them so the battle may not be fully fought, but the courts are trying wholeheartedly to freeze the assets, so we may get a true showdown proving the oft-touted crypto use case.
https://ottawa.citynews.ca/local-news/givesendgo-alleges-canada-has-no-jurisdiction-over-truck-convoy-fundraising-after-ontario-government-freezes-access-5053122

That I can agree with. Governments* are at least treating crypto as a form of currency when it comes to law enforcement, which negates much of the benefit. It's no different than if I was arrested laundering Mexican Pesos, except that there is a neat electronic record of all my transactions that can be subpoenaed. I'd be genuinely shocked if the CIA/FBI was collecting all our emails but not watching all the crypto ledgers.

So there's the worst of both worlds: It's not an anonymous system free of government influence AND it can't be used as a currency to buy anything.

*the ones that haven't outright banned crypto.

Sorry if I was harsh about zero hedge. I just think the concept of MMM face punches has to extend to the information economy and not just purchases.

I guess the question in the case you've linked is, "Should a democratically elected government be able to prevent international funding from going people with a stated goal of overturning the results of a fair election?"

If the answer comes up 'no' due to crypto, I think that will have some pretty grave implications for the world.  And any government watching that scenario unfold would do well to immediately making holding and using cryptocurrency illegal.

DiscoverJupiter

  • 5 O'Clock Shadow
  • *
  • Posts: 10
Re: What do you think of adding a low% of crypto allocation
« Reply #1024 on: February 11, 2022, 12:57:16 PM »
I'd be genuinely shocked if the CIA/FBI was collecting all our emails but not watching all the crypto ledgers.

So there's the worst of both worlds: It's not an anonymous system free of government influence AND it can't be used as a currency to buy anything.

*the ones that haven't outright banned crypto.

The government is definitely watching every ledger. It would surprise me if the nsa isn't compiling rainbow tables of btc private-public key pairs. Yes, space of all keys is probably too vast to rainbow them all, but if you can get even 0.1% of the space, you still capture many transaction authority since crypto ownership is defined only though knowledge of the private key.

And it is no secret. There are many private companies which exist solely to sell information related to the identities of the wallet-holders of crypto transactions, typically with government customers.

Which is why peer to peer purchases are important, same with non-kyc escrow services such as localmonero and localbitcoin.

If you're going to use crypto for more than just holding and day trading, such as purchases, be sure to rinse it through tumbling services without central authorities, get it from peer-to-peer cash transactions in which you make sure not to have your personal tracking device on you while wearing reflectacles, use a privacy-oriented ones exclusively, or mine it. Practice superior opsec without mistakes indefinitely or be prepared for your eventual unmasking.

ChpBstrd

  • Magnum Stache
  • ******
  • Posts: 4207
Re: What do you think of adding a low% of crypto allocation
« Reply #1025 on: February 11, 2022, 01:07:50 PM »
I'd be genuinely shocked if the CIA/FBI was collecting all our emails but not watching all the crypto ledgers.

So there's the worst of both worlds: It's not an anonymous system free of government influence AND it can't be used as a currency to buy anything.

*the ones that haven't outright banned crypto.

The government is definitely watching every ledger. It would surprise me if the nsa isn't compiling rainbow tables of btc private-public key pairs. Yes, space of all keys is probably too vast to rainbow them all, but if you can get even 0.1% of the space, you still capture many transaction authority since crypto ownership is defined only though knowledge of the private key.

And it is no secret. There are many private companies which exist solely to sell information related to the identities of the wallet-holders of crypto transactions, typically with government customers.

Which is why peer to peer purchases are important, same with non-kyc escrow services such as localmonero and localbitcoin.

If you're going to use crypto for more than just holding and day trading, such as purchases, be sure to rinse it through tumbling services without central authorities, get it from peer-to-peer cash transactions in which you make sure not to have your personal tracking device on you while wearing reflectacles, use a privacy-oriented ones exclusively, or mine it. Practice superior opsec without mistakes indefinitely or be prepared for your eventual unmasking.

Or the ultimate clandestine trade: the paper $100 bill.

DiscoverJupiter

  • 5 O'Clock Shadow
  • *
  • Posts: 10
Re: What do you think of adding a low% of crypto allocation
« Reply #1026 on: February 11, 2022, 01:25:18 PM »

I guess the question in the case you've linked is, "Should a democratically elected government be able to prevent international funding from going people with a stated goal of overturning the results of a fair election?"

If the answer comes up 'no' due to crypto, I think that will have some pretty grave implications for the world.  And any government watching that scenario unfold would do well to immediately making holding and using cryptocurrency illegal.

