Till and the economy Part 2

Hi together,

and on: I had some interesting conversations with colleagues who jumped on the Bitcoin train. They defend themselves by saying that bitcoin is deflationary and thus a so-called hard currency. As I said, I do not see it that this is the case: everything is derived from the quantity equation. This was, we remember, M = Y * P / U. M was the money supply, Y the real production, P the price or the price level and U the orbital speed of money.

First of all, I have now tried to grasp the economic terms more physically. On the one hand, I suspect behind the quantum equation there is also a physical connection, i.e. a law of nature, and secondly, I feel safer with the concrete physical concepts. I define Y := m, i.e. as a mass. This is obvious, because real production is really what we produce. Furthermore, I define the price P as volume, P := V = s3. The orbital velocity U remains the circulation speed within the system, i.e. v. Yes, then all that is left is what the money supply M means. One comes to a term m * V / v. If we start from the constancy of the orbital velocity, and sometimes disregard the units, we come to a term kg * m3. I call it cover. It is clear that if you need a blanket on cold nights, that it not only needs the necessary volume, but also needs to be fed, so you have to carry a certain weight. Accordingly, within the limits of this analogy, a larger, wider, higher ceiling is better, which is also heavier. So it is with the cover: the cover is better, the more mass there is and the more surface there is, the better the cover.

Money supply then fits very well with the coverage, because it covers the money that the goods require multiplied by their price. So we come to Bitcoin: It is then close to m / V, so to calculate the density. This is economically speaking: Y / P. The price of Bitcoin has risen extremely, while the real goods traded with it have definitely not risen by 300%. So last year we have had an ever-decreasing density. Here the formation of a bubble or bubble is to be feared, because it also loses more and more density, the more it grows.

As in the last report, this means that we either have to trade more real goods via Bitcoin in order to "feed" the bubble again. Or if that does not work, we will have to bite into the sour apple and reduce prices through currency reform. Monetary reforms after inflation are never nice, for no one, but the ultima ratio. Otherwise, the density decreases more and more and the bubble bursts.

So you can see that even a supposedly hard and deflationary currency in people's eyes can create an inflationary bubble.


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