If you read my previous post you will learn what problem bitcoin is trying to solve. But there is another thing that governments love to talk about when anyone mentions bitcoin or cryptocurrencies. To be clear on the difference between bitcoin and cryptocurrencies read this. The thing Governments love to bring up is a Central Bank Digital Currency or a CBDC for short.
What is a CBDC and what benefit does it have? The most important thing to know about a CBDC is it is 100% Government controlled, just like money today. It has no limit on how much of it there can be. Because of this they can create more new CBDC everyday and reduce the value of the ones you own. This is inflation and that is the problem that bitcoin solves by having a limit that is 21 million bitcoin ever. The fact that CBDC does not have a limit, means it is not a substitute for bitcoin and you should not be fooled by anyone on tv, or anywhere, saying a CBDC can replace bitcoin and now we don’t need bitcoin.
One thing a CBDC may do is either make settlements at the store faster or international settlements faster. Today international settlements usually go through a company like Western Union. It is very expensive to send money out of the country. Visa and Mastercard process most payments via their credit system and charge between 1.5%-4% to the businesses using their network. A CBDC could remove the need for Visa and Mastercard and for Western Union. Basically it could remove any intermediaries as a CBDC would be infinitely and immediately traceable. While to me all our money seems digital and traceable anyway, a CBDC would make it even more easily so. There may be a push from a government to use it as a form of punishment or denial of purchase for certain things which would be another option that opens up even more with the abilities of a CBDC. For example the government could say that buying meat is bad or buying more than 1000g/ month of meat is illegal and could limit your CBDC credit card to purchases of meat, or anything they wanted.
The main point I wanted to help people understand with that post is that a CBDC certainly does not do anything that would replace bitcoin or reduce inflation and could even potentially be used to control purchases by individuals.
To understand the reason behind why some people (like me) buy bitcoin you need to think about the problem we think bitcoin is trying to solve. When you use a government currency, like USD, the Government can effectively steal value from your bank account via money printing. How does this work?
To understand that you need to understand what the point of money is. Money is just a measurement of the value of something. We have all been trained that the value of things goes up over time because the price goes up over time. But just because a house rises in value by $100k over 5 years, does not mean its intrinsic value has risen. It’s the same house providing the same amount of shelter. It really shouldn’t gain value. What has really happened is the money, used to measure the value of the house, has lost value! It’d be like if you used a tape measure with 12 inches to 1 foot to measure a board and then you changed the tape measure to use 13 inches to 1 foot, where the foot is still the same length but each inch is smaller so you have “more inches”. But is the 1 foot board actually any more useful or longer if you use 13 shorter inches or 12 inches to 1 foot? No. This is how the government confuses us. They print more money and then our houses “go up” in value, but it’s because the measuring stick is changing. Why does the government do this though? They do it because that’s how they pay for the $1 trillion to $4 trillion budget deficit the Government has each year.
In WW1, while we were on the gold standard (every dollar was supposedly able to be converted back to gold at a bank), the government had to sell “war bonds” to pay for the war. This at least provided a little link between Americans turning over money for what they thought was a just cause. If people didn’t buy the bonds the government couldn’t pay for the war.
Since the US dollar was removed from the gold standard in 1971, the Government has had no restrictions on how much money they can print. The US government is able to fund any war ad infinitum via money printing. When this new money is printed the government uses it to buy good (ships, tanks, steel, sometimes roads, etc). Since they have unlimited purchasing power they can keep printing money until they can pay for what they need. Meanwhile, the average person might be unable to buy a new truck because the price of steel was pushed up by the government demanding 200 billion tons of steel for planes and warships.
When thinking about if you should buy bitcoin this is the fundamental issue you need to consider, how is my purchasing power being diluted via inflation?
Since bitcoin has a limited supply (21 million) as more US dollars are printed a single bitcoin’s value, measured in USD, or any other currency, will continue to go up.
This is due to those countries experiencing extremely high levels of inflation 50%-100% a year. I can’t even imagine what that would be like to live in. At 100% inflation, or even 50% you need a raise every paycheck! Your money would lose 1% of its value every week at 50% inflation.