Governments have interest optimizing for themselves. Should governments be able to inhibit free trade? That's an interesting question.

Regardless of the moral/ethical stance, I think an appropriate counter question would ask whether governments can effectively prohibit free trade under any pretense? After all, if the US tells me that I can't trade with Iran, I could still find a way. I could find a business in Turkey to serve as the escrow partner. My government would be none-the-wiser as to with whom I'm ultimately transacting, and all it costs me is the escrow markup.

Crypto has a similar function in governmental circumvention, but it specifically tackles the unregulated finance aspect of my deals. I believe it can be outlawed; pens are plenty. But the government cannot undiscover math. You can't stop mining operations... it's just computation. Good luck proving in court someone is crypto mining and not performing a massive, distributed deep learning training session when they run fde on every disk and use https, funneling coms through the onion, and have instant kill switches to power everything off when someone so much as breaches the property to clear ram. Metadata analysis will be the only vector of attack, and even then they'll just funnel traffic over non-standard ports to non US based syncing servers.

Math is forever, just like death.

DiscoverJupiter

  • 5 O'Clock Shadow
  • *
  • Posts: 10
Re: What do you think of adding a low% of crypto allocation
« Reply #1027 on: February 11, 2022, 01:31:05 PM »
Or the ultimate clandestine trade: the paper $100 bill.

Cash is and always will be the GOAT.

Though the government actively tries to combat it via unconstitutional laws such as civil asset forfeiture. The TSA will, for example, call LE on you if they notice you have a large pile of cash in your carry-on because they get a tipster kickback from civil asset forfeiture seizures. Countries in the EU have made it illegal to use cash in moderate sums for purchases. Governments want the ability to track everything.

The benefit of crypto is you can have a fully encrypted wallet on a mundane, small storage device, with a perfect replication elsewhere so that if the gov wants to seize it, all they got was a $1 piece of hardware. Much easier to smuggle or get past prying eyes... though cryptos haven't yet solved the track everything problem unless the user is extremely diligent in their every move.

talltexan

  • Walrus Stache
  • *******
  • Posts: 5057
Re: What do you think of adding a low% of crypto allocation
« Reply #1028 on: February 11, 2022, 01:46:43 PM »
India showed how easily cash can be sidelined.

StashingAway

  • Pencil Stache
  • ****
  • Posts: 743
Re: What do you think of adding a low% of crypto allocation
« Reply #1029 on: February 11, 2022, 01:50:40 PM »
Which is why peer to peer purchases are important, same with non-kyc escrow services such as localmonero and localbitcoin.

If you're going to use crypto for more than just holding and day trading, such as purchases, be sure to rinse it through tumbling services without central authorities, get it from peer-to-peer cash transactions in which you make sure not to have your personal tracking device on you while wearing reflectacles, use a privacy-oriented ones exclusively, or mine it. Practice superior opsec without mistakes indefinitely or be prepared for your eventual unmasking.

I'm getting some serious Poe's Law vibes here.

GuitarStv

  • Senior Mustachian
  • ********
  • Posts: 20015
  • Age: 41
  • Location: Toronto, Ontario, Canada
Re: What do you think of adding a low% of crypto allocation
« Reply #1030 on: February 11, 2022, 01:51:00 PM »
Should governments be able to inhibit free trade? That's an interesting question.

No it's not an interesting question at all.  The answer is a resounding 'yes'.  Government intervention in free trade is why we don't have slavery.  It's why Joe down the street can't buy a nuclear weapon.  Every government in existence places inhibitions on free trade because unrestricted free trade results in an anarchical state that is anathema to modern society.



Regardless of the moral/ethical stance, I think an appropriate counter question would ask whether governments can effectively prohibit free trade under any pretense? After all, if the US tells me that I can't trade with Iran, I could still find a way. I could find a business in Turkey to serve as the escrow partner. My government would be none-the-wiser as to with whom I'm ultimately transacting, and all it costs me is the escrow markup.

Crypto has a similar function in governmental circumvention, but it specifically tackles the unregulated finance aspect of my deals. I believe it can be outlawed; pens are plenty. But the government cannot undiscover math. You can't stop mining operations... it's just computation. Good luck proving in court someone is crypto mining and not performing a massive, distributed deep learning training session when they run fde on every disk and use https, funneling coms through the onion, and have instant kill switches to power everything off when someone so much as breaches the property to clear ram. Metadata analysis will be the only vector of attack, and even then they'll just funnel traffic over non-standard ports to non US based syncing servers.

