Compared to the appreciation of worldwide real estate, the market value of crypto is only a drop in the ocean. And countless people got unbelievable rich due to rising prices and "crowding-out" in cities without creating any value for society at all (in the opposite, making life harder for everybody struggling to keep up with their rent).
And nobody so far managed to explain convincingly, in which ways investments in (existing, residential, not for self-use) real estate creates any value. People don't by these assets b/c they provide better service or can run their properties more efficiently than someone else. They buy these assets b/c its risk-free return on the backs of tenants who need a place to live. In this aspect, Real Estate investors are arguably way worse than Crypte gamblers. But I agree that the rent-seeking behavior we see in more and more parts of our economy and our society is indeed corrosive in the longterm....
Not sure I understand your reasoning there.
> You're speculating on a digital collectible.
And if you buy properties not for self-use you're speculating on a physical collectible. So?
If you buy properties not for self use, you can hold them indefinitely and have an income stream. If you buy a share of a company and hold it indefinitely you can have an income stream. There is no equivalent in cryptocurrencies. You buy it and hope you can sell at a later date for a higher price.
Investing versus speculation.
Investing in a currency/cash is speculation in the sense that currency itself does not produce anything but its value can go up and down. Investing in a currency is like investing in roulette in casino, you may win and you may lose.
So, keeping your money in bank for ~0% interest really is gambling/speculation too.
But, from the point of view of the individual investor it does not matter if you are "investing" or "speculating". In both cases you may win and you may lose.
This is why it's being compared to crypto currency. The parent comment I was responding to said it's not a fair comparison but "it's worth what someone is willing to pay for it" describes both.
Shelter is literally third on the list of human needs after water and food. Make something desirable and people will leave their previous (possibly decent) place behind to move in. I'm not sure how anyone can say real estate doesn't create value just because they are frustrated that some people make money off of real estate.
GPs point is that owning land is not creating value. It is, however, very profitable.
In both cases the land would become a liability that you constantly have to take care of instead of being an "investment".
Productive work like building on top of land should be rewarded, waiting for a train station to be built in your neighborhood is not productive work that should be rewarded.
Pretty much every economist thinks that the work <-> reward relationship should be as tight as possible. However, most of them don't think of anything other than cutting taxes and strangely enough they insist on being able to take advantage of negative externalities (CO2 or illegal waste disposal in general).
And yes it does not stop at LVT which encourages useful development and discourages speculation and keeping land/homes empty. It extends to anywhere where society/the public/the commons is not being adequately compensated by private interests for the benefits they take. Goes from natural resources to pollution and paying for the waste processing of the products you produce (no more saving 5c by using a plastic bottle which costs the public 10c to dispose of).
That’s not the impression I get. They seem to have all kinds of broad beliefs.
The problem isn't that speculators are evil people but rather that the "arbitrage" they are doing is fueled by regressive housing policies. Increasing the efficiency in the housing market exposes the fundamental housing problem. After all, it can't just be that speculators are snapping up properties, there must be buyers that are willing to buy properties from the speculators, otherwise the speculators lose money. Those buyers don't even need to think that the house is overpriced, the house could genuinely be a good deal for them.
> If you complain you're just jealous
Everytime.
That wasn't anyone's argument, I think you hallucinated all of that. The person I replied to said real estate has no value.
> > If you complain you're just jealous > Everytime.
I did not say this, you hallucinated that too.
So yes, I agree that real estate ownership is not ‘value creation’ in the modern world. It’s speculation of a finite resource, but unlike Bitcoin that resource is essential to livelihood
Where were you in 2008?
I guess this is the thing that people are having a hard time coming to terms with - we no longer live in the real world.
All of these surveillance-advertising tech giants, all of these financial instruments, all of these media-induced bad feelings and ideological trends, everything that defines our contemporary era - none if it is real.
