{"id":15845,"date":"2021-01-12T00:38:10","date_gmt":"2021-01-12T00:38:10","guid":{"rendered":"http:\/\/mediashower.com\/blog\/?p=15845"},"modified":"2021-01-12T00:38:10","modified_gmt":"2021-01-12T00:38:10","slug":"bitcoin-vs-burgernomics","status":"publish","type":"post","link":"https:\/\/www.mediashower.com\/blog\/bitcoin-vs-burgernomics\/","title":{"rendered":"Bitcoin vs. Burgernomics"},"content":{"rendered":"

Here\u2019s my routine. Each morning I begin my day with meditation and exercise, then fix up a bowl of Bob\u2019s Red Mill while I scan The New York Times<\/em> (to take the pulse of the world) and Reddit (to take the pulse of the Internet).<\/p>\n

The Reddit community usually upvotes cute cat photos<\/a> and funny GIFs<\/a> (here\u2019s one that will make you laugh<\/a>). This week, however, the following post made it to the homepage of Reddit, where it quickly went viral<\/a> (warning: language).<\/p>\n

\"Anonymous\"

It\u2019s a fair question.<\/p><\/div>\n

This question ignited over 1,200 responses, including a surprisingly nuanced conversation about the value of gold<\/a>. This is not the kind of crowd-pleaser that usually wins Reddit gold, but it is an important data point. Why?<\/p>\n

Suddenly, the crowds are wondering about the value of money.<\/p>\n

Until Coronavirus, we\u2019ve lived with the idea that we have to work hard for our money. Money was scarce and difficult to earn. In response to the Coronavirus, governments are printing money<\/a>, and giving it away for free<\/a>.<\/p>\n

We all have one question: wait, what?<\/em><\/p>\n

\u201cYou\u2019re telling me we could have been printing money all along?\u201d we all ask ourselves. \u201cSo why am I working so hard?\u201d There\u2019s a cognitive dissonance: while we all appreciate the money, something about it doesn\u2019t feel <\/em>right.<\/p>\n

Free money seems too good to be true. There must be a catch.<\/p>\n

So we end up with the people questioning the value of the dollar, and (half-jokingly) proposing that McMoney might be more valuable, since at least it can be redeemed for food<\/em>.<\/p>\n

This is simple human psychology: we all know there\u2019s no such thing as a free lunch. Suddenly we\u2019ve all received a free lunch. Who will pay for the lunch?<\/p>\n

Which brings us to data point #2: The Coin Shortage.<\/p>\n

\"The<\/p>\n

The Psychology Behind Coin Shortages<\/h2>\n

I recently snapped this photo at a pharmacy cash register, where I was buying allergy medicine (a valuable item) with my free money (printed out of thin air). I have researched why there is a coin shortage<\/a>, and the usual answers blame the Coronavirus lockdown:<\/p>\n

    \n
  1. People aren\u2019t spending coins in vending machines and laundromats.<\/li>\n
  2. People aren\u2019t using as much cash to pay for small retail purchases.<\/li>\n
  3. People aren\u2019t dumping their piggy banks into supermarket kiosks (like Coinstar).<\/li>\n<\/ol>\n

    I\u2019ll add another explanation: perhaps people are hoarding coins.<\/p>\n

    Human psychology says that we all have a lot of FUD about the future: Fear, Uncertainty, and Doubt. If you\u2019re the type of consumer who still pays for things in cash, you may well be hoarding that loose change, in the same way you may be hoarding toilet paper and SPAM \u2026 just in case<\/em>.<\/p>\n

    Logically, if we really think money is losing its value, we\u2019d spend it as quickly as possible, converting it into assets with \u201creal\u201d value (like gold). This is, of course, already happening:<\/p>\n

    \"Goldprice\"

    Source: GoldPrice.org<\/p><\/div>\n

    Hoarding gold and hoarding coins, for most people, are two sides of the same coin (so to speak). Economically, they\u2019re completely different (see the Reddit discussion<\/a>), but they feel <\/em>kind of the same.<\/p>\n