While it seems like high inflation only happens in “far away” places with bad Governments that’s not the case. It has happened thousands of times in history
We, every person in the world, is in a fight with their own government to keep as much of the value they create as they can. The government explicitly taxes you, which we can debate but at least it is obvious. But the government also stealthy steals value from your bank account or savings via inflation and money printing that you have no control over.
Because in the USA inflation has been a relatively small issue (1%-3%) for most of the last 25 years most people in the USA haven’t thought about wealth preservation much. Now that we’ve seen 10% inflation it’s new to people and they aren’t sure how to protect their purchasing power! A bond paying 5% is really losing 5% a year to inflation if inflation is 10%.
I know bitcoin is volatile but the inherent properties of it (ultimate scarcity, 21 million total coins ever), make it the best chance we have ever had to get out of the system and protect our wealth. If bitcoin doesn’t succeed then we will have lost every opportunity to preserve value!
I think that is a cause worth supporting, by buying and holding Bitcoin. And you’re not just supporting it, but you’re protecting your wealth!
I have written politicians and blog posts trying to encourage people to understand this while bitcoin is relatively cheap ($30k). I know once it is $50k or $100k more people will have Fear Of Missing Out and will buy in which could happen in the next year or 2. It’s best to learn about bitcoin when it’s price isn’t rising like crazy and you aren’t having FOMO.
If you’ve wondered this last year or 2 how to avoid losing value to inflation I’d enjoy talking to you more about bitcoin. I only recommend 1% of your net worth in it to start. So if you have $100,000 of net worth you can just buy $1,000 worth of bitcoin. That’s a small risk to be part of a monetary revolution that just might pay off.
I try to occasionally share my thoughts with politicians that represent me. Who knows how much they take heed of what we say? We all have our own pet projects that interest us and perhaps these don’t interest our politicians. I also try to share my thoughts with others through this blog and in person, in hopes that it will influence them to also come around to my way of thinking. That all being said, below is an email I recently sent to an Iowa state representative about Bitcoin. The history is this person is a Democrat. We have had a couple previous emails about Bitcoin and they were concerned about the environmental impacts of Bitcoin.
Dear Representative –
Quick thoughts for the night. I really hope you will continue to learn about bitcoin. It is a very important tool for protecting individuals’ wealth in the future. It is also helping people in developing countries today.
Perhaps you’ve seen this article sent to the US Congress by Human Rights leaders asking them to learn about how bitcoin is helping the poorest in the world.
The other point about bitcoin mining specifically is it helps reduce emissions. It does not add emissions. It uses the cheapest waste power. Most miners have load sharing agreements to turn off when excess power is needed. This is good for grid stability and for emissions reduction.
There is a bitcoin mining company in town partnering with Cedar Falls Utilities. I urge you to talk to both CFU and the miner about their agreement.
Finally, the US military paid for Jason Lowery to attend MIT for 2 years to learn about bitcoin and its national security implications. He released his thesis on this and I have read it and you can too.
Of note, I voted for Joe Biden in 2020 as we could not have another Trump. I have already decided I will not be voting for Biden again as he has proposed a 30% tax on bitcoin mining. This shows me he has no understanding of bitcoin. Or he knows it’s threatening to the USD and the government is fighting tooth and nail to ban it. Either way, I prefer freedom. I do not like the government devaluing my money every day with the $1T +deficit. I didn’t like it under, George Bush, under Obama, under Trump or under bBiden.
I hope others will consider writing to their local politicians to inform them of the good that Bitcoin does. They also need to know that they will not be getting votes if they are against something we are for. This applies to everything. It would be good for more people to write their politicians on all topics. Let this be an inspiration to you. If you want you could even copy this one and send it to your local politician.
I had a short conversation with someone about EV’s (electric vehicles) who admitted that they didn’t know much about the current adoption/industry. I took it upon myself to gather a few highlights from 2022 as well as some info about exciting near term developments for 2023. Below are those articles!
A short deviation from all the EV stuff that will follow.
Porsche begins production of ‘e-fuel’ that could provide gas alternative amid EV push. Porsche said Tuesday that a pilot plant in Chile started production of the alternative fuel, as it aims to produce millions of gallons by mid-decade.
Tesla Cybertruck – Many Tesla fans are closely watching as tooling rolls into the Texas production plant, getting ready for Cybertruck production later in 2023!
