Yet another useful post

Suppport ! For the title of this thread

 

There's a lot to unpack here.

1. Negative Interest Rates (NIR)

Spoiler: Explanation on NIR

Before we talk about the issue of NIR, we need to understand what is meant to happen when NIR is in place.

NIR simply means that:

1. You pay to store money.
2. You get paid to borrow money.

That definitely sounds bizarre, but thereotically, it's meant to help the economy. Nowadays, people just want to keep their money in the banks. Not just people, companies, businesses, even banks want to do this. This makes people spend a lot less, and makes the economy stagnant. This leads to less employment, less new businesses, basically a recession.

Now, what happens when you have to pay to store money? One of the biggest affected players is the bank. Now, if they store way too much money in their own storage, they get charged, and they definitely don't want that. So they'll start lending more. Companies become happier and borrow more. This creates more jobs, more investments. You, as a normal person, might end up getting paid to say, get mortgages. Economy is helped overall, and recession stops.

Of course, this is all theoretical. People would really prefer not to do this, because this huge change might cause lots of unforseen issues. Not to mention, it might end up making everyone invest in riskier stuff just to get a positive interest rate. Also, I'd like to say that this makes me really confused because in what universe do you lend someone money and expect for it to come back to you less than when you lent it?

It's really just a last resort thing, but a few countries have made use of it and they haven't burned down just yet. "Just yet", however, might be closer than we thought. There is a reported $17 trillion invested in NIR investments, meaning that the longer you hold onto these, the poorer you get. Sounds like a scam.

2. Quantitative Easing (QE)

Spoiler: Explanation on QE

QE is also a last resort tactic. Basically, governments start printing money and injecting that money to banks. Banks will then be happier, and start lending more to the people, which will have more or less the same effect as NIR.

The difference is that there is a high chance that QE will instead cause too much inflation. It's a very experimental strategy that hasn't been implemented much, and so it is difficult to see when a country should stop QE. It is to be noted that past QE and NIR usage have been reported to hold positive effects, but a lot of people are claiming that they hold many unforseen negative effects.

An agreed notion is that while it might be a positive outcome, it is highly inefficient. England once printed £375B for QE, only to have their economy's spending increase by £23M-28M. They're basically making the rich richer, in hopes that the rich will use that money to invest in the economy.

3. Bitcoin / Cryptocurrency

Spoiler: Explanation on Bitcoin

Hoo, boy. This is a doozy. The reason why Bitcoin is starting to come up in these economic debates lies in the way they were structured: Their prices are not controlled by the government, and purely rely on the market. The goverment has absolutely no say in who trades bitcoins, and how they use it.

What does that mean? In a recession or a crisis, people can easily jump ship from their currency to bitcoin. Sounds good, right? Your money is free from any government rules, and its highly unlikely that the interest on these things will become negative. That whole NIR scam can be avoided.

...Except the reason why Bitcoin is so wonderful may be the final key to total anarchy.

Let's think about the future in this case. Let's say we do hit a recession, and people decide to jump ship to Bitcoins. Alright, cool. Bitcoin gets more recognition globally, and everyone starts jumping to Bitcoin. So what do we have now? A globally traded cryptocurrency, and a bunch of currencies that no one wants to hold anymore, because why would they? Bitcoin is obviously the better choice here.

When we hit that situation, it's likely that countries will start adopting Bitcoin as their currency instead. Every country starts following and takes in Bitcoin. Now, we have a global currency that is Bitcoin.

Except, what happens in a recession? Previously, governments could try to do QE, or try NIR, or come up with other strategies to boost the market. If Bitcoin was adopted, however, the government basically cannot do a single thing to fight recession. All they can do is pray Bitcoin doesn't stuff up.

And well, probably the scariest part of Bitcoin: We know from past prices that Bitcoin prices go up and down quite wildly. It's great and all if it rises, but when it falls, it falls significantly, and will create a much larger hole in your wallet than any negative interest rate would. It's a very risky investment.