If it all simply stopped, wiped out from a solar flare - for most of us here, nothing "real" would change. We'd all sit for a moment looking at dead black rectangles, then we'd have to go and find something else to do. My bet is that we'd all be happier for it.
Yeah, except for those who'd suddenly be without electronic medical assistance. There are definite downsides to the digital era, but to act as if there's been no benefit is laughable at best and dangerously ignorant of the past at worst.
People adapt to whatever the new norm is, and sort of fall back to whatever their bio-chemical baseline is. When things are in the process of getting worse or better, it'll push them one way or another. But once it settles again, so too do they.
The point being that happiness generally has more to do with internal bio-chemistry than whatever the new norm is.
This, and the parent comment:
> If you’re planning to be alive in 20 years, you’re better off making sure you have a work ethic and skills that generate value, than obsessing over any sort of wealth-hoarding instrument at all, because it is the only true protection against change.
You see, the problem is that they both read like correct statements, which is rather worrying.
Savings pay no interest, manual labor doesn't scale, but rent seeking and financial games get many people riches in no time.
What are the incentives in this kind of a system, and where are the safe harbors for storing value? And if you can't in value creation, your safest bet may be to gamble.
There's a wealth of uninformed investors and they're all hearing stories about crypto millionaires and how much it went up and FOMO narratives about it.
People haven't been transacting in crypto basically at all - it's not even a blip in the popular discussion about it, except as a flimsy justification for why its value is not tulip-mania.
The only thing in effect is the ultimate truth of investing: the market can stay irrational a lot longer then you can stay solvent. No one was "surprised" when the housing bubble collapsed in 2008, and no one will be "surprised" when crypto collapses, but as we saw in 2008 when the returns get high enough even the "sensible" investors can't justify to their stockholders/board why they're not jumping in on the apparent "easy" money.
No, that isn't just it. Like other assets, there can be multiple narratives that explain cryptocurrencies rising prices.
Yes, pure speculation is one of them. But another reason for some is deliberately shifting wealth from an asset ($USD, euro, bolivar, etc) they believe is deteriorating.
E.g. a multi-billionaire like Ray Dalio is already rich. He's the one saying "cash is trash" because he like many others see the M2 money supply growing very rapidly which erodes future purchasing power. (The "cash is trash" also means not holding US Treasury government bonds because of inflation.)
Yes, the Fed + US Govt can have all sorts of rationale to justify $2 trillion stimulus checks and printing billions to buy corporate bonds (Home Depot bonds), bail out banks, etc ... but economic actors can also counteract the money supply expansion by taking steps to retain future purchasing power. E.g. Shift wealth into real estate, tech stocks, gold, bitcoin, etc.
That fact that nobody uses bitcoin to pay for Starbucks coffee is irrelevant to the wealth holders looking for alternatives away from $USD liquid assets as long term holdings.
This is not new information, this is literally by design as a product of the Fed's 2% inflation target.
US treasuries have always been a last resort investment, because the return sucks but they're as close to risk free as anything ever gets - what's happened recently is demand for them has been so incredibly high (because better investments are so rare) that the US has at various points been able to issue them with negative interest rates - taking a loss has been less of a loss then just holding currency and no better options existed.
Crypto has a narrative being pushed to increase the value of crypto, but "the end if nigh" doomsayers definitely don't act like they think it's actually coming - otherwise they'd be diversified into Swedish gold depositories and basically planning to move country. Because come whatever "collapse" they think is going to happen...the power company is still going to want to be paid in USD.
I'm not saying that. His recent "cash is trash" was talking about staying away from investments like US government bonds because of negative yields and money printing: https://www.youtube.com/watch?v=tZyWVxGXPHo&t=24s
(Because in the past, reasonable people did believe that buying and holding US Treasuries was a semi-decent way of investing. To be clear, we're not talking about just leaving pure cash in a $250k FDIC-insure bank savings account.)
>the US has at various points been able to issue them with negative interest rates - taking a loss has been less of a loss then just holding currency and no better options existed.
