Post
Topic
Board Economics
Re: Have people become wealthy before, like with bitcoin?
by
Kluge
on 13/06/2014, 04:15:51 UTC
So what happens to the world if millions of millionaires are created all of a sudden?

A million millionaires would require purchase of 1 trillion dollars worth of bitcoin.  How is that going to happen?

It would be possible but it would be highly unlikely, at least anytime in the near future (assuming lack of hyperinflation).
Inflation acts a lot like compound interest. M2 is increasing around 7% YoY (official Fed numbers, not SS). Assuming this keeps up for 10 years, ~$2m at that time is the equivalent to $1m now. Basically, everything should double in price each decade at current rates even though that's somehow not considered hyperinflation. CPI is also lagging waaaaay behind M2 right now, but needs to be factored in eventually (over just the past five years, CPI's lagged around 25% [nominal%] behind M2), so I'd guess the consumer-realized inflation over this theoretical decade would be closer to 10%, which'd make ~$2.6m in 10 years the equiv. of $1m today. It starts, I think, if the Fed returns to sanity and starts valuing dollars with an interest rate of significance.

BTC's immune to this and can generate returns on top of it. If you can snag a conservative 10% annual return on it by, say, offering interest rate swaps on BFX, your fiat-value holdings would increase 20% annually. -And we're in the calm right now. Everyone's talking about the fear index being extremely low in the US, similar to the pre-08 crash. We didn't have BTC to buy back then. I wouldn't dare speculate the value increase a stronger crash would bring, but even 20% over 10 years on $1m comes to >$38m. Meanwhile, your family and friends are paying current credit card rates on their $500,000 ARMs while dealing with a declining GDP, house prices dropping like stones, not-hyper-but-may's-well-be-inflation, and austerity measures trying to reign in inflation and runaway national debt/GDP.

There's no doubt in my mind that $25k in BTC today is worth $1m in ten years (though that $1m is only worth ~$385k in today's dollars). .... Well, okay, there's some doubt. It's an arm-chair, very fear-based theory based on current trends continuing and probably some bad math. Grin