Of course, this is the current Bitcoin. Lots of people are including Bitcoin in their economic discussions, and this may lead to a change to how Bitcoin is regulated in the future.

In conclusion: Our financial system is ruined, so like, go nuts and do whatever you want.

I can't believe I wrote so much. I should've taken economics. :|

 

1. I guess it's a fair point to say that market liquidity will reduce volatility. Though it is still very far from being one, I am worried that having a global currency, and may I say, unregulated, will lead to unforseen issues.

2. I don't think this is right here. The reason why there is recession is because people are saving up. It's the whole reason why they tried QE and NIR, they want to force banks to lend and force people to spend more.

I read up on the argument of why this'll work, and I just don't agree. It seems like they're arguing that people will still spend because a) necessities, and b) they just want to at the moment. That seems like it's no different to the system we have now, except worse, because now they're incentivized to save rather than spend.

I've been reading this article for a bit, and for me, this explains the downside of Bitcoin very well.

3. I do find the fixed inflation policy of Bitcoin to be rather interesting. However, I'm not sure how well that'll hold up once it is actually used as a currency. I do believe that the supply and demand of services and goods will cause issues in this "fixed inflation" currency.

While I do understand the good to seperate monetary system from state, as seen in the GFC, it's also a double-edged sword. Yes, now the government can't control it, but also, yes, the government cannot control it. Sure, if we can prove that Bitcoin's self-regulation will never allow any crisis to happen, this'll be a great idea, but right now, all I see is the gold-standard happening again.

Also never heard of the cantillon effect, thanks for mentioning it! I don't see how Bitcoin can fix/improve the disparity though.

In the end, I do think Bitcoin is an interesting investment. I don't see it to be anything more than just virtual gold, though. You invest in it during recessions, just as you would with normal gold, but it wouldn't fix much if it was adopted as currency.

 

Gosh. I wish I never would've dropped out of geometry.

 

I think Rynn is the only person that has ever offered this guy an actual discussion on BitCoin via forums

 

I remember when the qt op originally started posting about bitcoin, peeps would engage him. Including you, I remember you guys discussing environmental impacts of bitcoin before. But after like the first 2 or 3 erryone stahped =[

 

Ran out of dicussion points, I guess. 😂

 

1. I read the article. Again, this is another case of the gold standard coming to fruition. Gold standard used to be the "currency", and it works the same way as bitcoin: hard money. But again, that system failed, mainly because it was disrupting innovation. When the economy wanted to grow, it couldn't, because gold/money was limited. Here's an explanation of the pro-con of the gold standard. Some of the points do not apply to bitcoin anymore, but a lot still do.

2. Yes, that's how recession comes to be. If everyone saves, who will buy products and services? If companies don't earn a profit, they'll start cutting costs, cutting employees, or even closing down. Look into the deflationary spiral, it's a very real possibility.

I can't say much about bitcoin or cryptocurrency as an investment. Every investor had their own risk profiles. I for one, despite intrigued by how it works, would definitely not invest in bitcoin simply because it's still very young and unpredictable. I understand that it may be different for you.

The only issue I have is once Bitcoin enters economic territory. Bitcoin is in no way better than QE and NIR. It works as a temporary safe haven, at best (which again, is just replacing the role of gold assets). It's far too early to think about adopting it as a currency.

 

I miss my man Pythagoras. :'(

(Wait, you mean he's made this sort of thread before?)

 

He makes tons of Bitcoin-related threads (and posts in general).

 

I do recall someone asking for like an essay on Bitcoin before. Don't remember if that's him.

 

It likely is. He's had a few IGN changes, so you may not recognize it off the bat.

 

Idk what that is. 😶

 

Her man.

 

How long ago did you drop geometry—

I wish. I bet he'll find all the right angles.

 

Touch that vertex sooooooo riiiiight😱🤤

 

Boycott money. Let's all go back to a trading system.

Someone come clean my house in exchange for wine.