If you're in London, ON, I'll be at this meetup tonight:
Have some Tahini's and a short talk followed by Q&A.
Riffing on the Stock-to-Flow Model
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In the jungle of the fiat world, there are crafty creatures known as scammers who have a distinct trait: they never admit they're wrong. You could proclaim, "Hey, this isn't working!" They'd shake their heads, waggle a finger, and claim you simply misunderstood. Suggest that Bitcoin would be a more useful route? They'd passionately argue for a convoluted token system. Even if you stated the obvious - that the sky is blue - they'd spin doubts about your statement by talking about its purple hues.
You see, scammers, like poker players, know that a single misstep can shatter the illusion of trust they've carefully built up with their victims. They've been so deeply conditioned to lie that they'll parry any perceived attack, all to maintain their delicate house of cards.
Now, let me make it clear, I'm aiming to be brutally honest with myself. I've previously analyzed the stock-to-flow model and, with conviction, declared it the only price model that made sense with me. While that hasn't changed entirely (though that says more about price models than this particular one), I've realized that something making sense doesn't necessarily make it true.
The past 18 months have been a philosophical sabbatical from the price-driven narrative of Bitcoin, mainly because this particular set of models have let us down. It was wrong, and there's nothing like a major error to trigger some deep self-reflection. So, armed with introspection and hopefully, some humility, I pen this article.
Let's revisit the source - the stock-to-flow model. My understanding of it, and I suspect, many others, hails from Saifedean Ammous's enlightening work, *The Bitcoin Standard*. It suggests that the existing stock of an asset, coupled with its annual increase, reveals how challenging it is for us humans to accumulate or create more of it. This is the core concept, and it's a handy tool for understanding relative scarcity and the effort needed to obtain a certain resource.
However, the model is a very different thing. Initially, the S2F model was a clever method to link an asset's stock-to-flow ratio with its market cap. At first glance, it seemed plausible; scarcity does, after all, influence price. But, as I reflected, I realized that scarcity is just one cog in the vast machinery of price determination.
Scarcity can nudge supply and possibly demand, but there's so much more involved. When it comes to supply, think about the influence of knowledge, technology, labor, and time. On the demand side, factors multiply - potential uses of the asset, liquidity, portability, and so on. So, the price, and thus, the market cap of an asset, isn't a straightforward equation of a single variable like scarcity.
In retrospect, I see now that many of us, myself included, yearned for this model to hold true. We were seduced by the possibility that since the supply of Bitcoin is so predictable and known, we could perhaps also do the same with price. The S2F/S2FX models promised the allure of future knowledge in the rollercoaster ride that is Bitcoin's global adoption.
Could there still be a model out there that accurately mirrors price? Possibly. But as with any hypothesis, it must stand the test of accuracy. If it doesn't hit the mark, it's time to swallow our pride and admit we got it wrong. It didn't and I was wrong.
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#Bitcoin Tech Talk #354
Based takes on US Presidents:
Washington - The greatest thing he did was to step away. He gave Hamilton too much credit for the growth of the economy when it was central banking taking from the future.
Jackson - He did the right thing in ending the Second Central Bank. His presidency was one of the best ever. Unfortunately, he controlled things a bit too much when he was out of office. Should have just retired and shut up.
Lincoln - Autocrat and grabbed way too much power, especially with the greenback. He also changed the nature of the federal government by taking autonomy away from the states.
Wilson - The entire progressive agenda was a disaster. Income tax, prohibition and direct election of senators were the beginning of the end for states' rights. His bringing us into WWI was inexcusable and a bold-faced lie.
FDR - He is Wilson just with a better smile. He did even worse in WWII by giving Stalin anything and everything. Essentially made the USSR a dominant power. He also took us off the gold standard by suspending convertibility. The fact that he was popular does not excuse the ridiculous Keynesian policies and the authoritarian rule that he exercised, particularly in foreign policy.
Ford/Carter/Reagan/Bush/Clinton/Bush/Obama - All pretty much the same, continuing the same policies post 1971 and getting us into unnecessary wars while debasing the dollar strategically.
On Identity and Community
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Identity is not a buffet where you can pick and choose your attributes at will. It is an inherent part of who you are, shaped by numerous factors like your upbringing, cultural background, and life experiences. It does not exist in isolation but is deeply intertwined with the communities you're a part of. Your identity grows and evolves within the framework of this community, influenced by its norms, values, and shared experiences.
This is why the idea of self-defining one's identity in any way one desires can be seen as narcissistic. It dismisses the communal context and suggests that the world should adapt to an individual's chosen identity, no matter how detached it may be from reality. It implies that the individual is at the center of their own universe, and that their personal whims and wishes should override the societal reality around the individual.
Such a perspective demands that the community complies with an individual's self-definition, without considering the collective identity of the community itself. It places the individual above the group, neglecting the shared understanding and mutual agreement that are the building blocks of any society.
