I have long been fascinated at the wealth created out of nothing tangible aside from the labor involved in the creation of some IP. Three guys writing software for a year collecting $3B. The value in the equation stems apparently via ad dollars in a somewhat zero sum game. The old paradigm of wealth resulting from exploiting natural resources via labor and IP got removed in the new economy, One day another exposition along this fine hamburger story would be helpful.
The metaverse helps because we are allowed to buy some unicorns that often are found there. Quite like burning money, I suppose except the money goes to people who while making more unicorns tell you to shut up and buy more unicorns.
I'd be interested to hear how investing in cryptocurrencies is similar to burning money, in this simplified picture. it sort of removes it from the system, in one way - even though it props up another, competing system.
Generally you buy something because it has value. Perhaps a digital entry in a logbook has value but that is what you buy when you get a cryptounit. You MAY be able to exchange that unit or subunit for something tangible, but few do that. In order to exchange the unit you must find another fool who will exchange a tangible created by their effort for that digital entry. Fiat script is exactly the same except there is a huge pool of people willing to make that exchange and there is a tangible involved that can be held eventually to stuff under your mattress.
We started with some tangible that we agreed meant some increment of real work. That turned into script with the same agreement. The government would like to create a digital entry to do the same thing and it remains to be seen if we will agree on the exchange in nominal daily commerce. There is no wide agreement about any other crypto currency. A few transactions happen similar to issuing a echeck on a real bank account.
Crypto is something that some are willing to exchange script to buy. it's value depends totally on finding someone who believes they can get some script in return. It has little other utility.
alright well you're making your ideological stance on crypto very clear (“another fool”, uh, thanks. “little utility”, I’d point to a few hundred web3 challenges to this claim. “no wide agreement”, the network of bitcoin nodes is one of the largest and most reliable networked computing platforms), but I was asking specifically about the conceptual correlation between “burning money” and “investing in crypto”
I invest my money. My efforts to ride momentum were a reflection of hubris that others have gotten caught up in as well. The companies I invest with are real tangible things and I am rewarded if they succeed. I have no ideological position on BTC, I do have a general opinion that BTC is a bigger fool investment and right now highly speculative. Best wishes to those who can find bigger fools. I have invested in companies that turned out bad often as a result of internal fraud. You take chances and don't always win. To me trying to make money in crypto is akin to burning money. As a medium of exchange like a stable currency we await mass adoption. Until then it is a speculative investment with no assurances of any returns. Lose that key and you have nothing.
There are entire application ecosystems that work off the back of various crypto "currencies" - it's not just about speculation and finding fools to sell your bag to.
Investing in a coin or set of NFTs that work as an application's infrastructure is akin to investing in a company - if you think the value proposition of the application is sound, then you might buy the underlying asset. Very similar to stock.
One such example is https://urbit.org/ - identities in the Urbit network are (essentially) NFTs. Owning address space on urbit is an investment in the core ideas of the platform (as well as a way to use the network at all). They myriad web3 applications are sort of flying under the radar at the moment, so you can be forgiven for being deadlocked into the simplistic mainstream, boomerweb idea that "crypto is only about speculating and finding a bigger fool to sell to". I'm sure "domain name squatting" in the early dotcom days was seen as similarly useless speculation... It won't be this way for long - soon enough these projects will start to hit the mainstream. This is my general tip for you; I offer it so that you don't miss an opportunity.
OK thinking about how this would actually go into your equation, the model still basically works and I'm just over-complicating an excellent thing for dummies. I'd just suggest -
Value of money = Amount of money flowing / Amount of stuff flowing
Because the way it's currently written only focuses on the supply side of the relevant things
I love this, but I think adding in two other factors would really help
1. Demand for Stuff:
- You touched on this a little bit when you gave the example of 2008 - creating more money but giving it all to one guy who still only eats one hamburger so the inflation doesn't hit in the same way.
In this model, we assume in increase in money also means an increase in demand for stuff, which is actually the more important factor in the numerator. Money sitting dead and idle in the dynamic, living economy is functionally the same as the money not being there (more or less).
I haven't dug too deeply into this but I think this impacted the timing of the inflation we're seeing, just as life was going back to 'normal' and people were demanding more stuff again.
2. Demand for Money (particularly the US Dollar)
USD is still the asset that everyone around the world runs to for a safety when they're scared. Global demand for dollars was way up during the pandemic.
This means USA can get away with money printing in a way that other countries can't.
That's changing though - US has been tanking its international reputation for a while now and more and more countries are waking up to the fact that, hey, we can transact directly without using USD as the middle man.
And probably even more importantly - the US and its allies just locked Russia out of all its dollar-denominated assets (about 1/5 of its foreign reserves). The sanctions mean they have to move away from the dollar based system and look for alternatives (hello Renminbi). And other countries are watching.
