Just over twenty years ago, my sister and I had about the same amount of money (give or take a couple of hundred thousand) to purchase a house. She purchased in West Van and my late husband and I purchased on an island not too far away. Husband and I wanted enough to buy a house, clear title and buy some precious metals…and after he died and I sold the place, it had gone up 50%. Precious metals doubled from point of purchase.
But, in the mean time, my sister’s place in West Van, originally purchased for went up 1000% or more in value. That’s three zeros, not two.
Using common sense, this never should have happened. Like never. And people have been waiting out that inevitable drop in prices, after prices in Vancouver merely doubled in value, for over 10 years. It hasn’t happened and they saw their most outsized gains in 2016. Prices went UP for single family detached in that area, during the pandemic!
It’s bulletproof. And yes, it has something to do with our own ‘fed’ But it also has to do with foreigners seeking safe havens for laundered money or honest foreigners with big bucks immigrating.
I have read several horror stories of young people saving every cent they had over the last 15 years, in order to buy into the inevitable collapse in prices. In the mean time having much of their savings eaten up by their landlords. It’s tremendously sad. These people have kids and are shoehorned into tiny apartments.
I feel that what is happening currently, in the stock market, has something to do with investors pursuing safe havens to hedge against inflation even though the logic is limited, as you have described so well. But then again, that is from a common sense perspective, another factor you have detailed.
Though I have to say, if investors are buying stock in corporations that are oligopolies, (which will become more and more like functional monopolies), it may not be the worst strategy. Look at Amazon. Perfect example.
It’s terribly sad that governments help to create sharks in the economic ecosphere. In order to survive we have to jump on like remoras and other parasites feeding off the largesse.
Things should revert to fundamentals, or ‘the trend is your friend.’ Which one wins out?
My parents sold a really nice house in North Van in 2003. Ouch. Now I can barely afford to rent in Vancouver.
Oh Mark, So sorry to hear that. I wasn’t sure what the BC stood for. I thought it might mean Before Christ!
It’s my initials, where I live, and also I used to spend a good amount of time in Baja California.
FWIW, I think that Gregory Mannarino’s daily Youtube updates provide the best real-time investment advice out there in terms of understanding and accepting how corrupt and manipulated the system is, but using this to your advantage to make gains of central bank credits (dollars), however fundamentally “worthless” those are (but you can still buy a house with those “worthless” bank credits!) I think he might go off the deep end a bit with some of the commentary around Covid, but his financial analysis is spot on. He hits it home every time. Cautiously buying call options in this environment is a no-brainer IMO.
So I think we should take the best of both worlds; prepare yourself mentally, financially and situationally for the “end” whenever that happens, but keep one foot in the mainstream to take advantage of opportunities that present themselves.
I realize Charles is a respected author with some credibility though this piece was a disappointment to me. At 74 I did experience an America functioning on hard currency and basically upholding our Constitutional Rights and mostly blind Justice.
At this point we have generations of educated people who were purposely led to believe in something else sadly, and are now in power.
The 800 pound Gorilla is the government we have and will have for the foreseeable future. Charles, do you think it won’t be there?
Everyone who has bitcoin will tell you "you just don't understand bitcoin" as if it is some absolutism reality that only needs to be understood in order to have value.
Max Keiser calls bitcoin the equivalent of and as important as the repeating rifle in liberating mankind. A bigger pile of crap I have not seen before now. The repeating rifle was a quantium advancement in a highly useful tool that allowed the average individual, through hard, daily physical effort, to better his direct physical situation like protect himself and go out and get food to feed his family. Bitcoin has allowed a handful of individuals become very rich without having to barely lift a finger and all of them are insistent that it is a basic human right and indeed obligation to buy more and more to drive up the price and make them more rich. Like all ponzi schemes it is 100% dependent on greater fools coming in behind the previous fools in order to proper.
I can hear it now "but you don't understand bitcoin" MIKE DROP!!! as if that somehow explains how this ponzi is different.
Bitcoin solves NOTHING!
The problem is that money, however you want to manifest it, must have a 1 to 1 relationship to a physical thing that exists in the physical world. This "money " then becomes a claim on that real thing and allows an economy to function. The problem is that money or what is the global representative of money the dollar has long left any such representation to a claim on any real physical thing. If anything the dollar represents a million claims for every real physical thing, in other words for every real thing there are a million claims to it in dollars.
Bitcoin does nothing to solve this and in fact makes it even worse. For every real world physical thing there are a billion bitcoin claims to it.
Some will say those real world physical things will eventually only be had through bitcoins. SO what that means is that the only ones able to live, to acquire the real world physical resources needed to not die will be those who have a bunch of these digital increments that they received for doing almost nothing and the reason for that is because they all hate the fact that 1% of the population get most of the dollars without having to do much of anything. Think about it, does that make any sense. Fool me once, shame on me, fool me twice and funck you.
With any sort of constraint on real physical things needed in order to not die they will not be given up for any increment of any made up unit of what anyone calls valuable, it will only be "traded" for something of a somewhat equal real physical useful value.