Sure.  There are always people happy to break the law.  But I suspect that a lot fewer people would use crypto if being caught with it came with mandatory jail time.  They don't have to monitor every computer, just enough of them to catch people now and again for this to be a good deterrent.

"Number go up" stops working if enough people become disinterested in the platform - and that's the only real reason to own crypto at the moment.  If I held a lot of bitcoin or ethereum, I'd be concerned about my crypto becoming illegal.


Math is forever, just like death.

lol

lifeanon269

  • Pencil Stache
  • ****
  • Posts: 552
Re: What do you think of adding a low% of crypto allocation
« Reply #1031 on: February 11, 2022, 04:40:16 PM »
but that reduced aggregate demand is essentially the definition of a recession/depression.

...hence my earlier statement about society needing to look beyond using GDP as a measure of economic success.

"Beyond GDP: The Need for New Measures of Progress"
https://www.bu.edu/pardee/files/documents/PP-004-GDP.pdf

You don't reap the benefits if your wages fall alongside the price of goods. I.e. if other people are paying cheaper and cheaper prices for the goods you produce, then your paycheck gets smaller and smaller. In an industrial economy, deflation looks more like layoffs because a business' sales cannot cover the salaries of employees. If you think you might be next in the unemployment line, the sensible thing to do is hoard cash and hold off on the new car. When everybody reacts that way, it's a depression.

That's not true. Lower prices due to productivity gains don't mean lower wages. Yes, monetary contraction can lead to lower wages, but productivity gains don't. Productivity gains yield better profits for businesses and thus shouldn't result is lower wages. It just means the company is more efficient at producing a good and possibly even receiving better profit margins through R&D ROI. That's a good thing for societal progress. So you have falling prices due to monetary contraction, but you also have falling prices due to productivity gains. Those are additive together and since only one of those also result in lower wages consumers benefit from falling prices of goods in relation to their wages.

The problem with our inflationary monetary policies is that they target a specific price inflation range. This means that if the price of a basket of goods falls by a large margin because of big innovation and production efficiency, it just gives more fuel for the central bankers to inflate the monetary supply, governments to run large deficits, and banks issue more debt, all for the sake of pushing GDP ever higher propped up on easy money and debt. Therefore the citizens never see those actual productivity gains in the price of their goods. It is masked by the incessant need to push economic growth at all costs. Meanwhile everyone just assumes the costs of their goods are flat in relation to their wages without realizing that productivity has shot through the roof and everyone is still working the same hours for the same wage/price ratio. It is lunacy.

DiscoverJupiter

  • 5 O'Clock Shadow
  • *
  • Posts: 10
Re: What do you think of adding a low% of crypto allocation
« Reply #1032 on: February 15, 2022, 09:26:17 AM »
No it's not an interesting question at all.  The answer is a resounding 'yes'.  Government intervention in free trade is why we don't have slavery.  It's why Joe down the street can't buy a nuclear weapon.  Every government in existence places inhibitions on free trade because unrestricted free trade results in an anarchical state that is anathema to modern society.

Fair enough. I should have been more precise. I wrote "fair trade", but I should have written, "voluntary trade with no negative externalities". Thusly, I don't believe the government has any business limiting private contracts between individuals when no harm is committed to a third party. Prostitution, drug trade, etc. should not be limited by the government as those are voluntary and harm no other third party. Slavery, murders for hire, are voluntary but not between all parties, and there is clear harm to non-consenting third parties.

I would argue that 2A currently provides the capacity for individuals to own nuclear weapons as it is an arm. If we, as a society, want to change that, we will need to ammend the constitution.

We need not devolve into total anarchy. But we must ensure that the government's role is limited to that of private contract enforcement among voluntary transactions, and only those powers otherwise enumerated to it in Article 1 Section 8 of the constitution.


Sure.  There are always people happy to break the law.  But I suspect that a lot fewer people would use crypto if being caught with it came with mandatory jail time.  They don't have to monitor every computer, just enough of them to catch people now and again for this to be a good deterrent.

"Number go up" stops working if enough people become disinterested in the platform - and that's the only real reason to own crypto at the moment.  If I held a lot of bitcoin or ethereum, I'd be concerned about my crypto becoming illegal.

This is a good point. I sometimes forget people follow the law and don't take my stance of "follow if convenient".

Plus we have exciting new developments! Canada just announced that it has extended its laundering and terrorism laws to include crypto and crowdfunding in response to people using crypto to donate to the Honking.

The real question to follow: will the government be able to stop it? Will this detour people from donating with it?

I, for one, will be making plain kyc purchases of some today and then funneling it through to the Honking efforts in the least covert way possible to see if people have decided to comply with these new laws.

