Topic: The fiat-money bubble! - page 3. (Read 3515 times)

Several news has come regarding the price rocketing. Recently too one among the large scale bitcoin firm operator and an enthusiast put forth the statement that bitcoin goes half a million in value in a short or too without any time scale.

Hello everyone.

There is much discussion around the price of bitcoins. Some seem to believe it could fly to a million, while some believe its just a big speculation bubble ready to burst.

My personal theory is that cryptocurrency is not the bubble, but rather the needle that will burst the fiat money bubble. Trough history we have always had an easy way to attribute value to things without it. Those who believe that fiat money is the only true way often attribute their opinion to the fact that fiat money is substainsable because of its centralized nature and its history of being used as a represantation of value.

The fact that bitcoin was created in the aftermath of the 2008 financial crises clearly shows it's intent. I believe Satoshi saw how a centralized regulated market can't be substainable thanks to the egotistical and evil sides we humans all posses.

Decentralized currencies will IMO be the future. I can't peg bitcoin to a certain price it will reach in the future as i usually don't speculate that way, but rather i just develop a bias on a subject and try to indentify the crowds bias as this is what acctualy IS the trend.
The trend for decentralized currencies is bullish overall, with some currencies being more exciting then others. Invest in the cryptocurrency you believe in and do your homework, lets bring the fiat-money world down once and for all!! 

Please share your opinion on the subject, this is my first post and just wanted to share my thoughts, thank you =)

LazyTurtle

There's a major difference between tulips and Bitcoin.  Tulips were not a very good money.  Bitcoin is designed to be a money, with anonymity and security built into an electronic architecture, in addition to the usual monetary properties like durability, divisibility, etc

The bubble will burst, but after a few years. Now it will still bring profit, because bitcoin has just started to develop. For the next 10 years I think it will definitely exist.

Yea i agree, everything without any "practical value" as food, shelter etc has a risk of becoming a bubble. People do love to speculate.

Really any value into anything without "real" value, is as you say, based upon the crowds perception of what SHOULD be the price of a particular object (paper,rocks whatever). Kind of like a mutual agreement to get the society up and running, trading resources constantly wouldn't be very practical as we know.

I dont think the fiat money is evil in itself, but people are just to prone for corruption for a fully centralized currency to really work. I personally see the confidence level for bank and government here in Sweden drop more and more and how anybody could have confidence in the USA banks/government i would never be able to understand. Kind of been declining here in Sweden (the confidence) since the USA and Island economic crises (witch really shows how stupid and corrupt government can be).

I totally agree with you in everything you say like that fiat money, in itself, will eventually fail. If bitcoin would be implemented as a easy-to-use currency everywhere, why would you even use a bank? IMO cryptocurrencies basically have most of the pros that fiat has, but not the biggest cons (like corruption).

Using state-issued money or bitcoins, in my world this choice boils down to "do i trust myself to manage my funds, or do i trust a corporation with a history littered of corruption?"

Personally i rather manage my personal wealth without a overhanging shadow seeing every financial move i make, my confidence lies in myself, not banks!

Nowadays, I've stopped reading anything except manuals and tech articles

I'm mostly writing myself these days. Nevertheless, the bulk of my knowledge comes mostly from the real life observations and communicating with people who know more than me in a certain field of human activity. For example, right now I'm interested in the specifics of carry-trade (I mentioned it before) since it is of practical interest to me. When I have time I will certainly look into what real currency traders have to say on the matter (I'm not so much interested in theory as its application in practice). if you are still interested which books had most influence on my understanding of economics in general (or just left a trace in my memory), I could name a couple still. This is the Principles of Economics by Carl Menger, the farther of Austrian school of economics (though this doesn't necessarily mean that I agree with everything they teach) and Economics in One Lesson by Henry Hazlitt. The latter just makes an interesting read on its own and thus should be read by anyone (it is an easy reading but still rather informative)

There is not such bad thing when it comes to believing and dreaming of a thing specially bitcoins price rocketing to a million dollars.It may really happen though it will take a seriously long time to achieved or it may not happen.No one can see future

I learned alot from this post when you gave a example of a possible currency bubble in Russia. Really interesting and i see your point and agree.

