🦌🎈 Stagflation, an opportunity for growth?

The breakdown of old paradigms invites us to question their validity– and pursue alternatives that better serve our needs.

AuthorAuthor

Dave Birnbaum & Joe Lupo
July 07, 2022

In 1965, U.K. politician Iain Macleod coined the term "stagflation" to describe a rare economic climate where inflation is high, yet the economy does not grow.

The U.S. lived through stagflation in the 1970s. Today, it rears its ugly head again.

Under normal conditions, if equities lose value, bonds perform well, and vice versa. In a period of stagflation, equities and bonds both lose value at the same time. This creates chaos for the traditional 60/40 equity/bond portfolio, which usually provides investors with a strategy for low-risk, steady growth.

The key thing to understand in this moment is that, according to the original Keynesian theories that underpin our monetary policies, stagflation should be impossible.

As traditional models fail to deliver rational explanations, it's natural to wonder if there is a model that better explains the reality we see all around us.

The same mainstream finance opinion-makers that struggle to explain today's economic realities want us to think that bitcoin is a highly speculative investment.

In contrast, we at Coinbits, along with many other luminaries in bitcoin and economics, see bitcoin as a powerful savings tool.

Which raises the question: Can both be true at once?

NEWS

🎆 July 4th and the Declaration of Monetary Independence

Independence Day in the U.S. was an occasion for bitcoiners to reflect on monetary independence. The fiat money printer has shown itself incompatible with a nation conceived in liberty as it continually funds wars lacking public support, handouts to political cronies, discriminatory subsidies, and an unaccountable bureaucracy. Bitcoin offers the only viable alternative, which makes it the most important social and political movement of our age.

💀 Voyager files for bankruptcy

Voyager, a major crypto platform and lender, halted customer withdrawals and entered Chapter 11 bankruptcy. It had offered customers high interest payments in return for staking crypto, but it reportedly lent out customer funds while borrowing to meet immediate obligations. As a result, Voyager customers are getting a harsh lesson on the importance of self-custody, as their funds are now frozen, and possibly lost forever.

🚀 Supreme Court ruling is a win for bitcoin

The Supreme Court determined the EPA does not have the authority to increase the cost of fossil fuel operations. This decision is good for bitcoin because it will likely reduce regulatory risk to miners who use inexpensive energy sources.

🌧️ Major miner sells 80% of its bitcoin

Core Scientific reportedly sold nearly all of its bitcoin holdings last month to stay afloat. Publicly traded mining companies have been hit with a double-whammy of stock market and bitcoin declines.

BITCOIN ROUNDUP PODCAST

Insight from bitcoin thought leaders about what it’s like to use bitcoin every day in business, relationships, and life.

BITCOIN ADOPTION CONTINUES

Turkey turns to bitcoin following 78% inflation. Bitcoin's trading volume in the country surged to 40% as inflation reached a 24-year high.

El Salvador bought the dip by purchasing 80 more bitcoins last week.

Colombia President-Elect said he considers bitcoin "a superior cash technology" and believes Colombia should utilize its energy surplus to mine it.

Serbian Prince discusses bitcoin adoption in Arab countries. In a podcast appearance, he characterized bitcoin as the perfect money for countries whose religious beliefs oppose the concept of debt. The Prince said an Arab country "could adopt bitcoin a lot sooner than you think."

HOW BITCOIN WORKS

Learn one key idea about bitcoin each week. This week: Bitcoin is investing and saving at the same time.

Bitcoin changes how we think about risk.

Usually, saving and investing are viewed as different concepts. However, due to excessive money printing, cash itself has become a speculative investment.

As the supply of cash skyrockets, people are forced to hop out further on the risk curve to combat their loss of spending power. Instead of saving in their bank accounts, they invest in stocks, real estate, cryptocurrencies, and other assets.

This blurs the line between savings and investing. While bitcoin's finite supply makes it a strong savings tool, it may also be an excellent investment in this unique moment in history.

We've entered a transformational period: The hardest form of money ever invented is still in the process of becoming widely recognized as money. Since bitcoin was invented, it has continually undergone a process of price discovery, creating a highly lucrative investment opportunity.

So, in this unique historical period during which bitcoin is becoming money, it may be credibly viewed as a savings vehicle and an investment at the same time.

There is one caveat, though. The price we pay for this opportunity comes in the form of volatility.

While it's tempting to get caught up in short-term price action, bitcoiners instead take this occasion to stack, hold, and be patient while the world discovers the true value of bitcoin.

COIN CHECK

How are new bitcoins created?

  1. Bitcoin banks create them when they issue new loans

  2. Bitcoin developers compile them when they run Bitcoin Core

  3. Miners discover and extract them by "data mining" large datasets

  4. Miners expend energy in hopes of winning a block reward

Check your answer at the end of the page.

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Answer: 4. Miners expend energy in hopes of winning a block reward