That said, I do not generally hold large crypto allocations for mostly the reasons you listed. The downside risk due to demand fallout or reclassification under the law outweighs its carry upside for me. I get it and out strategically depending on what upcoming transactions need to be made with it. Also note I have yet to make any legal purchases of a good and/or service with it.

GuitarStv

  • Senior Mustachian
  • ********
  • Posts: 20015
  • Age: 41
  • Location: Toronto, Ontario, Canada
Re: What do you think of adding a low% of crypto allocation
« Reply #1033 on: February 15, 2022, 09:59:47 AM »
No it's not an interesting question at all.  The answer is a resounding 'yes'.  Government intervention in free trade is why we don't have slavery.  It's why Joe down the street can't buy a nuclear weapon.  Every government in existence places inhibitions on free trade because unrestricted free trade results in an anarchical state that is anathema to modern society.

Fair enough. I should have been more precise. I wrote "fair trade", but I should have written, "voluntary trade with no negative externalities".

Interesting.  To me, preventing any negative externalities would probably result in significant government overreach.

For example, given that exhaust from cars and trucks kill 53,000 people in the US alone each year (https://qz.com/135509/more-americans-die-from-car-pollution-than-car-accidents/#:~:text=A%20new%20study%20from%20MIT,of%20automobiles%2C%20to%20nearly%20100%2C000.) . . . it would have to be illegal to purchase or sell a vehicle.  That is obviously and example of voluntary trade with serious negative externalities.

Your statement would appear to require the cessation of any sale of automobiles.  Was that your intent?


Prostitution, drug trade, etc. should not be limited by the government as those are voluntary and harm no other third party.

Generally I agree with you, but there are a few corner cases where limits make sense to me.  Take children for example:

If a child prostitute volunteers is that OK, or , should this be a legally limited action?
If a child wants to use his/her allowance to save up and buy some crack cocaine, should this be a legally limited action?


Slavery, murders for hire, are voluntary but not between all parties, and there is clear harm to non-consenting third parties.

Where do you draw the line with harm to third parties?  The exhaust from cars kills tens of thousands of people in the US each year.  That's clear harm to non-consenting third parties.

What about noise?  If I decide I don't like you, and stand outside your house with an air horn blasted straight at your window all night long so that you can't sleep, would you consider that do be doing you harm?  What if I did it day after day, and week after week?

I'm asking because you seem to have indicated support for a group of people doing just that . . . with little apparent care for non-consenting third parties:
I, for one, will be making plain kyc purchases of some today and then funneling it through to the Honking efforts in the least covert way possible to see if people have decided to comply with these new laws.

So I'm confused.  How much does harm done to a non-consenting third party really matter to your philosophy?


I would argue that 2A currently provides the capacity for individuals to own nuclear weapons as it is an arm. If we, as a society, want to change that, we will need to ammend the constitution.

Fortunately, the laws of the US don't agree with this fringe opinion.  They very clearly prohibit it in no uncertain terms and no constitutional amendment was required:
https://www.law.cornell.edu/uscode/text/18/831

StashingAway

  • Pencil Stache
  • ****
  • Posts: 743
Re: What do you think of adding a low% of crypto allocation
« Reply #1034 on: February 15, 2022, 10:53:23 AM »
I would argue that 2A currently provides the capacity for individuals to own nuclear weapons as it is an arm. If we, as a society, want to change that, we will need to ammend the constitution.

Fortunately, the laws of the US don't agree with this fringe opinion.  They very clearly prohibit it in no uncertain terms and no constitutional amendment was required:
https://www.law.cornell.edu/uscode/text/18/831

I completely missed that in my first perusal of the recent comments.

DiscoverJupiter- that is a perplexing position to take. There are so many follow up questions that I don't even know where to start.

DiscoverJupiter

  • 5 O'Clock Shadow
  • *
  • Posts: 10
Re: What do you think of adding a low% of crypto allocation
« Reply #1035 on: February 15, 2022, 11:54:58 AM »
Fortunately, the laws of the US don't agree with this fringe opinion.  They very clearly prohibit it in no uncertain terms and no constitutional amendment was required:
https://www.law.cornell.edu/uscode/text/18/831

It seems most of the clauses in that law are covered by two important clauses, here excerpted from (a)(1):
Quote
(A) thereby knowingly causes the death of or serious bodily injury to any person or substantial damage to property or to the environment; or
(B) circumstances exist, or have been represented to the defendant to exist, that are likely to cause the death or serious bodily injury to any person, or substantial damage to property or to the environment;
[\quote]

(2) non-violent theft
(3) international transport
(4) & (5) violent theft
(5) coercion/blackmailing
(6) direct harm
(8) & (9) expansions of the above

The only thing that may prevent someone from owning radioactive material, it seems, is the "without lawful authority" clause in (1), but even that is subject to the use of such material to cause death or serious bodily harm.

