I'm extremely confused by this argument that I see again and again. If you want to avoid your assets losing value to inflation that you can buy assets that are resistant to inflation, such as stocks, real estate, land, gold, inflation-adjusted bonds ...
I just don't see that cryptocurrencies are particularly useful for that. What's the deal here?
B)Are stocks and bonds inflation resistant if they are priced in the inflating currency? Not just normal year over year inflation but the type of inflation that happens when you debase a currency. Regardless, I already own these, the first rule of investing is diversification.
C)gold is inflation resistant and tangible so I agree that is the best option if you are truly worried about SHTF but it’s also heavy and more expensive to secure.
Bitcoin, in my opinion, is a hedge on the hegemony of the US dollar which I see weakening going forward. The US dollar is the global reserve currency thanks to the global oil industry. That gives the US a lot of power. But between the switch away from oil, the weakening of the dollar, and the rise of China the US currency dominance looks to be coming to an end. There is no other currency that could act as a global reserve currency except China, which would essentially make China the worlds superpower. That is where Bitcoin comes in: it can be the new global currency instead of China when the US dollar loses its place. Gold and paper only has value because we imagine that they have value, I don’t see how Bitcoin is any more or less imaginary.
B) Yes, stocks are not directly affected by the currency in which they are nominally denominated! Yes, inflation-adjusted bonds are not affected by inflation in the currency in which they are denominated, assuming you believe RPI to be a good measure of inflation.
C) You can buy gold without having to store it yourself! For example SGLN or https://www.bullionvault.com/ (no connection other than being a happy customer)
> Bitcoin, in my opinion, is a hedge on the hegemony of the US dollar which I see weakening going forward
If you really wanted a hedge on the US dollar you could buy oil, gold, JPY, EUR, CHF, GBP. Buying the hugely volatile asset called bitcoin doesn't seem like a good way to hedge USD.
> Gold and paper only has value because we imagine that they have value
No, gold has value because of demand in industrial process and jewellry. "Paper" has value because governments can demand you to pay it to them in return for participating in economic activity within their borders.
If these arguments are really what bitcoin supporters believe about the value of bitcoin then the whole bitcoin enterprise is in for a big shock.
Are there REITs that don't deal with interest?
The parent comment said "inflation-adjusted bonds". If you don't know what that means, look it up.
As for stocks, they are priced in an inflating currency in the same way that real estate or dogecoin are priced in an inflating currency.
Then I doubt that inflation should be much of a concern to you. Just make sure that other income you clearly depend on is adjusted to inflation.
Does it? On what basis would one know that? Why should it benefit from inflation more than gold, say?
The supply of gold might, technically, be "fixed" in the sense that no more of it is being created, but more of it could be discovered at any time.
Bitcoin's supply is mathematically demonstrably fixed. Nobody's ever going to discover a new vein of Bitcoin in the earth's crust, or on an asteroid.
The primary limitation as of now is ore quality, which directly dictates how much energy is required for smelting, and we have a good idea of the decline curve thereof. We know roughly when it will be economically profitable to extract the stuff from seawater, which isn't too far off. In the end, it's a question of energy. Very similar to proof-of-work tokens like BTC, in that regard.
Gold is presumably scarce. Bitcoin is provably scarce.
A lot of things are scarce. Some of those things are valued. Bitcoins may or may not be valued in the future, and if they are it is unknown at what price point they might be valued. Scarcity is only part of the equation.
But it looks like I'm actually going to need citations from you because everything I'm finding so far confirms that we do NOT know how much gold exists in the earth, or where it might be found, or whether it will become economically feasible to extract it. All we know is that discoveries are slowing down.[0][1][2][3]
I've tried to read a variety of sources, from a scientific journal to a metals dealer to a mainstream news outlet to an industry-focused site. By all means, though, if you have citations for your confident claims that you're willing to provide, I'll be happy to read them too.
[0] Earthquakes are still forming new veins: https://www.nature.com/articles/ngeo1759
[1] There may or may not be large undiscovered veins left, especially under the ocean and in Antarctica (and we don't know whether new technology will make them easier to discover and mine): https://www.providentmetals.com/knowledge-center/precious-me...
[2] New technologies are gaining adoption that could reveal veins that were undiscoverable before: https://www.bbc.com/news/business-54230737
[3] There's no reason to believe the discovery of large gold mines is nearing its end: https://www.mining.com/web/were-a-long-long-way-from-running...
If you're a cornucopian, and you're certain that new technology will unlock much more efficient smelting/separation/filtration/asteroid mining techniques, then sure, gold is virtually limitless.
If you're a realist, you understand that ore quality degrades as a function of the fact that we smelt the highest purity ores first, and that while (usually very small) new vein discoveries do occur, they occur as already understood as a statistical variance against a much much larger backdrop of averaging functions.
I'm not discounting the possibility of an extraction breakthrough - it's certainly possible. But revolutions of the kind you're assuming are certain to occur extremely infrequently.