I have long been fascinated at the wealth created out of nothing tangible aside from the labor involved in the creation of some IP. Three guys writing software for a year collecting $3B. The value in the equation stems apparently via ad dollars in a somewhat zero sum game. The old paradigm of wealth resulting from exploiting natural resources via labor and IP got removed in the new economy, One day another exposition along this fine hamburger story would be helpful.
Thanks as always,
So can the metaverse save us?
The metaverse helps because we are allowed to buy some unicorns that often are found there. Quite like burning money, I suppose except the money goes to people who while making more unicorns tell you to shut up and buy more unicorns.
I'd be interested to hear how investing in cryptocurrencies is similar to burning money, in this simplified picture. it sort of removes it from the system, in one way - even though it props up another, competing system.
Generally you buy something because it has value. Perhaps a digital entry in a logbook has value but that is what you buy when you get a cryptounit. You MAY be able to exchange that unit or subunit for something tangible, but few do that. In order to exchange the unit you must find another fool who will exchange a tangible created by their effort for that digital entry. Fiat script is exactly the same except there is a huge pool of people willing to make that exchange and there is a tangible involved that can be held eventually to stuff under your mattress.
We started with some tangible that we agreed meant some increment of real work. That turned into script with the same agreement. The government would like to create a digital entry to do the same thing and it remains to be seen if we will agree on the exchange in nominal daily commerce. There is no wide agreement about any other crypto currency. A few transactions happen similar to issuing a echeck on a real bank account.
Crypto is something that some are willing to exchange script to buy. it's value depends totally on finding someone who believes they can get some script in return. It has little other utility.
alright well you're making your ideological stance on crypto very clear (“another fool”, uh, thanks. “little utility”, I’d point to a few hundred web3 challenges to this claim. “no wide agreement”, the network of bitcoin nodes is one of the largest and most reliable networked computing platforms), but I was asking specifically about the conceptual correlation between “burning money” and “investing in crypto”
I invest my money. My efforts to ride momentum were a reflection of hubris that others have gotten caught up in as well. The companies I invest with are real tangible things and I am rewarded if they succeed. I have no ideological position on BTC, I do have a general opinion that BTC is a bigger fool investment and right now highly speculative. Best wishes to those who can find bigger fools. I have invested in companies that turned out bad often as a result of internal fraud. You take chances and don't always win. To me trying to make money in crypto is akin to burning money. As a medium of exchange like a stable currency we await mass adoption. Until then it is a speculative investment with no assurances of any returns. Lose that key and you have nothing.
There are entire application ecosystems that work off the back of various crypto "currencies" - it's not just about speculation and finding fools to sell your bag to.
Investing in a coin or set of NFTs that work as an application's infrastructure is akin to investing in a company - if you think the value proposition of the application is sound, then you might buy the underlying asset. Very similar to stock.
One such example is https://urbit.org/ - identities in the Urbit network are (essentially) NFTs. Owning address space on urbit is an investment in the core ideas of the platform (as well as a way to use the network at all). They myriad web3 applications are sort of flying under the radar at the moment, so you can be forgiven for being deadlocked into the simplistic mainstream, boomerweb idea that "crypto is only about speculating and finding a bigger fool to sell to". I'm sure "domain name squatting" in the early dotcom days was seen as similarly useless speculation... It won't be this way for long - soon enough these projects will start to hit the mainstream. This is my general tip for you; I offer it so that you don't miss an opportunity.
OK thinking about how this would actually go into your equation, the model still basically works and I'm just over-complicating an excellent thing for dummies. I'd just suggest -
Value of money = Amount of money flowing / Amount of stuff flowing
Because the way it's currently written only focuses on the supply side of the relevant things
I love this, but I think adding in two other factors would really help
1. Demand for Stuff:
- You touched on this a little bit when you gave the example of 2008 - creating more money but giving it all to one guy who still only eats one hamburger so the inflation doesn't hit in the same way.
In this model, we assume in increase in money also means an increase in demand for stuff, which is actually the more important factor in the numerator. Money sitting dead and idle in the dynamic, living economy is functionally the same as the money not being there (more or less).
I haven't dug too deeply into this but I think this impacted the timing of the inflation we're seeing, just as life was going back to 'normal' and people were demanding more stuff again.
2. Demand for Money (particularly the US Dollar)
USD is still the asset that everyone around the world runs to for a safety when they're scared. Global demand for dollars was way up during the pandemic.
https://www.fpri.org/article/2020/05/the-dominance-of-the-u-s-dollar-during-the-covid-19-pandemic/
This means USA can get away with money printing in a way that other countries can't.
That's changing though - US has been tanking its international reputation for a while now and more and more countries are waking up to the fact that, hey, we can transact directly without using USD as the middle man.
And probably even more importantly - the US and its allies just locked Russia out of all its dollar-denominated assets (about 1/5 of its foreign reserves). The sanctions mean they have to move away from the dollar based system and look for alternatives (hello Renminbi). And other countries are watching.