Thursday, December 14, 2017

Bitcoin is not a Bubble



Bitcoin is not a Bubble

For the past three decades, i struggled to understand how we were going to resolve the looming difficulties brought on by the steady and persistent decline in interest rates.

You must first though understand that the value of all money is based on human demand for two things.  One of those happens to be ease of exchange and simple portability.  Cash does that admirably and back in the day bits of metal as well.  Thus the mythical adoration of gold.  Yet all this is based on human need.  Without it we are economically crippled.

The second need is as a convenient store of value.  It is here that our government issued currencies have become unraveled.  Negative interest rates tend to do that and it is becoming more and more widespread.  The fiat printing machine however disguised has saturated the market with a mountain of cash that now cannot be placed.

Add in that we have started the process of exiting the whole oil industry as well and huge amounts of money will come out of that sector of the economy.  This will take perhaps two decades at most but the trend will be abruptly apparent much sooner.

Then along comes Bitcoin.  Every bitcoin has a finite supply and a profitable cost of production that naturally produces a huge body of individual interest just like coinage.  That body of interest will slowly expand and the only way in which that demand can be satisfied is through either mining or price appreciation.


Thus we see today multiple bitcoin clones all been spun out to meet that demand for a store of value.  There remain any number of issues in terms of security and thieves have done the odd hit and run.  all irrelevant and those holes are been steadily been plugged..  Bitcoin essentially works and is slowly shaking off the obvious frauds as well.

That means that when we have surplus cash, we will dump it into a bitcoin clone or even Bitcoin itself secure that most of the time we will actually earn because of expanding demand.  That is a completely novel idea.
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