Inflation and hyperinflation are a big inconvenience, waste a lot of time, make things inefficient and stressful; but people can finda ways to adapt and survive, and the country continues to function without becoming a Mad Max world.
I suspect deflation will predominate for some time. Presently the bankers and administration seek to undermine the dollar to boost exports and inflate risk assets, but collapsing productivity and debt expansion in Europe and Japan are making the U.S. look healthy in contrast, which is likely to push the dollar back up relative to other majors. These are not
mutually exclusive because all the majors are inflating their currencies massively, in tandem: They all have far more debt than ithey can service, so money has to get cheaper and cheaper (within the domestic market no less than it needs to do the same) in Europe and Japan. Thus bankers can carry incredible sums on their balance sheets, to bid up risk assets through a series of proxies. Each rentier skimming from this chain drains off another fraction of the debt, which the public is obligated in theory to pay off one day. The result is a class system in which 0.1% of the population gains the bulk of the benefit of economic productivity gains and public spending, A shrinking middle class carries a rapidly increasing tax burden and debt load, and a rapidly growing underclass is kept placid with government benefits.
Things go on until they can't. Exponentially increasing debt in the presence of declining economic growth, ultimately, economic retraction, will end catastrophically, if it is not managed. Absent a change in energy technology, increasing productivity is not a long-term option. The only way to manage this landing is calculated, systematic debt destruction.
The money is debt. It is made of debt. It is a token of debt. It is debt which can only be repaid by creating more debt. The money itself is the very
root of the problem.
Either the system implodes catastrophically, or it reforms itself. In either case, debt-based money will cease to exist as it does today.
The reason is because money (or bitcoin, or gold) is not real wealth, it is only a token that society will accept and exchange for real wealth. The exchange is so smooth and universal that, for personal or corporate finances, it is justifiable to treat money the same as wealth. But when considering a whole nation, or the world, one must ignore the money and focus only on the real wealth.
Real wealth being goods and services, command of labor, materials and supplies, energy. But you are ignoring the bulk of the wealth held by society. Most of the value in society is in the interconnections between people, the transactions, transfers, obligations and acquitals which they make. Human capital is not just a matter of skills, but of relationships. Many of those relationships, often the most economically important ones, are mediated by money. Ignoring money would cause you to ignore much of the value in society.
No matter how much money the government creates of derstroys, confiscates or gives away, the real weath of the country will not change. Fiddling with the finacial system, the currency, and the money supply can only change the distribution of wealth among the citizens
If the government destroyed all currency and all balances on account, I think half the people in the U.S. would be dead in a month. Supply chains would collapse, and under modern just-in-time inventory management practices, mass starvation, epidemics, and gang warfare would be pervasive.
The distribution of wealth among the citizens is obviously of crucial importance to the function of society. If instead, the U.S. confiscated the currency and balances on account, and handed them all to Dennis Rodman, the result would be indistinguishable from destroying them.
in a crisis most people need to take money out of investment funds and savings in order to survive; so the value of bitcoin is likely to drop, due to diminished demand, rather than increase.
You''re not doing that right. Circulating currency is worth more than reserve currency.
This is the best post I have ever seen on BTCTalk. Quoting for posterirty. Aminorex, do you post in the economics sub-forum? I haven't spent much time there, but would like to have more discussions like the one above. Also do you recommend any reading sources (books or blogs)?
