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Archive for the ‘money supply’ tag

Jul 12, 2019

Cars, Gold, Houses, Toys & Stock: What gives value?

Posted by in categories: bitcoin, cryptocurrencies, economics


The title of this post is intentionally misleading. We frequently discuss the traits that lead to value here in the Lifeboat Blog. But today, I was asked a more nuanced question: “What things will hold their value?

And there is a ulterior motive in being a columnist for Lifeboat. Analyzing the dynamics of durable value leads to some surprising conclusions about the money supply and what a society chooses to use as money. We’ll get to this at end of this post.


We know that value comes from supply and demand. There are no exceptions. But, we have not addressed the properties that make an asset hold value over the long haul. Let’s consider some examples…

Cars

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Oct 25, 2018

You don’t understand Bitcoin because you think money is real

Posted by in categories: bitcoin, cryptocurrencies, economics, government, internet

Maria Bustillos is founder of the blockchain supported publication, Popula. I stole the title of this post from her essay at Medium.com (linked below).* I hope that Maria considers it a tribute rather than title-plagiarism. Her article is blocked by a pay wall, so allow me to explain a concept that confounds even a Nobel Prize winning economist. My take on the issue is somewhat different than Ms. Bustillos.

The difficulty understanding or appreciating Bitcoin boils down to a misconception that the dollar is backed by something more tangible, such as gold, guns or the promise of redemption. Not only is this an illusion, but Bitcoin is backed by something far more tangible, intrinsic and durable.

The illusion that “real” value emanates from government coupled with a robust consumer economy has been woven into our DNA for millennia. But, the value we attribute to a Dollar, Euro, or Yuan is a result of conditioning rather than any intrinsic value. That same conditioning has led us to believe that there is something sane and inherent in a nation that controls its money supply and its monetary policy.

Most public works projects—power generation, space ships, or the telephone network—were controlled by government in the past. If not, they were regulated as a licensed monopoly. This creates a choke point, a lack of competition, and a gaping opportunity for inefficiency, mismanagement or graft. It defies a free market economy and it concentrates power in the hands of politicians. But, at one time, it seemed necessary.

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Jul 31, 2018

Is Bitcoin Erasing 300 years of Monetary Evolution?

Posted by in categories: bitcoin, cryptocurrencies, economics, finance, government, innovation

Today, economist and Nobel laureate, Paul Krugman, wrote in the New York Times, that Bitcoin is taking us back 300 years in monetary evolution. As a result, he predicts all sorts of bad things.

A significant basis for Mr. Krugman’s argument is that the US dollar has value because men with guns say it does.

Is Bitcoin erasing 300 years of monetary evolution?

Running with the metaphor that fundamental change to an economic mechanism represents ‘evolution’, I think a more accurate statement is that Bitcoin is not erasing the lessons of history. Rather, it is the current step in the evolution of money. Of course, with living species, evolution is a gradual process based on natural selection and adaptation. With Bitcoin, change is coming up in the rear view mirror at lightning speed.

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Jul 12, 2016

Why is Bitcoin Capped at 21M units?

Posted by in categories: bitcoin, cryptocurrencies, economics, government, transparency

I was asked this at Quora.com, where I answer questions under the pen name, ‘Ellery’. But the query deserves a companion question, and so I approached the reply by answering two questions.


You might have asked “Why was Bitcoin designed to have a cap?” But, instead, you asked “Why is the cap set at 21 million bitcoins”. Let’s explore both questions starting with the choice of a circulation cap…

Why set the cap at 21 million BTC?

The choice of a cap number is arbitrary and in fact, it could be 1 or it could be 1 hundred trillion. It makes no difference at all and it has no effect on the economy—even if Bitcoin were to be adopted as a currency all over the world. If it were set to 1 BTC, we would simply discuss nano-BTC instead of 1 BTC for amounts of about $650.

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