Identity, at its core, is a collaborative construct. It's a reflection of our collective existence, not just an individual attribute that one can morph as they please. The idea that we can arbitrarily define our identity disregards the importance of communal coherence and mutual values, debasing the morals that hold communities together.
Principles of Economics Review Part 2
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Chapter two of Saifedean's Principles of Economics builds upon the premise established in the initial chapter - the fundamental unit of economics is human action, the decisions we make in the marketplace. A multitude of terms are introduced, all with reference to this core concept.
Central to this chapter is the notion of value. Saifedean persuasively argues that value is a subjective construct; individuals assign value based on their personal needs, goals, and objectives. Yet, the reality of scarcity means that not all desires can be fulfilled, necessitating trade-offs. This is where economics comes into play, serving as the study of choices humans make when goods have a cost because they are scarce.
The valuation process varies across geographical locations, timeframes, and individuals, and even fluctuates within a single individual, especially as they accumulate more of a particular good. Saifedean emphasizes the variability of value, determined largely by our knowledge, our environment and our personal circumstances at a given moment. Thus, value cannot be objectively measured. As he points out, oil has gone from a good that people paid to get rid of, to a good that people paid a lot of money for. The properties of oil did not change, individual valuations did based on knowledge.
Saifedean identifies a common pitfall in economic thought—equating value with price. These two concepts, he argues, are distinct. A trade merely suggests that each party values what they acquire more than what they give up. While prices reflect the preferences of those involved in a trade, they don't serve as an objective measure of an item's value. He illustrates this with the enduring paradox of why diamonds are pricier than water. This question mistakenly blends the concepts of price and value. Although diamonds fetch higher prices in the market, the subjective value of diamonds versus water ultimately depends on the individual and their specific circumstances.
This chapter seems to be setting up Saifedean's approach to understanding human decision-making. He roots his understanding in fundamental principles, a stark contrast to non-Austrian methodologies, which often rely on oversimplified assumptions like the 'homo economicus' or deterministic numerical relationships. Human action is inherently varied, and this chapter compellingly argues for the recognition and understanding of this complexity and arms us with useful tools for evaluating it.
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#Bitcoin Tech Talk #353
Principles of Economics Review (Part 1)
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Saifedean's Principles of Economics kicks off strongly, addressing a common flaw in economic literature: either they lean into pseudo-scientific approaches, like Keynes', leading to nonsensical interpretations, or they dedicate too much energy debunking these approaches, sacrificing readability. Saifedean intended to create the book he wished he had at 18, and it seems he's on track to deliver an accessible introduction to Austrian economics.
Chapter 1 zeroes in on the fundamental building block of economics: human action. Saifedean argues that the essence of economics lies not in aggregate statistics but in individual human actions. Unlike atoms that behave predictably, humans have diverse goals, making the tendency to treat them as a static collective amidst changing circumstances a serious mistake.
Interestingly, Saifedean notes that Keynesians' preference for a quantitative approach mimics hard sciences, driven by a desire for the prestige associated with subjects like chemistry and physics. This pursuit led to unproven assertions that have become dogma and harmful economic frameworks that persist today.
Saifedean argues that isolating human action for quantitative analysis is unfeasible, as actions are inherently embedded in their social context. No lab can replicate the complex, multifactorial outcomes of individual actions. Hence the constant need to update Keynesian theories. The ease with which these are manipulated after the fact to account for any phenomena removes their predictive power, undermining their value as knowledge.
Lastly, Saifedean contrasts Keynesian and Austrian approaches to the issue of minimum wage. As he notes, humans act to optimize their well-being, not to satisfy bureaucrats. The prevalence of Keynesian economics in government is rooted in the need to justify laws that limit freedom. Keynesianism provides this justification, making it an appealing choice for policymakers.
Overall, it's a very strong start to the book and if this post gets enough likes, I'll continue this review as I go through it.
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Nope. In the countries I've traveled in the past 12 months, the only places that required vax stuff were Colombia, Cambodia, Canada and Brazil. I think Canada and Brazil ended theirs. You can google it to find out more.
El Salvador Impressions
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This is my third time in El Salvador. The first two times were January and June of last year. My, how things have changed.
It's hard to imagine a place can change so quickly, but first impressions of El Salvador are pretty good so far.
First, there's the new terminal at the airport. It's modern, clean and nicer than the other terminals that I flew into last time.
Second, there's building going on everywhere. Just on my ride to my hotel, I saw construction all over the place. Whether it's new hotels, gas stations, or resorts, there's clearly a building boom going on. I saw an amusement park which opened in the last year with modern rides. Lots of cars were lined up outside it and the street food scene nearby reminded me of Asia.
Third, there's a lot of entrepreneurs. The streets are filled with people selling all kinds of stuff. Last time I was here, they were mostly selling fruit. They've expanded to beachwear, cell phone services, and even full blown restaurants on the side of the road.
Even the road itself is freshly paved, there are way more billboards on the side of the road and better manicured property.