While one use of a nuclear weapon is death and bodily harm, certainly, it's not the only use. I can find a rational argument that would consider a home-owned nuclear weapon (so long as the material was sourced lawfully and never put anyone in danger) could be lawful when subject to these constraints.  Primarily that weapons are not themselves threats to bodily risk and death, but rather their use ill-intently is.  Perhaps this person has a nuclear weapon in case they need to strap it to a rocket to blow up an asteroid.


Interesting.  To me, preventing any negative externalities would probably result in significant government overreach.

For example, given that exhaust from cars and trucks kill 53,000 people in the US alone each year (https://qz.com/135509/more-americans-die-from-car-pollution-than-car-accidents/#:~:text=A%20new%20study%20from%20MIT,of%20automobiles%2C%20to%20nearly%20100%2C000.) . . . it would have to be illegal to purchase or sell a vehicle.  That is obviously and example of voluntary trade with serious negative externalities.

Your statement would appear to require the cessation of any sale of automobiles.  Was that your intent?

My intent was to state that the role of the government is to enforce private contracts.  The government is the arbitrator of what constitutes negative externalizes and gets to exercise that right when there is a claimant with standing.  But a grievance must exist to bring the matter to the courts.

In the case of prostitution, any harmed third party is welcome to bring suit against those that transacted.  In the case of child prostitution, child drug purchasing, or any other child-related standing, we have historically deferred to our recognition of cognition.  Currently laws are set so that children are minors when under 18 years of age.  Therefore any private contract with a child under 18 is not valid unless approved by a parent or guardian.  The obvious question that follows is: if a parent consents to their child providing sexual favors and the child voluntarily participates, should that be permissible?

Regarding vehicle emissions, I would state that if the negative externality is quantifiable, then perhaps we should consider exactly such laws as vehicle prohibition.  This seems to be the idea behind carbon offsets, etc. in the business world.  It is not outside the realm of possibility, but - again - there would have to be some quantifiable harm present such that a lawsuit could be successfully argued and won.  Perhaps we don't outlaw vehicles right now because no one vehicle can be attributed to the direct harm of another individual via emissions alone.


Where do you draw the line with harm to third parties?  The exhaust from cars kills tens of thousands of people in the US each year.  That's clear harm to non-consenting third parties.

What about noise?  If I decide I don't like you, and stand outside your house with an air horn blasted straight at your window all night long so that you can't sleep, would you consider that do be doing you harm?  What if I did it day after day, and week after week?

I'm asking because you seem to have indicated support for a group of people doing just that . . . with little apparent care for non-consenting third parties:
I, for one, will be making plain kyc purchases of some today and then funneling it through to the Honking efforts in the least covert way possible to see if people have decided to comply with these new laws.
[\quote]

I don't draw the line. I expect the government to, and their legislative actions should be fashioned as a preventative against flooding the court system with private claims.

When a law is enacted, it should be because there has been a scenario with quantifiable harm envisioned or having occurred.  The point of the law is to make it clear that such actions do necessarily[\i] coexist with quantifiable harm in all instances, and therefore you cannot do these things because, whether you realize it or not, there is harm.

I expect all laws to stand up to a challenge that quantifies what that harm is, and any law which cannot, I simply ignore.

Regarding the specific example of the truck protest, I do not have a problem if these people are arrested for breaking laws.  That is their aim.  Their goal is to break laws in such a fashion as to be a nuisance to society to bolster awareness and support for their claims.

We all play this game.  Murder is illegal, but obviously you can still do it. It's just that we have established a contract between the individual and society such that if you wish to murder someone you will have to spend the rest of your life in jail (or possibly be murdered yourself).  We can call it wrong, immoral, etc. but at the end of the day it is just the contractual payment for an action you wished to take.

JenniferW

  • Handlebar Stache
  • *****
  • Posts: 1166
Re: What do you think of adding a low% of crypto allocation
« Reply #1036 on: February 15, 2022, 12:01:53 PM »
I really don't like that crypto is so destructive to the environment.  We are turning the earth inside out for virtual assets.

