I'm wandering...who's going to buy bitcoin at a million and thinks it's a good price?
The laggards prognosticating $10M/
BTC?
You probably don’t want to calculate what 30 days of 20% growth would do to the Bitcoin price because it will make you vomit.
a factor 59
But what if what we are seeing is in truth fiat-inflation?
There has so much money been printed and it is out there and yet the inflation is just at 15% since 2008 while the amount of money has increased by about 500%.
https://fred.stlouisfed.org/series/BASE?cid=124Which means everything in dollar should theoretically cost about 5 times as much as it does today. Imagine 15$ for a coffee
That's not really how it works, if the supply of money is met with a growing economy that absorbs the new money you don't get inflation.
Also, most people tend to see rising asset prices as 'wealth' instead of (more correctly) bubbles. Can't steer where all that newly created money goes into. Now it has found a new gem: cryptocurrencies.
The impact of cryptocurrencies
The context of our analysis so far has been restricted to the well-established credit cycle. This consists of a period of credit expansion, facilitated by central banks suppressing interest rates, leading to price inflation, and thereby forcing central banks to raise interest rates until credit stops expanding. Inevitably, when bank credit stops expanding, businesses get into difficulty, the economic climate sours, and bank credit begins to implode. The correlation between changes in bank credit applied to business loans and interest rates managed by the central banks is evident in the second chart in this article.
It should be clear that the current period of credit expansion, being unprecedented in its magnitude, will be followed by a credit crisis potentially worse than the last. Furthermore, as posited above, the rapid expansion of base money, which is the traditional central bank response to a credit crisis, will coincide with a surfeit of deposited dollars in the banking system accumulated since the last crisis. Accordingly, instead of a deflationary event being triggered, the next crisis will increase these deposits even further, and is likely to trigger an inflationary event, once the dust settles. Depositors, who are not finance companies, will almost certainly attempt to reduce their swollen bank accounts, in favour of precious metals, and perhaps tangible assets such as art, land and buildings as well.
We now must consider the impact of a new element, cryptocurrencies. Assuming that central banks do not prohibit commercial banks from processing payments to facilitate cryptocurrency settlements, it is likely the cryptocurrency bubble will not only survive the next credit-induced economic crisis, but be fuelled by it. This being the case, increasing public participation becomes an additional destabilising factor for fiat currencies themselves.
Before the next credit crisis, there could be increasing speculation in cryptocurrencies, providing windfall profits for growing numbers of the general public all round the world. This will have two affects. Fiat money will be diverted from other uses into settling cryptocurrency transactions. This will require additional expansion of bank credit, if not for this direct purpose, to satisfy continuing economic activities that benefit indirectly from the bubble’s wealth creation. And secondly, the decline in preference for fiat money in favour of holding cryptocurrencies is could trigger a wider decline in the purchasing power of state-issued money.
It is perhaps time to consolidate our thoughts so far, and summarise the danger to the dollar. Unlike the last credit-induced crisis, which triggered a flight into the dollar, the dynamics building for the next crisis are wholly different, even though it will happen for the same underlying reasons. This time, the world is flooded with dollars, both in the form of investment money and bank deposits.
The Fed’s solution to a credit-induced crisis is always to inject more money into the system. But there is already too much money in circulation, illustrated by the above-trend increase in FMQ since August 2008. Foreign ownership of dollars in portfolios also increased from $9.641 trillion in 2009 to $17.139 trillion in 2016 (according to TIC data from the US Treasury), the unwinding of which will undoubtedly put pressure on the dollar’s exchange rate, in addition to other negative trade-related factors. Furthermore, fiat currency in the banks and at the Fed is now $6.4 trillion above its long-term sustainable growth rate.
There is therefore, already a recipe for a substantial fall in the dollar, adversely affecting all other fiat currencies linked to it. This problem is compounded by the lack of headroom to raise interest rates without aggravating the overall debt situation. The addition of cryptocurrencies as an alternative to holding fiat cash, if the cryptocurrency bubble is still extant at the time of the next credit crisis, can be expected to offer the public an alternative to holding fiat currencies deposits in the banks. This is all bad news for the dollar.
source:
https://www.goldmoney.com/research/goldmoney-insights/monetary-update-for-the-dollar