Tesla takes delivery of army of robots to build Cybertruck
Vingroup Joint Stock Company is the largest conglomerate of Vietnam,focusing on technology, industry, real estate development, retail, and services ranging from healthcare to hospitality. The company was founded by property developer and entrepreneur Phạm Nhật Vượng.
It’s hard to tell how many cars Vinfast has sold in 2022. It sounds like only a few thousand. But hopefully they will start producing more in 2023! More EV companies the better.
The company said it sold 15,617 F150 Lightning EV pickups in 2022. Plans to sell many more in 2023.
Rivian
On a full-year 2022 basis, Rivian produced 24,337 electric vehicles and delivered 20,332 to customers. Rivian is a new EV only car (currently only making Trucks and SUV’s) company.
In 2022, 20,511 Volkswagen ID.4 (small electric sedan) were sold in the US, which is 22.5 percent more than in 2021 (16,742) and 6.8 percent of the brand’s total volume. Cumulatively, more than 37,000 ID.4 were delivered to customers
United states post office – Personally I think this is a great application for EV’s. standard daily route length. Can recharge at night. Should save USPS a lot of money.
o Postal Service anticipates increasing the quantity of purpose-built Next Generation Delivery Vehicles (NGDV) to a minimum of 60,000 of which at least 45,000 will be battery electric by 2028. NGDV acquisitions delivered in 2026 and thereafter expected to be 100% electric.
o Postal Service expects to purchase an additional 21,000 battery electric delivery vehicles through 2028, representing a mix of commercial-off-the-shelf (COTS) vehicles. Acquisitions delivered in 2026 through 2028 expected to be 100% electric.
Chinese EV companies – NIO, Xpeng, Li auto – are the 3 new big upcoming Chinese EV companies.
NIO – . NIO delivered 122,486 vehicles in 2022 in total, increasing by 34.0% year-over-year. Cumulative deliveries of NIO vehicles reached 289,556 as of December 31, 2022.
Li Auto – They are the 3rd hot Chinese EV car company. Honestly I don’t know much about them but apparently they delivered just slightly more EV’s than Nio or Xpeng in 2022 (Li Auto – 133,000 deliveries in 2022. See above link.
BYD – BYD auto is a legacy car company that has delivered a lot of hybrids in china.They sell more plug in hybrids than pure EV’s. but still a good company/force in EV world.
In 2022, BYD sold more than 1.85 million plug-in electric cars, more than tripling its 2021 result of 593,745. This makes the company the world’s largest manufacturer of rechargeable cars, although, in the case of all-electric cars, Tesla still has a significant edge (over 1.3 million deliveries).
The reason for the book is because they are very long and in depth articles such that many people may not read them on the internet. But if you want to, they are free there.
Living in the USA it’s very easy to take a US centric view of the world. That view involves a relatively stable currency, at least for the last 40 years. The last time we really saw high inflation was 1982 when it was 6% and the few years before that. Since then it’s been under 5% and some years as low as 1%. Many other countries have not had this privilege.
In the USA we also have a pretty robust stock market, averaging 9%/year in gains and usually about 6% over inflation.
Because many people are unable to trust their own currency they try to trust the USD to maintain their local purchasing power. This is not always practical as trying to transact in a foreign currency can cause a lot of confusion. Change may also not be available.
Two countries that I highlight below have had very high inflation over the last year (and years), relative to the USD. Those countries being Argentina and Haiti. They have lost 25% vs USD for Argentina Peso and 27% for the Hatian Gourde respectively.
Many people complain about Bitcoin’s volatility. For example, if you had bought BTC in the USA 1 year ago you would be down 20% but since these other countries have such high inflation if people in Argentina and Haiti had held BTC instead of their local currency they would have maintained their purchasing power instead of losing 25%.
Even the Euro, which is a relatively stable currency, has only lost 7% relative to BTC over the last year, whereas the USD has lost 20% over the last year. Bitcoin’s performance over the last year relative the the dollar, the strongest currency, which is not widely available, really only highlights the benefits of the dollar being the world reserve currency.
Compared to many other assets, bitcoin has performed very well, even when measured against the Euro!
This is what is meant when saying we should “Check our Financial Privilege”. A real fear is that perhaps the USA will fall victim to extreme inflation in the future.