    Human psychology is often illogical. But it matters a lot, because moods drive markets<\/em>. If we all believe something has value, it has value. If we lose our faith in it (say, we suddenly get a lot of it for free, with no strings attached), then the value plummets.<\/p>\n

    This can become a vicious spiral, leading — in the most extreme cases — to hyperinflation.<\/p>\n

    The Psychology of Hyperinflation<\/h2>\n

    Hyperinflation, as we\u2019ve covered in previous columns, is where an economy experiences rapidly escalating prices, along with rapidly depreciating currency. (Here\u2019s a list of notable examples<\/a>.)<\/p>\n

    During hyperinflation, mob mentality takes over: as soon as people get their paycheck, they rush to go buy things of real value (like Big Macs and allergy medicine) because next week these things could cost twice as much. This negative spiral is both economic and<\/em> psychological: it is a self-fulfilling prophecy. (Counterintuitively, coins can become scarce<\/a>.)<\/p>\n

    Two things are necessary for hyperinflation:<\/p>\n

      \n
    1. A huge increase in the money supply (check)<\/li>\n
    2. That is not supported by an increase in goods and services (check).<\/li>\n<\/ol>\n

      Common sense tells us that people have not been as productive during the Coronavirus. Most professionals are working from home, while trying to manage kids and their own anxieties. People aren\u2019t traveling or networking, so deals aren\u2019t getting done. Meanwhile, time-wasters like Netflix and videogames are on the rise. Also, there\u2019s free money, so why work?<\/p>\n

      Here are the numbers to back up that common sense, brought to us just moments ago by the U.S. Bureau of Labor Statistics<\/a>:<\/p>\n

      \"Indexes\"

      If charts could talk, this one would be saying, “Ay-yi-yi!”<\/p><\/div>\n

      It takes the bureau a while to compile the data, so we\u2019re actually looking at numbers from April-June 2020, during the peak of the Coronavirus. You have to dig through the press release to find the numbers that matter, which is that business output is down 11%<\/strong> from a year ago, and down 38.7%<\/strong> from the first quarter of 2020. (For manufacturing, which is broken out separately, the numbers are even worse.)<\/p>\n

      In plain English, this means that people are not as productive<\/strong>. The bureau buried it in Table A-1 at the back of the report, so I\u2019ve taken the liberty of highlighting the most important numbers:<\/p>\n

      \"Labor<\/p>\n

      And here it is helpfully displayed as a graph, as it should have been by the government organization that prepared it:<\/p>\n

      \"Decline<\/p>\n

      Meanwhile, hourly compensation went the other way:<\/p>\n

      \"Increase<\/p>\n

      To summarize: the government is printing money, people aren\u2019t productive, and they\u2019re being paid more to do less. Meanwhile, people are questioning the value of money, even while they hold onto it.<\/p>\n

      Whenever we highlight a problem, we should try to offer a solution. Here\u2019s mine.<\/p>\n

      The Solution: Reverse Psychology<\/h2>\n

      I will tackle this from the human psychology perspective, because I believe that doesn\u2019t get enough credit in most discussions about the economy.<\/p>\n

      The economy is, of course, a human invention: it is not a great law of the universe, like mathematics. Although economics uses math, it\u2019s not math. Although we treat economics like a science, it\u2019s not a science (at best, it\u2019s a pseudoscience<\/a>).<\/p>\n

      Because humans invented the economy — not nature — the economy is subject to human feelings. Because humans are emotional creatures, our anxieties and fears have real economic effects. When we all believe in something, the price rises, and when we no longer believe in it, the price falls.<\/p>\n

      When we all start hoarding coins because we\u2019re afraid there\u2019s going to be a coin shortage, guess what? There is a coin shortage. <\/em><\/p>\n

      As I say in my book<\/a>: To make money, you\u2019ve got to zig when everyone is zagging, and zag when everyone is zigging. You\u2019ve got to use reverse psychology. So here\u2019s what I\u2019m doing:<\/p>\n

