Bitcoin is still bullshit: Inflation edition

 Yes, bitcoin is still bullshit.  And getting funnier.  Those paying attention to this particular pyramid scheme may have noticed that its value has collapsed, yet again, and if you ask me whether or not the price will inflate again my answer is:  maybe.  Dunno, don't care, but you're a fool to gamble your money on such things.  You might make a lot of money.  Assuming you pull it out at the right time.  As in, not this week!  When SCOTUS is about to overturn Roe v. Wade, might I recommend that you not bet too much on the pull-out method?

So what's-a-goin' on?

Having made a few crude jokes, let's turn to economic theory, which is far more obscene.  Remember one of the core arguments in favor of cryptocurrencies.  It is the same argument for gold, and against fiat currency controlled by a central bank.  Central banks influence the money supply (along with setting several other policies) in order to manage inflation and unemployment, with the catch being that the two are inversely related.  As inflation drops, unemployment rises, and vice versa.  So, the Federal Reserve has a "dual mandate" to keep both at a jointly manageable level, called the NAIRU-- the non-accelerating inflation rate of unemployment.  Essentially, if unemployment gets too high, the Fed targets a higher rate of inflation in order to reduce unemployment.  They just don't want inflation to accelerate.  It is a balancing act.  Is the current rate of inflation the result of the Fed keeping interest rates too low for too long, missing the NAIRU, and letting inflation accelerate rather than hitting the non-accelerating inflation rate of unemployment?  Plausibly, although there are other factors contributing to inflation because everything in economics is messy and complicated.  Still, a case can be made that they overshot the NAIRU in an attempt to target an unrealistic unemployment rate.  Along with everything else contributing to inflation, from fiscal policy to supply chain problems to energy costs to... it's a mess.

But there is a certain kind of person who gets really twitchy about inflationary policy.  Driving up inflation to reduce unemployment by shifting us along the Phillips Curve, taking money out of my paycheck to give to someone else, what's the difference?  To one way of thinking, inflationary policy is a sort of backdoor taxation.  The government isn't taking a cut of my paycheck, but government policy is reducing my purchasing power, and fundamentally, that's a difference with little distinction to some.  In the most extreme interpretation, it is tantamount to the theft of my purchasing power.  So, if we take away the government's power to inflate currency-- to devalue, to debase, to desomethingblahblah-- I keep what's mine.  So fuck central banking, fuck fiat (the currency concept, not the car, about which I have no opinion), and let's get back on the gold standard!

Or maybe cryptocurrency, 'cuz that's newer and therefore cooler and better.

So the point is that if central banks cannot create new units of X or devalue X, then X will retain its purchasing power when fiat currency inflates.  This is why you encounter the claim that "gold is a hedge against inflation."  Is it?  Not a very good one, but in some limited time horizons, you can see people shift their asset allocations, creating an illusory effect which masks all of those booms and busts from the eras of the gold standard, and such.  Basically, no.  It's not really a hedge against inflation, it's just a commodity that trades according to its own vagaries, because it's a commodity.  But at least it's a commodity that people want for its own sake, whether for jewelry, electronics, or whathaveyou, so it is far more stable than vehicles for speculation.

Like bitcoin.

Which just crashed.

Hard.

Again.

I'd like to think I'm above such things, but, yeah, I'm not.

And yes, the S&P hit bear territory, but here's the thing.  We've been waiting for a market correction for, like, fucking ever.  But when inflation hits, that's exactly when bitcoin shouldn't crash if the underlying premise is correct.  I can watch the S&P take a nosedive, and my only question is, what took it so long?  If you're a market watcher, you have been watching that thing rise like Trump's claims of his vote margins.  Every time you turn around, it hit a new record.  That crash was way overdue, but if there is one time cryptocurrencies shouldn't crash, given the underlying hypothesis, it's under rapid inflation because it's supposed to retain its purchasing power when central banks are stealing your money by keeping interest rates too low for too long, right?

Why did it happen?

Well, the short version is that bitcoin is bullshit.

And really, that's all you need, but I'm gonna go on a bit longer.

Remember the first point about bitcoin.  You can't fucking buy anything with it.  Well, you can buy dollars, after paying currency conversion fees, but you already did that when you converted to bitcoin in the first place, dumbass.  Cut out the middle man, and keep your dollars if you actually want to buy stuff.

And no, I don't care if you found me a store online that sells vape accessories, shipped from El Salvador, or something, where they now use fucking bitcoin.  Yeah, they use bitcoin in El Salvador because the country didn't have a functioning financial system anyway, so they just fucking gave up.  It's El Salvador.  No, I'm not being colonialist, or whatever.  The country is just dysfunctional.  What, are you gonna move to El Salvador?  No.  Refugees come here from there.  I welcome them.  I want them to retain their language, art, culture and all that, and bring it here to make America cooler and more interesting and maybe make Trump's head do a Scanners.  But El Salvador is fucked.

Also, kids, don't vape.  And don't fall for pyramid schemes.

Where was I?  Oh, right.  Since you can't buy anything with bitcoin, it's just a speculative asset to trade, the same way high frequency traders trade stocks based on algorithms that don't give a shit what the companies are, how profitable they are, or if they're even just cooking the books.  So, when the stock market crashes, bitcoin goes down the toilet with it.

The core problem, as always, is the following basic requirement for a useful currency.  "Stable store of value."  As in, a currency should be a ___.  But, "stable" relative to what?

As the dollar inflates, the dollar becomes less good as a currency because it is not as stable as a store of value.  It can't buy as much today as it could last month.  It does not store value as well as it once did.  We measure this trait by measuring value relative to goods and services.  Yet notice something.  As the dollar inflates, suppose bitcoin were a stable store of value.  Its price would change relative to the dollar.  Why?  In order to maintain the same purchasing power for goods and services (which you can't buy, but that's another problem), bitcoin would have to buy more dollars as the dollar inflates.  Instead, it is going in the other direction, but the key point is measurement in terms of capacity to exchange for goods and services at a stable level.

Bitcoin has never had that.  And it almost certainly never will, because it is nothing but a vehicle for speculation, and while those can inflate and deflate repeatedly, allowing the luckier participants in the stupid scheme to make money at the expense of the less lucky participants in the stupid scheme, that process is intrinsically one of inflation and deflation, which is intrinsically...

not a stable store of value.

But at least we can laugh when one of the crashes gets timed so perfectly to demonstrate that bitcoin is, always has been, and always shall be your friend bullshit.

We're going full-weird today.  Praxis, "Crash Victim / Black Science Navigator," from Transmutation (Mutatis Mutandis).