pull down to refresh

Where is the tipping point in inflation?
62 sats \ 9 comments \ @kilianbuhn 26 Mar 2022 bitcoin
I just had the thought that every inflation has a tipping point where the value of a currency is basically 0. This point is reached when people don't bother anymore using the currency. When shop keepers stop updating their prices twice a day. When people are using cigarettes or bottles of booze in the streets (in the pre-internet age).
When is this point reached? For me 7% is way past this point. For most bitcoiners 2% is past this point. 2 sounds like a small number but it cumulates year over year over year - especially due to compound interest. ✊damn you math✊.
But why isn't this point reached for more people? Why isn't it reached in Turkey? Why isn't it reached in Russia. If I was Russian I would prefer anything to Rubels right now - Preferably Bitcoin but really anything if necessary - I'd buy glasses of pickles and honey and vodka before I hold Rubels. Why aren't people panicking?
write
preview
related posts
10 sats \ 2 replies \ @cozy 27 Mar 2022
There's no tipping point, inflation is just a tool to change the path of an economy. (Why would a 2% inflation rate ever be a good target in the first place for a stablecoin/fiat? eg. Why not zero? Or a negative number?)[https://www.stlouisfed.org/open-vault/2019/january/fed-inflation-target-2-percent]
The point of Bitcoin isn't to avoid inflation entirely, it's to put monetary policy choices (like inflation) in the hands of the individuals instead of an involuntary collective.
The 21 million cap is related to protocol design, it's not worth fetishizing to the point of thinking that individual suffering is justified because some didn't adopt Bitcoin before hyperbitcoinization, or whatever.
reply
10 sats \ 1 reply \ @kilianbuhn OP 27 Mar 2022
There arguably is. In the German hyperinflation there was a point where it was suddenly over. From one day to next it was over. Because people just accepted that it was over and used every day goods to barter.
Why isn't this point reached in Russia or Turkey right now?
Also: I'm not fetishizing being early. You're projecting.
reply
0 sats \ 0 replies \ @cozy 27 Mar 2022
Fetishizing of "21" is everywhere in Bitcoin communities. There is a fine line between fetishization and kitsch, though, to be fair.
Regarding 'projection'. I'm not attacking 'you' I'm critical of ideas. 'Projection' is a rhetorical tool used by those (myself included until recently) who try to turn everything into identity politics. But, identity is subservient to the individual. (Side note, this is why I find something like "Decentralized Identity" to be something of an oxymoron). The individual uses group signifiers in order to affect causal action. Prediction is subservient to causality. Which is to say, when someone is 'projecting' they are making unfair predictions about another's ideas in relation to their own identity--but this obfuscates the fact that both participants of a discussion have causal power in reality, we are using words to change the world around us. So, I don't criticize people, just ideas, and even so projection wouldn't be a bad thing if i'm improving a part of myself, then, right? Say, if at the end of the conversation, the meaning of 'being a Bitcoiner' changed for either or both of us. The key is tolerance and openness in conversation, though.
All observations have some theory, some imperfect model, at their core. So, in a way, it's 'projection' all the way down. We use those projections, our best theories and understandings of reality, to do great things.
Making claims that history will repeat itself, like predicting another Weimar collapse for any or all of Western economies, is a form of Historicism, the name of a set of rhetorical tools used by philosophers as far back as Plato, through to Marx, and even McLuhan in the 70s. The best thing about predictions is that they can be broken--we can prevent the thing being predicted. There is no problem that is not soluble given the right knowledge.
So, my argument is that inflation is a tool the individuals should have access to. Volatility "for the greater good" of Bitcoin or humans are whatever, is dangerous. Buy Bitcoin, use Bitcoin to escape ones currency collapsing, and we'll never have a Weimar again, market forces can push authoritarian pressures out of individuals lives. Most people in Western countries ALREADY have or had access to this. Before I had Bitcoin I had access to low-volatility FX markets through my bank in Japan: Shinsei Bank. I could choose between a variety of macroeconomic ideas and central bank monetary policies. Anyone with a phone and access to Wise can do that, now, too. Bitcoin brings it to the rest of the world (given that the people want to take on the responsibility of owning Bitcoin and knowing how it works).
reply
23 sats \ 1 reply \ @k00b 26 Mar 2022
What's kind of interesting about inflation is that it's kind of advantageous for certain economic actors, particularly the government, and bad for others. It's also merely inconvenient for some and devastating for others.
Up until this point I've been pretty resistant to living on a Bitcoin standard because I hate all the games I have to play to pay bills and transact with most businesses.
There's nothing I can do about my rent besides convince my landlord to take Bitcoin which I might actually be able to do given the conversations we've had. But if I had a credit card I could pay off in Bitcoin, I might be willing to give it a shot.
My personal threshold appears to be >5%, because at around 5% I began to consider trying to switch to even less fiat. As is, I keep 6 months of "runway" in fiat, but I'd like to get to 1-2 months if I can figure out the rent/bill situation.
reply
1000 sats \ 0 replies \ @jeff 27 Mar 2022
I don't think it's the rate that does it. It's the convenience/practically.
Let's focus on working-class bitcoiners for a moment. Earning in fiat, auto-deposit into their bank. Bills/rent, are all in fiat.

