Afternoon Must-Read: Gauti Eggertsson and Neil Mehrotra: Secular Stagnation and the Paradox of Worth
...cannot operate as a perfect storage technology as this may put a zero bound on the real interest rate... a secular stagnation equilibrium remains a possibility as the natural rate can be negative while the discount rate relevant for risky assets remains positive. The real interest rate and the possibility of a secular stagnation can also be affected by the presence of bubble assets... [such] bubbles may be efficient, but depending on the stability of the bubble, interesting tradeoffs may emerge between the level and volatility of employment...
...at this stage and call this the end of Bitcoin... the positive-feedback loop forces which drove Bitcoin to $1124.76 have now become the same very same which will drive it down... the fact that the mechanism that ensures coins cannot be overproduced to benefit from high prices also prevents supply from being contracted when prices/demand collapses... in a race to the bottom it doesn’t pay to switch off your mining machine if you’re the most efficient miner. So how did we find ourselves on this delusional joy ride to begin with?... It’s the same old story of frivolity, irrational exuberance, hysteria and of course the mistaken belief that something like a free lunch is truly possible... the sort of irrationality and bad allocation of capital that the Fed is trying to shake-out at this stage with tightening talk. We’re sure we may still see a few deep pocketed VCs or ‘believers’ throw more money at defending the dream, but chances are we’ve now gone through the exponential break point. Time and money would probably be better spent trying to pump up Bitcoin V.2.