GuitarStv

  • Senior Mustachian
  • ********
  • Posts: 20015
  • Age: 41
  • Location: Toronto, Ontario, Canada
Re: What do you think of adding a low% of crypto allocation
« Reply #1037 on: February 15, 2022, 01:22:57 PM »
Fortunately, the laws of the US don't agree with this fringe opinion.  They very clearly prohibit it in no uncertain terms and no constitutional amendment was required:
https://www.law.cornell.edu/uscode/text/18/831

It seems most of the clauses in that law are covered by two important clauses, here excerpted from (a)(1):
Quote
(A) thereby knowingly causes the death of or serious bodily injury to any person or substantial damage to property or to the environment; or
(B) circumstances exist, or have been represented to the defendant to exist, that are likely to cause the death or serious bodily injury to any person, or substantial damage to property or to the environment;
[\quote]

(2) non-violent theft
(3) international transport
(4) & (5) violent theft
(5) coercion/blackmailing
(6) direct harm
(8) & (9) expansions of the above

The only thing that may prevent someone from owning radioactive material, it seems, is the "without lawful authority" clause in (1), but even that is subject to the use of such material to cause death or serious bodily harm.

While one use of a nuclear weapon is death and bodily harm, certainly, it's not the only use. I can find a rational argument that would consider a home-owned nuclear weapon (so long as the material was sourced lawfully and never put anyone in danger) could be lawful when subject to these constraints.  Primarily that weapons are not themselves threats to bodily risk and death, but rather their use ill-intently is.  Perhaps this person has a nuclear weapon in case they need to strap it to a rocket to blow up an asteroid.

I fully support your right to hold these fringe opinions, but am also quite glad that the law has interpreted them to be ridiculous and dangerous.


Interesting.  To me, preventing any negative externalities would probably result in significant government overreach.

For example, given that exhaust from cars and trucks kill 53,000 people in the US alone each year (https://qz.com/135509/more-americans-die-from-car-pollution-than-car-accidents/#:~:text=A%20new%20study%20from%20MIT,of%20automobiles%2C%20to%20nearly%20100%2C000.) . . . it would have to be illegal to purchase or sell a vehicle.  That is obviously and example of voluntary trade with serious negative externalities.

Your statement would appear to require the cessation of any sale of automobiles.  Was that your intent?

My intent was to state that the role of the government is to enforce private contracts.  The government is the arbitrator of what constitutes negative externalizes and gets to exercise that right when there is a claimant with standing.  But a grievance must exist to bring the matter to the courts.

Regarding vehicle emissions, I would state that if the negative externality is quantifiable, then perhaps we should consider exactly such laws as vehicle prohibition.  This seems to be the idea behind carbon offsets, etc. in the business world.  It is not outside the realm of possibility, but - again - there would have to be some quantifiable harm present such that a lawsuit could be successfully argued and won.  Perhaps we don't outlaw vehicles right now because no one vehicle can be attributed to the direct harm of another individual via emissions alone.

Death seems pretty quantifiable.  Indeed, I just did quantify it pretty clearly for you . . . about 53,000 a year are caused by the particulate matter put into the air by cars and trucks.

There is mention of 'carbon offsets'.  I'm not sure how something similar would apply to this case.  Few people would accept a small cash payout in exchange for their death or the death of a loved one, so it could never effectively address the problem.

Then there is discussion that because it would be difficult to sue a single individual for deaths caused by their use of a vehicle that nothing at all should be done about the tens of thousands of dead due to negative externalities.  If negative externalities can only be prosecuted when they can be tied to an individual beyond a reasonable doubt, it leads to some rather obvious problems:

I have five rifles.  I load four of them with blanks and one of them with a real bullet.  I randomly distribute them to a group of five people who all point them and shoot at your child.  The child is killed by the one real bullet.  I take all the guns back and melt them down.  Nobody can ever prove who fired the killing shot, therefore no crime was committed in the murder of your child, right?

What you're describing appears to be a system of governance rife with internal inconsistencies that would prevent it from functioning well in reality.



In the case of prostitution, any harmed third party is welcome to bring suit against those that transacted.  In the case of child prostitution, child drug purchasing, or any other child-related standing, we have historically deferred to our recognition of cognition.  Currently laws are set so that children are minors when under 18 years of age.  Therefore any private contract with a child under 18 is not valid unless approved by a parent or guardian.  The obvious question that follows is: if a parent consents to their child providing sexual favors and the child voluntarily participates, should that be permissible?

Let's explore this a bit too.

In our society a child below the age of consent is considered incapable of having consent - so parents are responsible for those choices.  So kids can't consent to sex with pedophiles.  I think we're both on the same page thus far.  But in my preferred system, government laws exist that prevent pedophiles from raping children regardless of parental consent.  In your preferred system it sounds like the parent can choose who their minor child has sex with (and the kids wishes don't matter, as they're below the age of consent).  Is this a correct understanding?

