106 sats \ 3 replies \ @gnilma 2 Mar \ on: Why the Bubble Economy Isn't the Real Economy | Dusty Wunderlich econ
I wonder how much of the bubble does bitcoin fix? When the world moves onto a bitcoin standard, where value cannot be created out of thin air, by fiat, and every investment requires forgo consumption of capital, skin in the game would kick in. Naturally, one would think that a lot of misallocation of capital and bad investments would be gone, due to skin in the game and elimination of money printing. Yet, human make mistakes all the time and bitcoin will not prevent people from investing in bad ideas.
I guess to answer my own question, under a bitcoin standard, bad investments will be punished and good investments rewarded. Over time, it goes through a sort of Darwinian process where the ones with an eye for good investment will thrive and continue to thrive, while the ones that make bad investments will run out of capital. No more printing money, QE, or whatever they call it to paper over and bail out the bad investors just because they are close to the money printer. What do you think?
The Austrian view is that bubbles need an artificial expansion of credit to form. Any other types of mistakes will be distributed randomly over time, rather than occurring simultaneously.
reply
reply
There are a lot of differences of opinion of whether and how much artificial credit expansion we'll see on bitcoin. You could think of scams like FTX as having done exactly the kind of thing that creates bubbles.
I do think the bubbles will be smaller on a bitcoin standard, but I think they'll still happen occasionally.
reply