Do you have any litterature you would recommend that explore these topics, or just any book that you would recommend for someone interested in economics (mostly currencies)? Or perhaps just a author you find wisdomful.

I have gone to a pretty basic course in economics and econometrics, so the book's doesnt need to be super "noob", i do have a fundamental understanding of the more basics concepts

You are welcome

This may in fact sound like an obscure and convoluted theory, but this regretfully is as real as shit. Many local fiats get "hyped up" (I'm using the terminology from the cryptoworld but it fits well even with real fiat currencies), i.e. their price against reference currencies (say, the US dollar) rises in nominal terms, but it counterintuitively doesn't lower inflation rates in these countries (which would mean real value of that currency rising). For example, the Russian ruble has been rising against the dollar for over a year till now already, so you might intuitively expect that the inflation in Russia should be at least on par with the inflation in the US, while in reality it is nowhere near the case since it has been times greater during this year (as it was years before). The chart below shows the exchange rate of the US dollar to the Russian ruble



I guess this is the best approximation to a currency "bubble" which we could come up with

I mixed together the terms value and price, thats why i was confused. Thanks for clearing that up, it was interesting to discuss with you! 

No one can predict what exactly will happen in the future. In the event of a nuclear war, they can turn off electricity and the Internet, no currency will have value.

Right now it is (for the most part, at least)

Bitcoin and other cryptocurrencies fit well into the definition of a financial bubble. I could even claim that Bitcoin is a sort of tulipomania. Just like tulips, bitcoins are useful for some purpose, namely, for transferring value around the world while completely bypassing centralized (real controlled) entities like banks, but Bitcoin current price is by no means determined by this utility. Most of Bitcoin value today comes from sheer speculation. Whether Bitcoin bubble is going to pop eventually or its real use as a currency will finally match its use as a speculative vehicle is not clear as of yet

George Soros shorted the pound, just in case

But that's irrelevant since when I talked about the fiat value I referred to value, not price. Basically, price is what you pay, value is what you get. In this way, by value I mean the amount of goods which the unit of a certain currency can buy. If you consider the value of money (what you can buy with it), it will be hard to imagine how you can inflate it without expanding the real economy while keeping the amount of money in circulation the same. That would mean price deflation, and it is even more dangerous than inflation, but this is another question. To better understand what I mean think of the money value in terms of goods that you can buy with it. How are you going inflate this value by pure speculation?


Hyperinflation basically means that the value of money itself collapses, but since bubbles in currencies rarely change the purchasing power of money, they are inconsequential to hyperinflation. Essentially, they are just short-term speculations when the price of money (in terms of other currencies) gets divorced from its value (in terms of goods it can buy). When the currency bubble bursts the price of money goes back to its real value (so called "fair price"), which is determined in the way I explained in one of my previous posts (namely, by the amount of money over the quantity of goods)

But as you mention, the famous George Soros did manipulate the exchange with speculation, having a practical effect on the value of the currency. Thus showing that fiat money's value is heavily influenced by speculation, i am confused to where you stand on the issue now? I see contradictions in your original posts with what you write now, so please clarify if there's something i missed.
As you said earlier you had trouble even imagine how i could believe speculation being a factor, but now saying its obvious that it is?

You also wrote " I suspect there cannot be bubbles of that kind with fiat currencies. The examples you give refer to severe currency devaluations. Obviously, the latter have nothing to do with speculative bubbles, though the end result is essentially the same (i.e. dramatic loss of value)"


Well first of all, as i said earlier this was a case of hyperinflation. Hyperinflation is very connected to bubbles witch would dissprove that statement(IMO)