And this is the part I was responding to in your first comment. It's not just speculators. Another narrative for crypto's rising price is that some investors believe a better option now exists for preserving purchasing power. This is the defensive financial perspective that can simultaneously exist with other market participants who are only in bitcoin for the casino gambling speculation.
Yes, some people buy real estate and just leave the houses empty for "speculation". But some others also buy houses to live in them and many buyers bid up prices with competing offers because of desirable location closer to the office. If there can be 2 or more different narratives for rising real estate prices, why can't there be multiple narratives to explain crypto?
The real estate comparison is also irrelevant: unlike any other asset, cryptocurrency doesn't do anything useful.
Holding more cash than you need for transaction purposes is inefficient, regardless of the inflation rate. This is because what makes holding cash a bad idea is not the fact that it depreciates over time (in inflationary circumstances), but the fact that holding cash has an opportunity cost, and that opportunity cost is unaffected by inflation.
As I have said in previous comments, the Fed has been unable to erode future purchasing power, because the excess savings rate increases to compensate for the increase in the money supply.
> (The "cash is trash" also means not holding US Treasury government bonds because of inflation.)
But the entire problem is that the newly printed money ends up in exactly those places. Negative interest rates are impossible, because people can just get cash or rather, they get cash equivalents, namely treasury bonds. The Chinese government is using excess dollars from its trade surplus to purchase treasury bonds. The money put into treasury bonds can only be tapped into by issuing new debt, thus excess savings (uninvested savings) are being created. The government has to employ people on behalf of the Chinese investors otherwise the end result is unemployment because the household savings rate has to go down which means spending more than you earn.
>Yes, the Fed + US Govt can have all sorts of rationale to justify $2 trillion stimulus checks and printing billions to buy corporate bonds (Home Depot bonds), bail out banks, etc ... but economic actors can also counteract the money supply expansion by taking steps to retain future purchasing power. E.g. Shift wealth into real estate, tech stocks, gold, bitcoin, etc.
The problem with this strategy is that it is built on the existence of excess savings. If the inflation rate were to go up, which eats away at corporate savings, companies would be forced to find viable investments and thus generate jobs. The existence of these investments would allow the Fed to raise the interest rates again and excess savings would flood out of treasury bonds and other cash equivalents into regular bank accounts and corporate bonds again. That means stocks, real estate and cryptocurrencies would go down, precisely because inflation is going up i.e. because your future purchasing power is eroding.
Crypto is a 'get rich quick' speculative behaviour, driven by multiple narratives as you say, but those are effectively just narratives used to validate the participation.
Amway's 'narrative' was that you could 'help' your neighbours by selling them cleaning products.
But really it was a pyramid scheme.
There are some questions around the Fed and monetary dilution etc, but BTC is not the answer.
And of course currency was never meant to be a 'long term holding'.
Literally by design, we build at minimum a tiny bit of dilution into our currency, that's 'part of the plan' so don't hold it, hold something else.
Exactly. When I did a deep dive on crypto currency a few years ago I wondered, what can the transaction rate be for proof of work schemes. Turned out it was less than a dozen per second across an entire network. I don’t think this has changed (https://bitcoinvisuals.com/chain-tx-day). How many transactions does Visa alone do?
I really don't understand how it can be secure and haven't tried to read more into it due to skepticism about cryptocurrency generally, but are non proof of work schemes more viable?
Initially it was supposed to be money, and so there was a lot of effort to drive adoption. You could buy games on Steam for BTC.
But then a thing happened: the value exploded, and new people started hearing about this amazing new asset growing in value. Crypto became not a coin, but a thing to hoard and sit on, waiting for the price to get higher still.
In this situation, using it as a money is stupid. That pizza somebody bought for 10000 BTC was a terrible loss to the buyer -- they could sell the 100BTC for $634 million today. They shouldn't have bought a pizza, they should have just kept their money in a wallet and done nothing at all with it for a decade.