There may have been a time when bitcoin or crypto could have been used as a unit of trade but to go from the $ to crypto now is like trying to sell someone a bridge who has previously lost their life savings on buying a timeshare on the Taj Mahal.
As ponzis go crypto is a doozy and many will get rich, and many will lose it all but the world will not be the better for any of it because it solves for nothing. I am all for taking away the ability to create money out of nothing from the banking/finance industry but crypto just makes a slightly different group able to create money out of nothing and obscenely rich. All money should be directly tied to real world physical resources and any money created or made otherwise should be taxed at 95%.
Netlej, you make some good points but I remind you that
- bitcoin really is a great invention, and is as significant as the Model T Ford was to transportation, or the tungston filament incandescent bulb was to lighting. When the history of the world is written, bitcoin will be given its rightful place along with those other great innovations.
- bitcoin is not ephemeral but represents an extreme amount of electricity. This energy is real. If you compare the total amount of electricity used last year to operate (verify transactions by mining) the bitcoin system last year, and multiply each kilowatt hour used by bitcoin, by 10 cents (an average price for electricity in America and also for Chinese factories) you end up with $73 dollars of electricity consumed for each bitcoin transaction.
Who pays for this $73 electricity per bitcoin transaction? Investors into bitcoin.
Bitcoin is really cool and lots of fun. That much is clear from reading breathless accounts from people on this site, whenever bitcoin valuation goes up.
- Bitcoin does not create wealth, it measures relative prices. It’s a yardstick. It’s the best yardstick humans have created so far because of its absolute cap of 21 million (of which about 18.6 million have already been mined).
The rising price per coin that you see is a direct function of that limited supply (systematically coming into the market at the rate of 6.25 bitcoin every ten minutes) meeting rising demand. This is basic economics: limited unit supply + increasing demand = higher price per unit. Put another way: what we are witnessing is open market price discovery of a hard asset with limited available supply.
It is inevitable that in an open market, where the only value comes from adoption or rejection (where no state power can mandate adoption or rejection, and therefore cannot disperse bitcoin “equally” or “fairly”), those who adopt earlier will realize more gain on their investment than those who adopt later. Those who adopt last realize the least gain. However unless the open market concludes Bitcoin has no value as a measuring stick after all, the value per coin will not go to zero.
Volatility is simply a function of the rate at which people enter and exit the market. It varies in rate and intensity, and will be more pronounced in the early years than in the later years because in the early years investors are more uncertain of the value of their investment; it’s easier to become starry-eyed and it’s easier to get spooked. As the asset matures and builds a history, volatility dampens as more purchasers choose to hold through ups and downs rather than sell at the first hint of decline. This is all natural; it follows human nature.
The question you need to ask yourself is: does bitcoin serve as the best yardstick for identifying the relative value of real world items, or is it the worst yardstick, or does it fall somewhere in the midling range between? When you reach your conclusion, you know how to invest your own money and trust in bitcoin as a yardstick. Do what is prudent for you in your estimation. Let others exercise their own judgment and reap the results. That is what the free market is all about, and it is how the wisdom of the crowd is achieved. It is how the final price of bitcoin will be determined, in time.
It does not do to conclude bitcoin is a lousy yardstick of value, then become bitter that others don’t agree, or to become jealous of the increase in value others receive from investing when you don’t and from holding when you sell. No one of us is the wisdom of the crowd.
The difference between bitcoin and state monies is that bitcoin operates by a set of core rules that both give it its inherent value as a yardstick and that no one, not even a government, can manipulate. Therefore, it truly reflects the crowd’s wisdom about relative values of real world items, and about its own worth, and not the wishes of some small group of governors and their connected friends.
How much is that independent yardstick worth to the world? To businessmen and women? To consumers? To you? I tell you, that is what really drives bitcoin’s value appreciation. The more obvious it becomes that the state actors are failing to provide honest weights and measures for real world goods, the more individuals and businesses choose to encourage bitcoin’s adoption.
That is also why bitcoin is preferred over other cryptocurrencies. It alone cannot be canceled or changed by any cabal. Only with predominant agreement between the miners, node operators, and users of bitcoin can fundamental changes be implemented. (In this way, it is like the US Constitution: egregious flaws can be corrected, but only if a majority of constituents agree the flaw is egregious enough to matter, and the proposed correction will serve better.) The diverse interests and perspectives of bitcoin’s global, and globally expanding, constituency makes changes to the base protocol slow and unlikely. That is what makes it so strong as to be called immutable. It isn’t quite immutable, but it is as close as can be without being designed to be fatally rigid. And that immutability bolsters bitcoin’s case as a reliably strong, impartial arbiter of the value of real world goods.
During a time when fiat currencies are highly inflated and so are losing their ability to represent the value of the labor and production of real persons and companies, it is obvious that a better money will garner increasing interest and adoption. In turn, such a hard money will appreciate in value.
An interesting question: is what we are seeing as the rising price of bitcoin actually just the declining value of the dollar (or euro, yen, rupee…)? I think yes. So-called smart money is looking for a safer haven than blatantly manipulated fiat currencies. Like precious metals, bitcoin is that. And it is young enough to also still be in the process of price discovery – unlike pms – so a smart investor who chooses bitcoin can compound protection from fiat currency debasement with hard money value appreciation.