While stocks have historically been an inflation hedge and will likely continue to be the best hedge, the USD as the world reserve currency may have completed its time. The world reserve currency has changed many times in the past. Before WW2 the British Pound was the world reserve currency. Before that it was the Dutch Guilder, which doesn’t exist anymore.
In conclusion, when considering if “bitcoin is good for me” you should try to expand your scope a little. While you may not realize the problem of inflation, even low inflation, as it’s been ever present, many people around the world have seen the damage inflation has done and see the potential that bitcoin may provide to hedge against inflation.
USD to BTC – May 22, 2021 – $37,59610 May 22, 2022 – $29,985.50 20.25% decrease
Hatian Gourde to BTC – May 22, 2021 – 3,318,494.21 May 22, 2022 – 3,361,197.64 1.29% increase
Argentine Peso to BTC – May 22, 2021 – 3,541,519.54 May 22, 2022 – 3,549,033.05 0.21% increase
Hatian Gourde to USD May 22, 2021 – 88.27 May 22, 2022 – 112.09 27% increase
Argentine Peso to USD May 22, 2021 – 94.20 May 22, 2022 – 118.47 25.7% increase
Euro to USD May 22, 2021 – $1.22 May 22, 2022 – $1.06 13.1% decrease
Euro to BTC May 22, 2021 – 30,863.91 May 22, 2022 – 28,415.65 7.93% decrease
I’ve been thinking about bitcoin off and on since approximately 2017. More intensely since about Dec 2020. Here is a short distillation of my thoughts.
My main interest in bitcoin is not bitcoin itself but its characteristics of being “hard” currency. Currency that can not be debased or inflated for use by a central authority. Beyond that, bitcoin itself has very few special properties. Any economic research that is interested in sound monetary policy applies to bitcoin, of which there has been much.
But Bitcoin does have a few key properties that give it great benefits as a sound monetary unit.
Bitcoin is much better than gold, the historical hard currency, as a hard currency.
It has 3 key features.
One. It can be purchased or transacted from your home, or anywhere else with internet access, to anywhere else with internet access. I can send bitcoin to anyone in China, Haiti or Argentina, or next door.
Two. It can be split into much smaller pieces than gold. The smallest unit of a bitcoin is a Satoshi. With $1 you can buy ~ 2100 satoshis today (when 1 full bitcoin is worth $~$46,000) whereas transacting in gold in small useful units is basically impossible. You cannot really buy $1 worth of gold or even $100. 1 oz of gold is nearly $1k. 1 gram of gold is still ~ $60. That is not a useful transaction unit at all.
The third is that bitcoin has a hard fixed amount that will ever be created. Gold is not truly scarce in the universe. While mining gold is difficult and allows a relatively fixed amount. There is still growth in the total gold supply each year and potential to find new deposits at any time or get a massive amount from asteroids in space. In contrast, Bitcoin is capped at 21 million bitcoins that will ever exist, providing ultimate scarcity.
For a primer on bitcoin, I recommend the Fidelity Paper “Bitcoin First”.
“Sound money not only imposes fiscal discipline upon government, impeding reckless federal spending and imprudent warfare, but it also provides a stable unit of account, store of value, and medium of exchange for entrepreneurs, businesses, and individuals.”
If you have any interest in talking about bitcoin let me know!
The book focuses on the impacts of climate change in the future. Near the start of the book there is a heatwave that strikes India harder than the rest of the world. 20 million people die. This makes me think of the link of this event compared to the current wave of covid sweeping through India and what actions they may take as a result?
In the book there are various attacks by environmental terrorist style groups to try to force companies and individuals to reduce their carbon footprint.
While I don’t condone that type of violence, much of history is driven by violence, and usually the history books are written by the winners, who write their violence off as justified.
Another development in “The Ministry for the Future: A Novel” is the carbon coin. This makes me think of a paper written by ARK investment group and Square (the company). It is a very short read (5 pages).
“Bitcoin is Key to an Abundant, Clean Energy Future In this memo, we aim to explain how the Bitcoin network functions as a unique energy buyer that could enable society to deploy substantially more solar and wind generation capacity. This deployment, along with energy storage, aims to facilitate the transition to a cleaner and more resilient electricity grid. We believe that the energy asset owners of today can become the essential bitcoin miners of tomorrow. “ – Link
The implication is that bitcoin can create an incentive to develop clean energy as long as you can incorporate bitcoin mining as a secondary income source for the green energy when it is not being used by the grid. This would allow a buildup of excess energy supply in the grid that would be used by customers as needed but alternatively used to mine bitcoin, and thus create profit, when there is excess.