It's hard to believe that so much can progress in a single year, but that's what it looks like. The fiat rot is all pervasive and removing it seems to have supercharged this place.
Fiat: There is no right and wrong, only pleasing the authorities.
Bitcoin: There is right and wrong and it's based on Natural Law.
It's not a coincidence that the former is what we're taught in school. Real education is discovering what is right and wrong. Bottom up morality is just. Top down morality is abusive.
Once you've tasted truth, you're going to want more.
Bitcoiners discover the truth about money and leads down different rabbit holes, precisely because learning and understanding the truth is so satisfying. It shines a light on everything else, on how things work and why things are the way they are, because in a sense everything is hidden and what's presented by those in power is always a lie in some way, shape or form.
What truths have you tasted?
Sound of Freedom
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Having recently watched the film "Sound of Freedom," I can assert that it is an impactful and thought-provoking movie. As a father, the storyline is horrifying: the theft and abuse of a child is a parent's worst nightmare. As a Christian, the depiction of mankind's depravity is a sobering reflection of our world's darker realities.
Based on true events, this movie presents a stark counter-narrative to critics who deceptively argue that "things aren't that bad." Such dismissal is laughable in the face of the real-life horrors that have been documented by so many.
Critics largely target this movie because it brings forth uncomfortable truths about issues such as transgenderism and drag shows targeted at children. These performances are taking place in elementary schools, not nursing homes. The association with children is an unsettling aspect of the narrative for proponents of the transgender movement, challenging their ideological stances. The criticism of the movie is a pre-emptive strike against this very obvious association.
It's crazy that we're starting to get pushback against rescuing children from sex trafficking, but that's where we are. Woke ideology is a very demanding god.
Malinvestments and Fiat Money
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https://void.cat/d/RANsXLXj7pgZTchXBv5x6m.webp
Under a fiat monetary system, interest rates are manipulated by the Fed, ostensibly to reduce unemployment or inflation, but really lead to a lot of arbitrage for the elite which results in a lot of malinvestment. Malinvestment is a misallocation of resources, a direct result of false market signals driven by distorted interest rates. Bankers of all types, riding the wave of artificially cheap capital, funnel resources into risky, high-yield projects - ventures that would otherwise not pass the test of viability in a natural market setting.
In such an environment, yield does not carry an opportunity cost - a fundamental cornerstone for investment decisions in a sound monetary system. With the fiat system, as yield surfaces, it is inevitably driven downwards due to the creation of loans leading to increased leverage. Bankers essentially get to create money out of nothing to get more of that yield. The difference between the rate they get the loan and the rate of the yield is their profit and they do nothing to get this money. Thus, yield is pushed towards zero as fresh money is printed, feeding arbitrage opportunities for the rent-seeking middlemen.
Yield, however, isn't easy to find because everything that has yield has been driven toward zero already. That means that bankers have to find riskier and riskier assets. This results in a surplus of capital being channelled into unsustainable ventures, leading to asset bubbles. Because the upside on them is so high (with leverage, it can be as high as 100x) and the decent probability of bailout, the bankers pile in.
However, reality always catches up. When these precarious ventures underperform or fail, the bubble bursts, leading to bailouts of the bankers. Whatever happens the bankers always win.
Contrast this with a sound money system, where opportunity cost plays a crucial role. Every investment decision bears weight, driving thorough due diligence and cautious allocation of resources. The arbitrage opportunities are not based on leverage and instead based on savings, meaning that the middlemen don't make nearly as much. Malinvestments are less likely to occur in this environment, promoting better companies.
So remember, when yield seems too good to be true, and the opportunity cost seems suspiciously absent, there are usually hidden costs and risks. Fiat money can create illusions of wealth and prosperity, but in the end, it's the solid principles of sound money that lay the foundations for a robust economy. Oh, and the bankers will always win in a fiat system.
A lot of media publications saying negative things about Sound of Freedom and how it's somehow right wing when it's about child trafficking and the problems around that. There's nothing that makes me want to watch it more than that.
I watch maybe 1 movie in theaters a year. This is going to be my one.
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#Bitcoin Tech Talk #352
Cut out negative people. You can find people that give good feedback without being a jerk.
Self-esteem is a scam.
The concept itself is from the psychobabble of the 60s and 70s and it's no coincidence that it emerged during the final death throes of the gold-exchange standard.
When you are no longer pushing the frontier, you look inward and try to convince yourself that you're doing something useful when you aren't. It's delusion that's necessary for rent-seekers because deep down, they know they're leeches.
Don't focus on esteeming yourself when you don't deserve it. Do something worthy of esteem instead.
Social acceptance by others is your biggest impediment to doing what you think is right.
This is why courage is a virtue and all virtuous action requires it. Think about the pandemic and how few people were willing to swallow the party line whole.
Remember that you are largely the average of your 5 best friends. If they don't have courage, neither will you.