[HN Gopher] Ask HN: Is Bitcoin part of the Money Supply? Is it a...
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Ask HN: Is Bitcoin part of the Money Supply? Is it affecting
Inflation?
So I was getting my head round
https://www.lynalden.com/inflation/#cpi If M2 is all the currency
in bank accounts and wallets etc, the have we expanded the money
supply by Trillions? Is it measurable? Just thinking out loud
Author : lifeisstillgood
Score : 14 points
Date : 2021-05-11 19:13 UTC (3 hours ago)
| anm89 wrote:
| I wouldn't think of it this way. There is no global thing called
| "the money supply" and there is no generalized thing called
| "inflation". These concepts generally only make sense in the
| context of a currency.
|
| So M2 is a good example of this principle. M2 IS NOT ALL CURRENCY
| IN BANK ACCOUNTS AND WALLETS. It is a measure of <b> USD </b>
| both in terms of currency(paper money) and debt(credit) in
| circulation. You can't just talk about M2 generally, outside of
| the context of the dollar, it is specifically a metric for
| measuring the dollar. Therefore by its definition, bitcoin cannot
| directly affect M2 or USD inflation.
|
| So then saying > have we expanded the money supply by Trillions?
|
| is sort of like saying "Is it hot now?" to which you'd respond
| "Is what hot?" The question would have to be "Have we expanded
| the money supply of USD by Trillions?" In which case the answer
| would be yes but that has nothing to do with Bitcoin.
|
| This is also why currencies are denominated in pairs like USD/EUR
| or BTC/ETH. The USD is kind of a meaningless concept until you
| compare it's value relatively to something else, either goods or
| services or another currency. So you can't just say a dollar is
| worth 12 value. You have to say a dollar is worth 1 hamburger or
| a dollar is worth .00001 BTC. In this sense inflation of the USD
| is when it takes more USD to buy a BTC. In this sense again you
| can see that inflation has to be relative to a specific currency.
| elevenoh wrote:
| It's effecting how I personally contribute to inflation: my
| demand for USD has dropped & my perceived worth of USD relative
| to goods/assets is increasingly less.
|
| And I don't think I'm alone.
| PaulHoule wrote:
| There is a "wealth effect". If you think you are rich because you
| have a lot of Bitcoins that will be worth more 30 years from now
| you might spend money instead of save.
|
| Collectively people doing that create aggregate demand in the
| economy, increase GDP, and if they use the extra money they
| believe they have to bid up the prices of goods and services,
| increase inflation.
| CheezeIt wrote:
| I've found the expectation of massive gains to curtail my
| spending. When you know BTC would double, everything looks
| twice as expensive. Last year for me was like living in
| hyperdeflation.
| Udik wrote:
| I'd say yes, of course. In an "ideal" bitcoin scenario, the more
| people get convinced that bitcoin is here to stay, the more it
| goes mainstream, the more people will buy it driving its price to
| astronomical values, until it reaches an equilibrium. But by that
| time, you have created a large number of nominally rich people.
| So a lot of people will have a lot of money to spend. Say you
| want to buy a house, you can overbid by a larger margin, because
| you're bitcoin-rich. But the people you are competing with are
| too. So you end up paying much more for the same. You have
| effectively created inflation.
| retrac wrote:
| The normal sense used by statistics bureaus and such is pretty
| narrow and focuses only on the national currency, usually. So in
| that sense, given that Bitcoins are not dollars or yen or
| anything else, then by definition, no.
|
| In a more general sense? I don't know. Folks are still debating
| whether Bitcoin should even be considered a currency. Maybe it's
| better thought of as an asset like gold, from how people seem to
| be using it. Except at least you can make computer chips to mine
| Bitcoin with, out of gold. So maybe it's not even quite like
| that. Maybe it's something entirely new and our old models don't
| model it quite right, sort-of-like currency, but not quite.
|
| Now, if we do accept that Bitcoin is operating as a currency,
| then yes, it would be part of a more fuzzily defined notion of
| total global (or American) money supply, including all national
| currencies and currency-like instruments in use. But then, taking
| that very literally, so are cigarettes, given their use in black
| market commerce in prisons. For both of them it would be hard to
| measure, but it's definitely a factor in some way.
|
| I don't know if it's affecting inflation. I do suspect that the
| recent rise in price is at least partly driven by people seeking
| safe harbour from inflation, especially those who do not have an
| easy mechanism for buying real estate and the other usual hedges
| against inflation.
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(page generated 2021-05-11 23:02 UTC)