> And Bitcoin lost over 90% of its value in just under 2 years.
When do you mean? Right now Bitcoin is US$9400, which is almost exactly half of its all-time high value of US$19891 (in 2017). There are several times it has lost more than half of its value, but I don't remember a time when it has lost 90% of its value.
The reason the dollar inflates and never deflates is that it's designed to inflate. On purpose. The underlying Keynesian monetary theory is a radical experiment in stimulating economic activity by maintaining the proper level of unemployment — when unemployment is "too low", central banks raise interest rates (in effect, printing less money), while dropping them when unemployment is "too high". Of course, deliberate inflation of coins by governments has a much longer history than Keynesian monetary theory or fiat currencies — not only did Song China experience it when it introduced paper "representative money", but it's also a well-attested phenomenon in Roman commodity money and later coinages (there known as "debasement", in a technical sense different from its metaphorical use in literary English to describe degradation.) But Keynesian monetary theory, which might be correct, provides a theoretical justification for believing that inflation is good under some circumstances and bad under others, and since 1973 we are all, for better or worse, participating in a radical large-scale experiment to test this hypothesis.
Bitcoin is, in significant part, a dissident response from a group of eccentric intellectuals looking for a way to opt out of that radical experiment. Consequently it is designed to make inflation (of Bitcoin) infeasibly difficult — the existing Bitcoin supply increases asymptotically toward a fixed quantity, known in advance. So, although Bitcoin's value will fluctuate, sometimes wildly, it doesn't have the secular inflation trend designed into the dollar's governance mechanism.
> we are all, for better or worse, participating in a radical large-scale experiment to test this hypothesis.
Well if you have a suitably sound and accurate economic model that you’ve been secreting away, let us know and save us the time.
Additionally, it’s not like it’s been exclusively Keynesian economics since the 70’s: there’s been a huge amount of neoliberal economics going around-do you not remember the popularity of austerity measures during the 2008 GFC?
To me, bitcoin and co’s dogged insistence on the evils of inflation feels more like someone along the way had some personal issue with inflation alone and designed something to counteract it, plausibly at the expense of numerous other economic factors.
> When do you mean? Right now Bitcoin is US$9400, which is almost exactly half of its all-time high value of US$19891 (in 2017). There are several times it has lost more than half of its value, but I don't remember a time when it has lost 90% of its value.
Looks like I overstated it slightly. It lost 85% of its value between its all time high December 17th 2017 ($19,891) and December 16th 2018 ($3,159).
The rest of your response, in my opinion, is immaterial. I can't imagine a soul who'd prefer their money to "fluctuate wildly"—to the tune of -85% in a year—vs slowly losing 1-3% per year. Especially when there are very accessible financial instruments (e.g., TIPS) to avoid even that.
Anyone who invests in a stock is taking a significant risk of losing 100% of their investment, a risk on the order of 5% per year. Anyone who invests in gold is used to seeing it fluctuate by a factor of 2 or 3 most years. Yet not only are these popular investments — they're better investments than dollars are over all but the shortest time periods. Anyone who invested a large amount of money in stocks or gold in 1973 would be rich today, unless they were very unlucky at picking stocks. Anyone who invested a large amount of money in a bag of dollar bills in 1973 would be poor today.
In short, if any soul you could imagine had won the lottery in 1973, they'd be poor again by now because of not knowing how to manage their money, incorrectly believing that a currency is not a kind of investment.
You're moving the goalposts. Are we comparing BTC to currency or investments?
People invest in things, generally understanding the risk. Risk is not all equal. BTC is far riskier (more volatile) than virtually all publicly traded stocks or commodities. See again the very recent 85% drop in 1 year.
And let's be clear: BTC is not comparable to a stock. Company stock is valuable because it gives you ownership (and therefore a stake in) the company's profits. Gold is a much more reasonable comparison, but even that has real practical value (e.g., use in electronics, jewelry, dental work, etc.) And funny enough, Gold is worth less today than it was in 1979. So... it's not a great investment. It's just volatile, and "investment" in it is basically a 0-sum game. Just like Bitcoin.
In 1979 the price range of gold was $226 to $512 per troy ounce, a slightly higher level of volatility than the Bitcoin level you describe with a bit of exaggeration as "far riskier than virtually all…commodities." The gold price today is $1485 per troy ounce.
I'd like to caution the people who have downvoted your other comment that there is a plausible reading that is sufficiently charitable to make your new comment not actually false. Namely, although if you measure it in dollars, it's "worth" 3 to 6 times more, even over the timespan you cherry-picked, the dollar has lost more than a factor of 6 since 1979, so gold really is worth less today than it was then. The attraction of gold — just as with Bitcoin — is precisely that it doesn't have a secular decline in value built in, so it's a good vehicle for preserving wealth through periods of instability, even though it doesn't generate a return in the way that stocks and bonds do.
And Bitcoin lost over 90% of its value in just under 2 years. Where are you going with this, council?