But you also missed my question about children and buying drugs.  All drugs are legal in the preferred system you described.  A child can walk to a store and buy some candy if they want to in our society.  So can a child also walk to a store and buy some heroin or crack cocaine in the society you're envisioning?  Why, or why not?



Where do you draw the line with harm to third parties?  The exhaust from cars kills tens of thousands of people in the US each year.  That's clear harm to non-consenting third parties.

What about noise?  If I decide I don't like you, and stand outside your house with an air horn blasted straight at your window all night long so that you can't sleep, would you consider that do be doing you harm?  What if I did it day after day, and week after week?

I'm asking because you seem to have indicated support for a group of people doing just that . . . with little apparent care for non-consenting third parties:
I, for one, will be making plain kyc purchases of some today and then funneling it through to the Honking efforts in the least covert way possible to see if people have decided to comply with these new laws.

I don't draw the line.

Yes you do.  You already said that you ignore what the government says when it's not convenient to you:
Quote
I sometimes forget people follow the law and don't take my stance of "follow if convenient".

So the government's laws don't really matter then, right?  You're taking things into your own hands anyway - so only the actions of the individual matter.  The original question posed is therefore the correct one to ask . . . "where do you draw the line?"


Regarding the specific example of the truck protest, I do not have a problem if these people are arrested for breaking laws.

So lemme get this straight.  You believe in a system of government that prevents people from hurting innocent third parties . . . but you're funneling money to people who are actively hurting innocent third parties.  But you also don't care if the people you're supporting get arrested for breaking the law?

Is there some logic for this inconsistency in word and deed?
« Last Edit: February 15, 2022, 01:25:55 PM by GuitarStv »

DaKini

  • Bristles
  • ***
  • Posts: 414
  • Location: Germany, Munich area
Re: What do you think of adding a low% of crypto allocation
« Reply #1038 on: February 16, 2022, 04:53:32 AM »
I find this discussion very interesting.
However it would be cool if some mod would split it off - we disgressed waaaay to far from the OP

talltexan

  • Walrus Stache
  • *******
  • Posts: 5057
Re: What do you think of adding a low% of crypto allocation
« Reply #1039 on: February 17, 2022, 06:50:40 AM »
I will admit, the fact that Robert Kiyosaki is back in the news touting Bitcoin definitely is making me think I should not own it.

goodmoneygoodlife

  • 5 O'Clock Shadow
  • *
  • Posts: 54
    • Good Money Good Life
Re: What do you think of adding a low% of crypto allocation
« Reply #1040 on: February 17, 2022, 08:09:37 AM »
Of course this is a great idea. You enjoy the benefits of reverse-black swan risk (i.e. most of the time you lose money, and have a long tail chance of gaining massive amounts of money) with very limited downside.

UltraStache

  • Stubble
  • **
  • Posts: 172
Re: What do you think of adding a low% of crypto allocation
« Reply #1041 on: February 18, 2022, 04:39:29 AM »
On the topic of crypto, I thought it rather interesting that The Motley Fool recently(last month?) purchased $5,000,000 in BTC as part of their investment portfolio.

Also of note, Warren Buffet/Berkshire Hathaway just bought $1,000,000,000 of stock in a South American bank that *may or may not have some association with crypto currencies?*
https://www.yahoo.com/video/warren-buffett-invests-1b-bitcoin-011723509.html
« Last Edit: February 19, 2022, 07:41:41 AM by UltraStache »

talltexan

  • Walrus Stache
  • *******
  • Posts: 5057
Re: What do you think of adding a low% of crypto allocation
« Reply #1042 on: February 18, 2022, 06:34:23 AM »
$BRK is a public company, so we know that $1 billion is very small relative to other stakes they have.

Do we have any guess as to the size of the Motley fool company?

GuitarStv

  • Senior Mustachian
  • ********
  • Posts: 20015
  • Age: 41
  • Location: Toronto, Ontario, Canada
Re: What do you think of adding a low% of crypto allocation
« Reply #1043 on: February 18, 2022, 07:12:50 AM »
Not sure I'd read too much into the Motley Fool purchase . . . they've been calling for a crash that hasn't happened in the Toronto housing market every year for just about thirty years now.  :P

StashingAway

  • Pencil Stache
  • ****
  • Posts: 743
Re: What do you think of adding a low% of crypto allocation
« Reply #1044 on: February 18, 2022, 12:55:43 PM »
Also of note, Warren Buffet/Berkshire Hathaway just bought $1,000,000,000 of stock in a South American crypto bank
https://www.yahoo.com/video/warren-buffett-invests-1b-bitcoin-011723509.html

Crypto friendly bank. It's a bank. Deals primarily in fiat, focused on 100% digital banking products. Has some really good options for those who don't have access to regional banks. Crypto isn't even listed in articles describing the company.