        \n
      1. Diversify, diversify, diversify<\/strong>. The only thing we know for sure is that we don\u2019t know anything for sure. So look for ways to diversify your savings, your 401(k), your business activities. Think a wide array of assets, in a wide array of countries: anything people will expect to \u201chold its value.\u201d<\/li>\n
      2. Invest in yourself<\/strong>. As we continually preach here at Bitcoin Market Journal,<\/em> the best investment is in yourself. If you\u2019re out of work, use this time to learn new skills. If you\u2019re less productive than usual, work twice as hard on something that\u2019s grabbing your interest.<\/li>\n
      3. Consider buying digital assets<\/strong>. If you\u2019re not already into bitcoin and altcoins, this is a great time to get started. We\u2019re already seeing a great boom in bitcoin (from $7,300 before the Coronavirus to $11,500 today), and that may continue as people leave traditional money behind.<\/li>\n<\/ol>\n

        These are reverse psychology strategies. While people are holding onto coins, you\u2019re using them to buy a diversified set of assets. When people are playing videogames and watching Netflix, you\u2019re working hard, building your brain. While people are spending their free money, you\u2019re investing it into bitcoin.<\/p>\n

        Most importantly, these strategies put you in control. <\/em>Rather than sitting on your couch, nervously waiting for the other shoe to drop, you can be doing something that prepares you for what\u2019s next \u2013 whatever that is.<\/p>\n

        Despite all the doom and gloom, I have a confession to make: I secretly kind of enjoy this time<\/em>. It is incredibly difficult, to be sure, and I don\u2019t wish suffering on anyone. But I see opportunity everywhere: a once-in-a-lifetime chance to rethink how we do things, to reshuffle the deck. Let\u2019s use this time wisely.<\/p>\n

        The answer to the Reddit question, of course, is that even McMoney won\u2019t hold its value if the underlying currency can\u2019t be used to buy burger meat. (Burger meat, by the way, is 15% more expensive than last year<\/a>.)<\/p>\n

        So what will<\/em> hold its value? Your brain, for one. (Learn stuff.) Maybe real estate, maybe gold. (Diversify.) Maybe bitcoin. (Consider crypto.) Figure out where the crowds will start putting their money — but don\u2019t follow the crowds. Lead them.<\/p>\n

        John Hargrave is the co-author of <\/em>Blockchain Success Stories: Case Studies from the Leading Edge of Business<\/a>.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

        Here\u2019s my routine. Each morning I begin my day with meditation and exercise, then fix up a bowl of Bob\u2019s Red Mill while I scan The New York Times (to take the pulse of the world) and Reddit (to take the pulse of the Internet). The Reddit community usually upvotes cute cat photos and funny… Read More…<\/a><\/span><\/p>\n","protected":false},"author":2,"featured_media":15846,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[459],"tags":[],"_links":{"self":[{"href":"https:\/\/www.mediashower.com\/blog\/wp-json\/wp\/v2\/posts\/15845"}],"collection":[{"href":"https:\/\/www.mediashower.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.mediashower.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.mediashower.com\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.mediashower.com\/blog\/wp-json\/wp\/v2\/comments?post=15845"}],"version-history":[{"count":4,"href":"https:\/\/www.mediashower.com\/blog\/wp-json\/wp\/v2\/posts\/15845\/revisions"}],"predecessor-version":[{"id":15997,"href":"https:\/\/www.mediashower.com\/blog\/wp-json\/wp\/v2\/posts\/15845\/revisions\/15997"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.mediashower.com\/blog\/wp-json\/wp\/v2\/media\/15846"}],"wp:attachment":[{"href":"https:\/\/www.mediashower.com\/blog\/wp-json\/wp\/v2\/media?parent=15845"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.mediashower.com\/blog\/wp-json\/wp\/v2\/categories?post=15845"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.mediashower.com\/blog\/wp-json\/wp\/v2\/tags?post=15845"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}