Comment by throw0101a | Hacker News Reader

Comment by throw0101a | Hacker News Reader

Parent Full thread

You list assets, which have generally always gone up in value over time. Inflation, i.e. CPI, is (roughly) about cost of living through a basket of goods:

* https://awealthofcommonsense.com/2021/01/inflation-truthers/

* https://news.ycombinator.com/item?id=25644580

If you don't believe the government-published CPI you can confirm their work, as others have done:

* https://en.wikipedia.org/wiki/MIT_Billion_Prices_project

For your items:

* Monthly carrying costs haven't changed much: prices up, but mortgage rates are down. Plus average square footage has gone up, so you're getting more.

* Land depends on location, and urban prices have gone up because it's more cool to live in the city now than in the 1970s and 1980s. I live in Toronto, so I know all about land/housing prices over the last 10-15 years.

* Modern cars have more power, while burning less fuel, and being safer, and on average lasting longer, for the same money. I own a 2003 Golf that I paid $30K for (in 2003). What's available for $30K is a lot better, and the equivalent dollars today is closer to $40K—which gets you some sweet things.

* I was invested in 2008: I've seen stocks go up and down.

* Crypto is a Ponzi scheme.

I think your analysis is right, but if cars and houses are things that people buy with borrowed money, it does seem like interest rates being low would drive prices up. And it might increase the price of inflation proof assets like crypto. Is there a framework we should be describing this with besides the broad “inflation” term?

Cars are lasting longer, and how many cars can the average person own? There's also depreciation, so cars aren't 'quite' an asset, so trade-in is also limited if people want to rotate vehicles (unless one leases).

> Is there a framework we should be describing this with besides the broad “inflation” term?

If asset prices are higher than what they "should" be, then one generally calls that a bubble.

There's a practically unlimited supply of cars. If people start buying more manufacturers will produce more.

But they can only be produced at a finite rate, which may cause competition amongst buyers in the short term as they bid against each other for the finite number that are on the lot.

Further, the resources needed as raw material are finite (unless we start asteroid mining), as is the energy needed in the process: we have only so many gigawatts we can produce at one time.

More plants can be built, but those take resources as well: some of the very same resources that are needed to build the cars we're talking about.

>* Crypto is a Ponzi scheme.

I agree but that doesn't explain why Bitcoin had multiple bubbles and survived all of them. Bitcoin is highly deflationary. Bitcoins are lost all the time. The supply is only growing very slowly. It's also an "immature" asset compared to gold so a large influx of a new class of investors can drive the price up.

> I agree but that doesn't explain why Bitcoin had multiple bubbles and survived all of them.

For the same reason people still go to astrologers or think that during the playoffs the can't shave or their favourite team will lose: cognitive biases and wishful thinking.

* https://en.wikipedia.org/wiki/List_of_cognitive_biases

The fact that the bubbles happen so often and and so drastically is another reason that I avoid it: volatility is generally a proxy measurement of risk, and what reward am I gaining by taking on this risk?

Everyone is bullish on it at >US$ 40K, but people seem to have forgotten that it dropped by half in two days in March 2020:

* https://www.cnbc.com/2020/03/13/bitcoin-loses-half-of-its-va...

If someone wants to have it in their 'portfolio' at some small percentage as part of their "play money" that's one thing, but to make it a significant portion seems foolish to me.

I do feel a bit of FOMO, and may eventually create a trading account with like 5% of my portfolio for playing around in WSB and Crypto and such, but right now I'm fully invested in index and bond funds (80/20), so don't really have spare cash available for any of these temptations.

> Crypto is a Ponzi scheme.

I've never heard anybody educated on the matter make this statement. It's always from someone that doesn't understand it and therefore thinks it's a scam.

What purpose, exactly, does crypto serve? What problem does it solve?

It has failed as a payment system, as a currency, as a reserve currency, a remittance channel, a timestamping service, a settlement layer, a bank for the "unbanked", a cypherpunk liberator, a money laundering tool, a drugs-by-mail tool, a unit of accounting, a store of value, and as a "disruptive" fintech technology.

What exactly is the value in holding Bitcoin (or whatever)? My only hope is having someone in future come along and take it off my hands at a higher value than I bough it.

When I think of crypto/Bitcoin, I am reminded of Warren Buffett's view on gold:

> Today the world’s gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce – gold’s price as I write this – its value would be $9.6 trillion. Call this cube pile A.

> Let’s now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world’s most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money (no sense feeling strapped after this buying binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B?

[…]

> A century from now the 400 million acres of farmland will have produced staggering amounts of corn, wheat, cotton, and other crops – and will continue to produce that valuable bounty, whatever the currency may be. Exxon Mobil will probably have delivered trillions of dollars in dividends to its owners and will also hold assets worth many more trillions (and, remember, you get 16 Exxons). The 170,000 tons of gold will be unchanged in size and still incapable of producing anything. You can fondle the cube, but it will not respond.

* https://www.berkshirehathaway.com/letters/2011ltr.pdf

Since crypto pays no return on profits it cannot meet the definition of a Ponzi.

It is more akin to tulip mania, dependent on inflated futures with diminishing utility.

Presently though, it's better than cash, which finds itself in a similar position.

There is no crypto economy. It doesn’t create value so it should not be considered an asset.

Do contract lawyers add value?

If everyone was honest then no. Unfortunately we don't live in such a world so we have to trust a third party.

Presumably he's talking about asset inflation.

Valuations go up until they go down. See 2008, and 2000 before that, and ...

As someone with another couple of decades until retirement I'd love a crash about now so that I could "buy low".

How many miles on that 2003 Golf?

Not a lot.

I bought it when I graduated and my first job was in an office park with little transit. Since then I've mostly worked in more urban areas, so I've been able to take transit or pedal, and so mostly use the car on weekends.

Reply on news.ycombinator.com