Given that usage pattern, ability to process transactions doesn't matter. The ideal is one buy at the bottom, and one sell at the peak, possibly years apart. Fees don't really matter, because the transaction is enormous. Paying $5 to move $10 is ridiculous. Paying $5 to move $634 million is a rounding error.
And since Bitcoin was made to be deflationary this pattern of usage is more or less guaranteed. Using it as money is always silly because any newcomers to BTC increase demand and therefore the competition for the supply. And over time, some BTC gets lost, which adds to that as well.
The last 20 years were marked by the corporate savings rate increasing, meaning companies are not investing. This could be related to China and various other factors but it is clear that the Fed and the government has done enough to help corporations, they are doing so extremely well that they don't need any more help. The mistake from the start was that the government didn't help citizens enough. It didn't create enough jobs or it didn't return those excess corporate savings to the population forcibly. The reason why wealth redistribution is popular is that excess savings are zero sum, for the corporate savings rate to go up, either total investment has to go up (it hasn't) or the household savings rate has to go down. There is a similar dynamic with rich vs poor.
The corrosion you speak of doesn't exist. The system is way too stable, far more stable than should be possible, that's the real problem. Your dollars, by that I mean the dollars corporations and therefore the wealthy own, aren't losing value fast enough.
Since when was it ever coupled?
Whether it works or not is to be seen. You can look at both Biden and Trump as the end of the arc of neoliberalism that began with Reagan. The same broad moves seem to be happening in other peer nations.
a 2% "tax", on retail sales, at best.
b2b, c2c, and large dollar b2c generally don't go through visa.
calling it a "tax" is nauseating. you get something from visa, and you can choose not use them, if you'd like. it's the rare place that won't take at least a few other alternative payments, including cash.
it's a rarer tax yet that you can choose not to pay.
Yes, and when you pay with an alternative, that’s when you get hit with the 2% credit card tax. Because you and the credit card user both pay the same price, but the merchant has to raise prices by 2% to cover fees caused by the latter. The credit card user is reimbursed for the fees they created via cash-back programs, while the cash user has to just swallow them.
Crypto as an asset class is only working the way it is because there is a separation between perceived value and net present value. The same way fundamentalists value companies by expected earnings and angel investors look at the TAM, crypto is blowing up in large part because people are starting to believe in the story that crypto is pinned to.
At the end of the day, you probably should have some skills to fall back on and not depend on an asset increasing in value, but if you have enough assets, that is your skill.
That's grim! It's not my job in life.
This suffers from a fundamental problem. If the creation of value is the ultimate good, and we are obligated to maximize that good, we could do a lot better job at it than smiling some dopamine into our neighbor as you suggest. We’re all irredeemably evil for not doing so.
Nurses create a lot of value, especially during a pandemic, but they receive only a tiny part of it. Competition can force you to give most of the value you create to your customers.
Everything that was valuable in 2001 is still of about the same value now. But the mechanics who didn't want to diagnose electronics and the accountants who refused to learn computers and the programmers who only wanna write php have seen their skills reduced in value because they did not maintain currency.
Being responsible for the work output of other people and doing your job somewhere unpleasant or dangerous pretty much always increases your pay.
I've been regularly asked by my employer to change role to help some other part of the business. Whether it was switching from mobile to server, server to front end web, or switching frameworks / tools within those domains, I always made the switch.
The problem is that now I'm a jack of all trades, and a master of none.
“I’m a master generlized problem solving machine, how can I be of service?”
If you're the jack of all trades guy, you'll always be asked to cleanup, or take care of small feature requests. When the company needs the big guns for a mission critical feature, you will never be called.
This is an important point for people to realize. There's risks at specializing for sure, but there's also a lot of risk to being a jack of all trade.
Granted i climbed the ladder in mid size non-hot companies so may not be applicable.
