cryptonomics

Apologies for being reclusive over the last couple months. I've been a little busy relocating. Lets discuss some of my favorite topics: monetary policy, global trade, and (you guessed it) cryptocurrencies. First: Hyper inflation, bad... very bad. very very very bad. controlled inflation, ok. Inflation has taken a beating throughout the blockchain community. Mainly from Bitcoin Maximalists. Scarcity, along with supply and demand, creates value. However, scarcity also leads to a decrease in the velocity of money, and lead to hoarding. Why? When resources are scarce, humans conserve. Think of the price of oil. When the price of oil is high, the price of gas is high. When the price of oil is low, the price of gas is low. You can see the correlation by comparing the next two graphs. The price (USD) of oil per barrel. Chart by MacroTrends The price (USD) of a gallon of gas. Chart by  Gas Buddy When oil is abundant: supply goes beyond demand (most recent 2014), and p...

A world that uses Bitcoin (or another scarce  cryptocurrency) as a base currency could create a better, more innovative one. One could argue that the velocity of money is driven by the demand for luxury goods and services. On top of that, an economy is only as good as the labour within it. The money hoarder will exchange the hoarded currency if there is a good or service that he/she desires. If there is no desired good or service, then there is no reason that the money hoarder should put his/her money back into circulation. This will give the markets a reason to innovate and create demand for luxury goods and services. There will be less complacency in the markets as companies and industries compete for your money. A historical example of complacency is the Spaniards post colonization of America. After the Spaniards colonized the Americas, they inherited vast amounts of gold. What was once a scarce commodity was less scarce. Instead of boosting exports to create more wealth, S...