I don’t see anything either immoral about that or stupid about it. I don’t know why everyone wouldn’t take advantage of that dual benefit with some percent of rainy-day funds or excess cash flow.
Meanwhile, the base valuation of bitcoin – its value apart from price discovery, could we distinguish parts – is surely going up because the purchasing power of the dollar (and every fiat currency) is being diluted by state actors who can’t countenance fiscal discipline even when failure to do so assures the economic disaster they want to avoid by printing ever more, ever more worthless fiat. Given a choice between parking my excess earnings in a debasing fiat currency or its proxies, and a truly sound money still discovering its true value, I choose the latter. Every market actor – and that’s all of us, whether we know it or not – makes their own choice. History records the outcome. Welcome to the truly free ‘free market.’ - The only way to consider what is taking place in bitcoin a Ponzi scheme is to not understand what a Ponzi scheme is. With bitcoin there is no guarantee that those who get in early will benefit at the expense of those who come in later – the historic extreme volatility of bitcoin puts the lie to that right off; that very volatility is exactly what a Ponzi scheme must avoid to attract new investors. Nor are the returns for investing in bitcoin guaranteed. The value of each investment varies greatly over every four year period between halvings. Indeed the problem of buying high and riding the deep dip is one criticism many have against the viability of bitcoin as an investment. No Ponzi scheme allows for such an experience, except in the very last iteration, when it all crashes. By that measure, bitcoin has failed the Ponzi narrative 3 times over in a big way, and many more times over in small ways. There is something else going on here; writing bitcoin off as a Ponzi scheme is indication of a failure to examine the bitcoin adoption dynamic beyond ascribing to it a misunderstood narrative that, in its misunderstood iteration, constitutes a convenience if one wants to dismiss bitcoin out of hand.
My power just went out due to rolling blackouts…and due to Texans not being able cope with winter weather…My wealth is in my greenhouse…in my land …in my propane tanks…rain water tanks…bullets…chickens…canned food…hunting gear…warm clothes …I consider those things my store of wealth. Dollars and Bitcoin not so much. In survival mode today.
none of any of that is mutually exclusive. of course the tribe is dogmatized to believe it is. because you believe a certain paradigm you have what you consider wealth tied up in a greenhouse, warm clothes, bullets etc. of course that ignores the fact that all of your “wealth” was acquired with dollars. the base layer of your wealth is fiat currency. hmmm funny how that works isn’t it. all those tangible things were manifested with an intangible.
btw it appears you are not as wealthy as you think. no solar panels? batteries? windmill? microhydro? no electricity
netlej you are new here so your posts are understandable. this is not facebook. i have mentioned that to you before. your posts are (especially this one) generally nothing more than a compilation of assertions w/o any data to back them up.
the discussions here are expected to be fact based. you make the assertion that money must have a 1:1 relationship to a physical thing. can you please cite an economic text book where that is stated?
“Most economic textbooks define money the following way: anything that is accepted as payment for purchases; a medium of exchange; a unit of account; or as a store of value. In other words, money is defined by its many roles.”
money is an abstract. it is an agreed upon value of a thing, labor or service. therefore money has value in your mind. in an exchange it also entails the abstract value in someone else’s mind. gold and silver were once used as money but those days are long gone. they have utility and value that is also abstract. you might benefit from reading the following,
https://medium.com/@onejohi/money-as-an-abstract-concept-77e18bcd0531#:~:text=Money%20is%20created%20from%20thin,is%20defined%20in%20the%20mind.&text=It%20exists%20no%20where%20else,how%20much%20money%20it’s%20worth.
vt has done his usual excellent job of exposing the false narrative you put forward as “fact”. there are facts about crypto which clearly elude your ability to comprehend and yes that is because you don’t understand it mic drop (not mike). have you read the white paper satoshi published? do you understand what makes btc the hardest money ever created? have you read “the bitcoin standard” by safiedean ammous? the first 8 chapters barely mention btc. they talk about the history of money etc. are you aware that an entirely new monetary system and financial system is currently being built that is fair, transparent and democratic. it is a system designed to level the playing field in wealth generation and preservation? question is why would you not be interested in such a system?
your post is nothing more than an abstract rant which adds nothing to an intelligent conversation. pp is not the place for that. again it is not facebook.
the following is an interview with safiedean ammous. he is an austrian school economist.
https://www.youtube.com/watch?v=vhvpyou-jAA
why does bitcoin have value?
https://www.aier.org/article/why-does-bitcoin-have-value/
Yes we have two solar systems…one Outback 48 volt system of 20 panels with battery backup and 24 panels with micro inverters. Yes… I traded dollars for them …and value them more than silver or currency. Dollars are a transition currency … not a store of wealth. I half expect my portfolio to be raided in some fashion. ( is inflation considered a raid?) Not much I can do about it. But if someone tries to raid my property…this 69 year old man will stand strong.
glad you have electricity.
yes inflation is a raid. you can defend your portfolio against that raid with btc. bullets are worthless against that raid
the only rational response to what you describe is support for sound money of which there is only one on the planet, bitcoin