Topic: I just don't get it. - page 4. (Read 10684 times)

Well this is the monetary base.  So it isn't all dollars it is the fed's balance sheet.  But since the monetary base is the starting point for FRB yes the amount of dollars has "exploded" over the last couple years.  Here is the equivalent chart for the M2.



The FED only know one way to stimulate the economy and that is to pour dollars on everything like gasoline.  The M2 has "only" expanded 60% or so in the last three years.  Why?  The FED can't directly change the amount of money in circulation.  It can only create conditions where banks increase debt which produces more money.  However banks have found this great loophole.  They borrow money from the FED for essentially 0% dump it into Tbonds for 2% to 3% and collect a nearly risk free return. 

Still 60% M2 inflation in three years is pretty huge.  You may be wondering if the number of dollars has increased by 60%+ why haven't prices almost doubled.  Well velocity has fallen off a cliff.



The more the economy stagnates the more the FED does the only thing it can do which is print more dollars, however banks are growing loans so the economy sees less and less of that money.   So the fed keeps printing and printing and printing in order to coax the economy to life.  Kinda like someone who can't get a barbaque lit so their solution is to keep dumping gasoline on it.  One gallon doesn't work, lets try 2 gallons, 5 gallons, 50 gallons, hey back up that tanker truck.

However if the economy ever grew by any significant % suddenly their would be a "shortage" of dollars velocity would skyrocket and that would be the spark for an inflationary inferno.  Of course the omniprescent FED will see this coming and contract the money supply at the perfect time to neither hurt growth nor let inflation get out of control.  If it sounds highly risk, don't worry the FED has a great track record with the almost inhuman precision needed to manipulate the world's large economy.  As an example of their awesome skill in manipulating the economy to maximum benefit, take a look at the housing bubble.  They quickly saw that low interest rates were fueling an utterly unstable bubble in housing prices and were able to gently bring prices down averting the recession of 2008 and expanding the economic expansion for 2000 straight through 2013 with massive growth in real GDP, employment, and overall prosperity ... er wait.

Orrrrrr, it could be somewhere in between.  I'll wager that BTC will not be $0 and it will not be $10k/$100k within your estimates.  To make a statement like that is foolish.  

To the OP, sorry you took everything off the table.  In my experience, unless you have the foresight like ZB that your investment may be 0, sell off a little and take some profits.  I started this experiment when BTC=4$, sold a little, bought a little, and never looked back.   Best you could hope for now is maybe a correction like 10-20% and get back in the game.  

Does this graph mean what I think it does. If it does then it's much worse than I thought and my opinion wasn't that conservative to begin with ... wtf

(So I am asking have the amount of dollars in circulation tripled since 2008? :|)

...Why do financially sensible people jump lemming-like into hare-brained speculative frenzies--only to jump broker-like out of windows when their fantasies dissolve? We may think that the Great Crash of 1929, junk bonds of the '80s, and over-valued high-tech stocks of the '90s are peculiarly 20th century aberrations, but Mackay's classic--first published in 1841--shows that the madness and confusion of crowds knows no limits, and has no temporal bounds. These are extraordinarily illuminating,and, unfortunately, entertaining tales of chicanery, greed and naivete. Essential reading for any student of human nature or the transmission of ideas.

Extraordinary Popular Delusions and the Madness of Crowds

I hope he re-bought around the conference when price was around $3.

Yep he should've re-read his own articles and stayed the course during those dark days.

Its yet to be seen if bitcoin can scale given the block size issue and a hard fork managed badly could seriously put a dent in confidence.

There are good reasons to be cautious.

i hope he didn't get hurt too bad selling.  he must've been whipsawed bad.

Thanks, I have a soft spot for Falkvigne and hope to meet him in person someday.  Aside from digging his championing of liberty in general, his fantastic series of Bitcoin articles in 2011 (including the famous "putting all my savings in Bitcoin") were my personal catalyst for dipping my first toe into the BTC waters.

He he, that's the best case scenario, 100% of USD printed going straight to BTC, the same way that many folks in banana republics currently put all their money into USD right after they get their paycheck.  Could happen within the next 10 years once the UST bond bubble bursts and the USD starts losing its irrational reputation as a safe parking place.  And imagine not just the USD monetary base, but the entire plane's monetary base trying to fit into 21 million units.

Rick Falkvinge 2011 in Prague: "I predict bitcoin will reach usability sometime in 2019". (with "usability" here he means "mainstream adoption")

watch vid for more great stuff:

http://www.youtube.com/watch?feature=player_detailpage&v=mjmuPqkVwWc#t=1563s

agreed with post above

i think to many big players are involved at this point and if one were to go down the market could handle it,

when coinlab opens i am excited to see how the market will react to quarter million dollar buys and sells

Can't argue with you there but there arent that many people who own 100K BTC. And those who do probably were pioneers who picked their coins up for next to nothing. Which, if i am guessing right, will not be too perturbed by sudden price swings as long as bitcoin remains fundamentally sound

As long as BTC performs, or has the potential to perform, the way people think it will. We don't have to worry about a crash of apocalyptical proportions (major price swings on the other hand...). But if one day something happens to end the bitcoin dream (like a major hack, or total global ban) then we all jump ship at the same time and no one will come out of it without losing close to everything they have

i'm much more interested in comparing Bitcoin asymptotic growth to this:

Given your statement (which i agree with), I think it's slightly amusing how the built-in coin generation rate curve looks a lot like the Internet adoption curve:



That's most likely a meaningless coincidence.  

However, the interesting point from the chart, is that if the adoption rate of both phenomena are similar, it would imply that most of the adoption (& price gains?) will occur approximately within 10 years, i.e. by 2020.  The X factor being that the existence of the Internet accelerates information dispersion and uptake by at least twofold, but on the negative side a brand new type of money has to deal with an entrenched legacy mentality and infrastructure that is tougher to convert.  So perhaps Bitcoin might only need 4 or 5 years to reach global awareness and adoption (similar to something like Facebook between 2008 to 2012), or it could take 20 years to fully overcome the inertia of existing moneys and payment systems.

People always talk about how each bitcoin will worth after each one on the planet will own 1 of them, this is short sighted view in my opinion

Even everyone on the planet already get their hand on bitcoin, it is still early phase of the adoption. The well known limited supply nature make bitcoin a perfect target for saving without worrying about the lose of its value, it is more like a permanent promise about the trustworthiness, and it is backed by mathematics and network (more or less today's prevailing religion)

And the demand for saving is huge, because now we know that government can not hold their promise for repayment of pension due to various problems in the economy/financial crisis etc...

I foresee there will be a huge trend of private pension saving, and bitcoin definitely will become a very important part in that portfolio

There was probably hardly any liquidity left on the exchange either.

The 2011 crash took about a month to plunge the price under $15, even let's just say, we now have 1/10 of that much time--3 days, would that not be enough for you? Not to say the early adopters did not care that much about at what price they cash out--they got the bitcoins for cents.

Yes, but they can panic in advance, seeing the price approaching their buy-in level. Not sure that I agree with oak that flashcrash is not possible anymore - Gox is bigger that in 2011, but order book is still thin at only about 100k coins to go to $20, so it takes 2.5 million of profit taking for a significant dip. That's why high prices I think is important - price would be much more stable if we steadily grow to triple digits.

The price of a bitcoin is irrelevant. Even if bitcoin were $1000 each it would be a good investment if it rose to $1200. That's a 20% return!  It's never too late to get in on a rising price.