Just throw in some thoughts, I also have major in economics, though never really understood the differential equation part of it (CK proves I know the real world economics rather well and can apply).
I had a discussion with a well known flemish professor in monetary economics through Twitter after he made fun of Bitcoin:
https://twitter.com/GertPeersman/status/555776517599682560
I replied that the volatility will become lower when adoption grows (S-curve) and that the current low liquidity compared to large currencies creates the volatility.
Current volatility is an inevitable byproduct of the market process that determines if Bitcoin will become a widely used currency or not. To function as an acceptable currency and store of value, its market cap needs to be in the order of gold, EUR, or USD, ie. 1000 times higher than the current marketcap, minimum. For it to grow smoothly
and quickly to such value, is not possible, because any growth much in excess of the "risk-free interest rate" (I would say anything that grows more than 10% per year) inevitably creates a speculative boom that discounts the future growth to its present value (same process that gives some growing companies a high P/E). This makes the present value (exchange rate) grow much quicker than 10% or even 1000% per year, until a bust results. If the fundamentals are correct, this turbulent growth continues with successive speculative valuation cycles. If not, there is no recovery and the experiment is over.
Making fun of the only known market mechanism for price discovery of currencies is not very smart, although very fitting for a statist professor.
Keyword: turbulent growth.
"The problem is not the volatility in the exchange rate, but the macroeconomic price level indeterminacy"
I don't even know what he means, but gold has nearly fixed quantity, and when gold was money, everything worked better than last century, except from the bankster-gov point of view of course. That's why he propagates difficult-sounding terms, which (even if they have a meaning) represent problems that only exist in statist economics, not in a world rid of it.
"limited supply is NO guarantee that hyperinflation doesn't occur.
His definition for "hyperinflation" is that the currency loses all
trust, and becomes worthless. In this sense, crypto can sure experience hyperinflation, many coins, as well as fiats have died as there has not been enough trust in them.
Conclusion: I think he just denies that fact that a free market can (against his beliefs) allocate value towards a currency that has no "intrinsic value" (and I hate to use that word, because I don't agree with that. Gold has no "intrinsic" vale nor the EUR)
There is no such thing as intrinsic value. Value (price) is determined by markets. Gold is valued because of its monetary characteristics (mainly store of value) nowadays. Fiats are valued because it's practical to use them, and also they are created as debt, which sets the whole debt slavery system in motion (someone always needs fiat desperately, to pay his debt + interest, and the interest part is not even created). BTC may be valued according to the same monetary function criteria. Only few items derive the bulk of their value from being money (those being the prime examples). But many items have some monetary component in their value, silver for instance.