Spend and replace - month end

Pseudo code of what most are probably doing right now (notice, at no point, are we really spending in BTC):
bank_account = TradeFiBankAccount(KYC)
bank_account .receive_paycheck(employer1, 'USD')
for bill in bills:
    bank_account.pay_bill(bill, 'USD')
bank_account.buy_btc(amount=current_balance, 'USD') # costs fees, time, hassle

Spend and replace - each bill

The following algorithm is what some bitcoiners want to do, but realize it's irrational...
bank_account = TradFiBankAccount(KYC)
bank_account.receive_paycheck(employer1, 'USD')
bank_account.buy_btc(amount=current_balance, 'USD') # costs fees, time, hassle

for bill in bills:
    bank_account.sell_btc(amount=bill.amount + fees)
    bank_account.pay_bill(bill, 'USD')
It's the fees, time & hassle, which are the real issue.
Now, why can't somebody setup this business:

Spend and borrow/re-pay instantly

some_amount_of_btc = 0.1
bank_account = TradFiLikeBankFocusedOnMagicInternetMoney(KYC)
bank_account.deposit_btc_collateral(some_amount_of_btc, 'BTC')
line_of_credit = bank_account.new_line_of_credit(value=0, max=some_amount_of_btc * 0.5)

for bill in bills:
    if line_of_credit.has_capacity(bill.amount):
        line_of_credit.pay_bill(bill, 'USD') 

        if bank_account.settings['instant']:
            line_of_credit.pay_down(bill.amount, 'USD') # spot market conversion
        else:
            start_sending_email_to_user_daily(bill.amount)
     else:
         send_email_asking_for_more_btc(bill.amount)
Fees:
  • 0% fees on the implicit conversion from btc to usd
  • Slightly higher than market rates on normal lines of credit (but since it's fully secured by collateral, it's actually arbitrage like)
The software would all be cheaper and more secure to maintain than an exchange (no withdrawals, just deposit & balance tracking), and would act like a one-way system (BTC in, bills paid out). The business only needs working capital to pay the bills on user's behalf.
...thinking outloud. Anybody want to partner to build this? Or, can somebody please just steal this idea?
reply
0 sats \ 0 replies \ @LowK3y19 5 Dec
No one seems to care until they are burning their fiat to stay warm
reply
0 sats \ 2 replies \ @thrown 26 Mar 2022
Why hasn’t BTC price gone up?
reply
0 sats \ 1 reply \ @kilianbuhn OP 27 Mar 2022
BTC never goes up. BTC never goes down. It never has. It never will. BTC is always 1 in 21 million.
reply
0 sats \ 0 replies \ @thrown 28 Mar 2022
what is 1 out of 21 million bitcoins worth?
reply