I am not aware of this happening yet. Although there are plenty of grid scale battery storage solutions that are replacing “peaker” power plants and providing tremendous payback to their developers. So that is a 3rd option for excess renewable grid buildout.
There are even more reasons besides temporary surges in use for peaker plants. A coal power plant apparently suffered an explosion in Australia and a battery plant was able to provide instant backup.
Back to Bitcoin. The largest risk for Bitcoin is it’s challenge to the sovereignty of Ffat currency of any nation. If it does challenge a nation’s ability to collect taxes in their own fiat currency, it will be outlawed. On the other side though, gold is a current store of value that does not fundamentally topple the current fiat money system, but lives alongside it. If bitcoin were to continue in that manner, it would be fine.
I often call the USD (and all other government issued currency) as “backed by bombs”. This is in reference to any government’s “monopoly on violence”.
Meaning that the threat of violence by the government if you don’t pay your taxes, in their designated currency.
Other overreaching governments such as Turkey have also outlawed Bitcoin.
What does that mean for Bitcoin in the USA? It is unclear yet. Personally, I hope it is regulated and taxed as a normal currency eventually, (and not as as art or gold, which have very high tax rates as collectibles).
I was reading up on Michael Tubbs, the former Stockton Mayor who started a basic income pilot. I was curious why he didn’t win reelection. Here was the story I found.
In other basic income pilot news, Sam Altman’s Y-combinator is still working on their basic income pilots. And Sam Altman has written a very thought provoking piece on basic income. He proposes this income be funded by the following – “We could do something called the American Equity Fund. The American Equity Fund would be capitalized by taxing companies above a certain valuation 2.5% of their market value each year, payable in shares transferred to the fund, and by taxing 2.5% of the value of all privately-held land, payable in dollars.”
This year Apple is spending $90 billion in share buybacks, which is about 4% worth of their company value when valued at $2.17 trillion dollars.
As far as how profitable other companies are, the answer is “very profitable”.
“We already have American tax payers supporting companies, first banks and GM in 2008 and now airlines in 2020 when they might go bankrupt, or when they do. But the American People aren’t getting paid back for their support.
So I think it’s only fair for taxpayers to get a substantial piece of the upside in return for bailing out these companies. And in the process, bailing out their shareholders, who would be left with nothing if the companies failed.
Yes, this is the same point I made last week about a taxpayer bailout of Boeing.
But it’s a point that we should keep in mind every time we see companies line up at the bailout trough. If many of these companies hadn’t spent lots of money to buy back their own stock to prop up its price, they wouldn’t need anywhere near as much money as they need now.
That’s especially true of these four airlines. Almost seven out of every eight dollars the four airlines sent Wall Street from 2015 through 2019–$39.1 billion out of $44.7 billion — went for share buybacks. The rest went for dividends, according to my calculations based on the companies’ Securities & Exchange Commission filings.” – Washington Post
We need to move to a system that focus on humans, not the economy and profits.
We already have some institutions that their sole driver is not profit. Credit unions supposedly have their owners, who are also their users, needs as a priority, instead of just profit.
Vanguard is a company that both serves it’s owners and it’s users.
If we increased the base of each companies shareholders to include everyone, there would be more incentive to “help everyone” instead of “maximize profits”.
“The most successful firms today are those that pursue what Peter Drucker long ago saw to be “true North” for a corporation: “there is only one valid purpose of a corporation: to create a customer”. Generating fresh value for customers is the foundation the basis for generating benefits for all the stakeholders.” – Forbes
Finally, another thing that would help small business and entrepreneurs everywhere, as well as helping people stay health is Universal health care in the USA.
“You know what would really help me as a business owner? Universal health care. The money we pay to subsidize employee health care is astronomical and grows every year. I’ll happily pay higher taxes to cut out health insurance companies that make $40 billion a year in profit.” – Dan Price CEO
Admittedly this is a fairly loosely held together narrative of ideas I’ve been thinking about lately, but I hope by sharing them it gets other people thinking about them too.