Im currently a consultant in my trade and I appear to sell this ONE thing but in every case i end up solving problems as a generilist.
Is there a chance that you can claim that you are already an expert in one the things you do? sometimes other people’s bar for expertise is lower than yours.
It might also be considered a "soft skill", but there are some communication skills I think are really valuable in a technical space; like knowing which diagram to make which will most effectively summarize the complexity of your system and is appropriate for your audience. The tools for constructing that drawing will change, but the activity of sketching for communication isn't going anywhere.
My evidence is that we still have a lot of legacy and technical debt around, and it's likely to still be there in 20 years, so even if you don't work on the cutting edge (which may now have stratospheric requirements for entry like a PhD and Github projects and 8 rounds of interviews), you can still take legacy work.
Security and defense (physical and IT/software) will also likely be around forever.
Maybe the demand will increase fast enough to keep salaries from dropping in real terms.
I don't think there's any non-tautological way in which this can be simultaneously true and not an oppressive imposition by capitalism.
Put another way, I'll worry about a million people not "adding value" when there ceases to exist individuals who have captured enough wealth to support a million people. The latter is the real problem.
I have no such thing. I am debt free and live the way I want. I live alone. I have no children or spouse to support. I owe nothing to anybody. I don't owe anyone an explanation. Maybe the opposing views come from people who believe they do, but in no way is it universal.
Your point from the perspective of wealth inequality is more elegant. In my case I am wealthy enough to support roughly one person: me.
If I want or need more resources, I have levers I can pull to obtain them. But don't tell me I have a "duty" to add value to the economy.
I won't name names, but I do know people who have simply not filed nor paid taxes in a decade. They even got stimulus checks.
Who is going to create all the value consumed by rent seekers, financial engineers, thieves, scammers, corrupt or bloated government? People who create and provide more value than they consume.
I don't think this is true. This is one of these work ethic corollaries that helped build wealthy societies when productivity was proportional to people's effort. But it seems to grow more obsolete by the day.
Without capitalism, we could regress to the most primitive version of civilization and still require contribution to the tribe. The alternative is to go off on your own (and at that point, there are no "people around you" to help). Less primitive alternatives, as different political-economic systems, usually still require you to contribute through taxation.
As opposed to rent, property speculation, the stock market, etc?
At this point, I can't imagine financial regulators doing anything to stop it.
I have a hard time imagining what actual tangible disasters will happen if crypto currencies lose their value overnight besides some speculators losing money and some mining centers closing.
From 2007 to 2008, for example, global wealth declined about ~10% [1].
There's not much room left for central banks before we officially enter banana town. If cyrpto implodes, it could easily be worse than the financial crisis - which means, regulators have an interest in it NOT imploding.
[1] https://www.credit-suisse.com/about-us/en/reports-research/g...
As an example, I have 5-20k in crypto assets on any given day. My wife and I are also shopping for a new couch. If my crypto assets evaporated we would not be shopping for a new couch, nor would we be going out for dinner tonight, despite the fact that I am not spending down crypto assets to fund either of those purchases. The psychology behind it is that people adjust to a certain amount of "savings" and will adjust purchasing to get back to that level if their savings changes quickly and substantially.
https://www.barrons.com/articles/a-new-crypto-etf-is-here-yo...
Plenty of people have also lost money on crypto and oil speculation.
Explain to me the value of Daddy's Money and Landlords. No, seriously, tell me about it.
This is also why “crypto” (the asset class, not technology) is so corrosive, because it makes people who have done approximately nothing to create value in society, but who’ve enjoyed a massive boost in monetary value, think they’ve “won” or accomplished something real. This doesn’t work long term, and will eventually collapse on itself like all false religions.
If you’re planning to be alive in 20 years, you’re better off making sure you have a work ethic and skills that generate value, than obsessing over any sort of wealth-hoarding instrument at all, because it is the only true protection against change.