That headline is somewhat misleading, and your summary of the headline is like a bad version of phone tag, wherein important bits of info get dropped at every stage.

MustacheAndaHalf

  • Walrus Stache
  • *******
  • Posts: 5195
Re: What do you think of adding a low% of crypto allocation
« Reply #1045 on: February 19, 2022, 02:22:07 AM »
Not sure I'd read too much into the Motley Fool purchase . . . they've been calling for a crash that hasn't happened in the Toronto housing market every year for just about thirty years now.  :P
First I've heard of their house picking service... I've signed up for their US based stock advisor and rule breakers, both with good track records.
https://investorjunkie.com/reviews/motley-fool/
https://www.wallstreetsurvivor.com/motley-fool-stock-picks-2021/
https://www.modestmoney.com/motley-fool-review/

UltraStache

  • Stubble
  • **
  • Posts: 172
Re: What do you think of adding a low% of crypto allocation
« Reply #1046 on: February 19, 2022, 07:42:48 AM »
Also of note, Warren Buffet/Berkshire Hathaway just bought $1,000,000,000 of stock in a South American crypto bank bank that *may or may not have some association with crypto currencies?*
https://www.yahoo.com/video/warren-buffett-invests-1b-bitcoin-011723509.html

Crypto friendly bank. It's a bank. Deals primarily in fiat, focused on 100% digital banking products. Has some really good options for those who don't have access to regional banks. Crypto isn't even listed in articles describing the company.

That headline is somewhat misleading, and your summary of the headline is like a bad version of phone tag, wherein important bits of info get dropped at every stage.

Edited

StashingAway

  • Pencil Stache
  • ****
  • Posts: 743
Re: What do you think of adding a low% of crypto allocation
« Reply #1047 on: February 19, 2022, 08:19:57 AM »
Also of note, Warren Buffet/Berkshire Hathaway just bought $1,000,000,000 of stock in a South American crypto bank bank that *may or may not have some association with crypto currencies?*
https://www.yahoo.com/video/warren-buffett-invests-1b-bitcoin-011723509.html

Crypto friendly bank. It's a bank. Deals primarily in fiat, focused on 100% digital banking products. Has some really good options for those who don't have access to regional banks. Crypto isn't even listed in articles describing the company.

That headline is somewhat misleading, and your summary of the headline is like a bad version of phone tag, wherein important bits of info get dropped at every stage.

Edited

Lol, touché

vand

  • Handlebar Stache
  • *****
  • Posts: 1904
  • Location: UK
Re: What do you think of adding a low% of crypto allocation
« Reply #1048 on: February 24, 2022, 03:04:07 AM »
Digital Gold, folks.... ^_^ ^_^ ^_^

clarkfan1979

  • Magnum Stache
  • ******
  • Posts: 2809
  • Age: 43
  • Location: Pueblo West, CO
Re: What do you think of adding a low% of crypto allocation
« Reply #1049 on: March 26, 2022, 07:29:36 AM »
Running a few backtests on portfolio visualizer, here are the stats using SPY and GBTC from year 2016 to now

100% SPY has 17% yearly returns and 19.4% maximum drawdown
98% SPY and 2% GBTC has 23% yearly returns and 19.8% max drawdown (note: portfolio is rebalanced annually)
95% SPY and 5% GBTC has 30% returns and 20.4% max drawdown

Wow, just 5% of the GBTC and we can see wonders with our returns (75% higher) and only 1% more drawdown

Having a huge allocation to Crypto can be dicey but just adding a small percent and annually rebalancing seems a great strategy to enhance returns. What are your thoughts on this?

Original post was on September 6th, 2021 and bitcoin was trading at $52,656.

Now 6.5 months later, Bitcoin is $44,403, which is a 15% decrease.

I understand that Bitcoin doesn't represent all crypto, but I need to provide numbers for something.

During this same time, my leveraged real estate went up around 10% and I'm increasing rents by 10% for my annual leases. I do self-manage and it requires about 200 hours/year of my time with me performing some repairs that I like to do. I hire out the stuff that I don't like to do.

How much time do you spend "researching" crypto trends? Some people claim to be experts because they consumed massive amounts of information for the past 6 months. That doesn't seem passive to me.

I do not have any fear of missing out on crypto.