The below is a lightly edited email I sent to a few friends. Because it takes so long to fully research and put together ideas, I haven’t been posting a lot lately. But I want to continue to use this blog to share ideas and have dialogue with others. I am posting this (lightly edited) to see if anyone else finds this sort of information interesting. Enjoy!
This guy (Tony Seba) has a few very interesting pdfs available (pretty long well put together documents) about future and emerging technologies. Tony runs Rethink. Catherine Tubbs wrote the paper “RETHINKING FOOD AND AGRICULTURE 2020-2030” and Tony was a co-writer.
Last I checked the Tony Seba/Home link was broken. But the below link to Rethink Website should work. You can access the reports under the “reports” tab.
I was wondering if ethanol plants could be repurposed for precision fermentation? That’s basically what they do now.
This YouTube video is a summary of a longer interview of Catherine Tubbs who wrote the RETHINKING FOOD AND AGRICULTURE 2020-2030″ it has a link in the video description to the full 45 minute podcast. Pretty fascinating.
Iowa has a Republican governor who claims (like all Republicans) to be pro business. We also have a strong clean energy economy both through our adoption of ethanol as well as windmills for electricity. Because of all these things it is egregious that the best selling electric car in the world is not able to be purchased in Iowa. Tesla cars are unable to be purchased in Iowa due to a law related to dealership franchises, which Tesla does not have. No one likes going to dealers. They are awful to deal with. They jerk you around on vehicle sale price. They try to talk you into buying something more than you need or can afford. I can’t say I have ever met someone who is genuinely excited about going to a car dealer. Alternatively, Tesla, which makes the most efficient and best selling EV’s in the world, and which are made in the USA, are unable to be purchased in Iowa, the state with the highest amount of green wind energy per capita. Tesla vehicle pricing is also clear on their website. Everyone pays the same for a Tesla.
I have personally written multiple of my state representatives and senators to try to get them to make a move on this to remove this law from the books. Here was my interaction with the state representative (I will tell you which one if you ask me directly).
Dear Rep.
Iowa is a state that has approximately 40% of it’s energy supplied by windmills. We say we are a green state. But residents are unable to purchase a Tesla, the best selling electric car ever, in our state. This is due to archaic laws and crony capitalism. I urge you to help change these laws. – Axel Hoogland
Reply –
Dear Axel Hoogland,
Thank you for your email. I had no idea it was such a problem to buy a Tesla in Iowa. I spoke with another legislator who owns a Tesla and she said it was because of franchisees code. You are able to buy a Tesla in Iowa but it remains difficult to pick one up anywhere nearby. Unfortunately there is not a coalition nor political will to move language forward. I will watch this…it doesn’t seem to be fair nor help us reach our sustainability goals. Please email me anytime.
Yours, Rep.
This is representative of every email I have sent to a politician, regardless of the policy I am addressing. Admitting that it is bad, backpedaling that “there is no will to do anything about it.”
That is why I am sharing my views with the internet. I would ask anyone who thinks that you should be able to buy a Tesla in Iowa to just send your state representative or state senator a short email. You could even copy mine. (below)
Iowa is a state that has approximately 40% of it’s energy supplied by windmills. We say we are a green state. But residents are unable to purchase a Tesla, the best selling electric car ever, in our state. This is due to archaic laws and crony capitalism. I urge you to help change these laws. – Your Name
It seems like a very simple law to erase. The only people who it seems to benefit are the car dealerships, not individuals. So why won’t state politicians change this law?
There was even an 80 pager report in 2016 from the Iowa Economic Development Authority titled “Advancing Iowa’s Electric Vehicle Market” which specifically mentioned the issue that Tesla’s are unable to be sold in Iowa. If they truly wanted to “Advance the Electric Vehicle Market” in Iowa the easiest and best thing they could do would be to allow the cars to be sold here.That report can be found here.
Page 55 (pdf page 62) shared the information about Tesla/dealership laws in Iowa.
Like all progress that is inevitable, sometime in the next 10 years it is very likely that Iowa citizens will be able to purchase a Tesla in the state of Iowa. I am giving state politicians an easy win here by asking them to overturn an arcane law that is hurting a progressive American Business and hurting Iowans, making them drive out of state to make a large purchase.
MyWheelLife.com 