And to that point, I'm a "very long term corncucopian", in the sense that a thousand years out, we will probably eventually realize the Minsky dream of nanobots that can act effectively as the Maxwell's Demon of elemental extraction. But I'm old enough, and have awaited the Singularity long enough, to realize that optimism doesn't make a science, and that this won't be for at least a few hundred years, at minimum. (I'll leave what 300 years of quantum computing work could do to 256 bit hash collisions as an exercise for the reader.)
And that's assuming that we even survive the coming climate and/or resource catastrophe that awaits 10 billion souls in 20 or so years.
Upvoting you because you are precisely me, 20 years ago before understanding how things actually work :)
I'm definitely not meaning to argue with you. I ask that sincerely. I wasn't particularly interested in this subject before, but any time I have a chance to ask questions of someone 20 years ahead of me in anything, I try to make the most of it!
Also harder to take.
Lot's of gold is mined each year. Houses are built. Stock is issued, etc. Bitcoin has a well-established upper limit.
Aha! That brings me to my next question. In what sense does bitcoin actually have a fixed supply? Sure, a loose coalition of people agree for it to have a fixed supply at the moment, but if enough of the miners, core developers, etc. agree they can change the rules arbitrarily, viz. hard forks.
Why should we believe that bitcoin really has a fixed supply, just because everyone has roughly stuck to the rules so far?
Therein lies your answer: if a large enough number of people place faith into something, it "takes".
If a proposal to raise the cap is introduced, price would react negatively, hurting miners, and making it more (relatively) expensive to mine. It's unlikely there is any scenario where it is economically feasible to try to raise the supply cap.
Hard assets like real estate, land, gold don't fit that bill, but each of their own tradeoffs. Right now cryptocurrencies are making gains against those hard assets so they are more attractive. An investor may wish to diversify among some or all of these options.
Stocks are coupled to the productive output of the firm the stock is issued by, which is coupled to it's real world productivity - which, again, for convenience is measured in a fiat currency.
Nitpick, but the SEC would object to that. That said, American securities regulation has a unique philosophy, i.e. every securities trade must be registered and follow a narrow book of rules unless specifically exempted.
Your broader point, of financial and real assets being proven hedges against inflation, stands.
I believe it's the other way around. It can be denominated in anything, but trading e.g. the deed to your house for some Apple stock is a no no. (Doesn't have to be U.S. dollars, though.)
And I have my doubts whether Bitcoin mining is more destructive than gold mining. It's possible (it's a LOT of energy), but gold mining is also pretty nasty.
Also, as a comparison, nearly all the gold mining machinery runs on gasoline.
Resistant to inflation means that the price increases roughly with the same % as inflation.
Using your approach you'd end up saying something like Apple is experiencing inflation because its price has gone up more against housing, oil, General Electric stock. Yeah, that could be done, but it's not the way the word is being used in this conversation. We're talking about inflation of US dollars against a basket of goods as measured by the CPI as opposed to talking about an increase in housing costs relative to Apple stock.
>Inflation is the decrease in the purchasing power of a currency.
>Inflation is the decline of purchasing power of a given currency over time.
>Inflation is a persistent rise in the average level of prices over time in a given currency.
> Inflation occurs when prices rise, decreasing the purchasing power of your dollars.
Those are literally the top search results for "inflation" when I Google the term. Now certainly your Google search for that term may differ from mine and you are certainly welcome to share your findings. Until then I will rest satisfied that my first sentence expressing that inflation is almost always understood to be with respect to a currency is also true.
Furthermore I believe that investing in real estate promotes those asset owners to contribute to the neighborhoods they've invested in. When you invest in something you are participating in its growth and you're attempting to align your well being with the well being of the asset you're invested in. That's a great thing.
The downside to real estate investment is that it could prevent future people from participation. The solution to that isn't to stop treating real estate as an investment, it's to allow more opportunities for building and to incentivize people to build entirely new communities instead of pigeon holing everyone into a handful of existing mega cities.
I think this is treated differently in different cultures. In Germany, while there is a real-estate as investment market, many people don't (expect to) move much during their lifetime. They buy their home ('Eigenheim') essentially for life (sans the tail end in a nursing home). Still many put a lot of time and money into those houses they don't expect to sell. It's a quality-of-life thing (and some bragging rights). You can (and some do) spend easily a fortune on a kitchen alone. You even find more than one kind of light switch there.
So I'm not quite convinced that real-estate as investment is necessary to drive housing quality.
I am not an expert on the German real-estate market, but the first search results on Google indicate that Germany has a very active real-estate investment market and that home ownership in Germany is among the lowest in the world, the majority of Germans rent their home.
Either those people are renting from the government, or they are renting from a private landlord, either an individual or a corporation. If they are renting from a private landlord, and once again my very cursory research indicates 96.7% of housing is privately owned, then that's a big sign that the landlord owns the property for the purpose of deriving an income from it. Given that 56% of homes in Germany are rented out (one of the highest rates in the world), that indicates that at a minimum, 56% of homes in Germany satisfy the textbook definition of being investment properties.