Good article and in principle correct, but I disagree with both the "rule of thumb" and general conclusions around risk.
At a first glance, it appears sound, but the flaw is that bitcoin is actually the *only* thing in the universe that is perfectly ELASTIC, whereas "fiat liabilities" always have optionality and inelasticity. In practice, you always have the choice to not spend bitcoin... how painful that is depends on circumstance, but to suggest fiat liabilities simply "liquidate" bitcoin as if it were automatic is disingenuous.
The variance across circumstance is rather large. Moreover, I would say the biggest mismatch is in the opposite direction most of the time. The real mismatch is the perceived circumstance one thinks one is in and how they imagine it might play out. People are overl fearful, yet will put zero weighting on the possibility of their fiat going poof overnight, say, due to being personally targeted. Low, but not zero risk.
The more compelling and robust version of this article focuses on the corporate balance sheet where the liabilities are more pressing and much shorter duration. Similarly, the elderly retiree. From the mismatch problem it can be pointed out that an index that actually tracks the liabilities directly would be superior to fiat. You want food? Ok, you are a fool to only hold dollars and zero CALM shares for food you want in 3 months for fear of volatility, especially if you want to eat eggs.
Dirac Delta
npub1c8…pqsah
2023-04-01 15:59:42
in reply to nevent1q…7808
Author Public Key
npub1c8nlcgd5l8qenesgdcy4vw0s794yujyy23z50n52v5ld0ddkcjnsppqsahPublished at
2023-04-01 15:59:42Event JSON
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"content": "Good article and in principle correct, but I disagree with both the \"rule of thumb\" and general conclusions around risk.\n\nAt a first glance, it appears sound, but the flaw is that bitcoin is actually the *only* thing in the universe that is perfectly ELASTIC, whereas \"fiat liabilities\" always have optionality and inelasticity. In practice, you always have the choice to not spend bitcoin... how painful that is depends on circumstance, but to suggest fiat liabilities simply \"liquidate\" bitcoin as if it were automatic is disingenuous.\n\nThe variance across circumstance is rather large. Moreover, I would say the biggest mismatch is in the opposite direction most of the time. The real mismatch is the perceived circumstance one thinks one is in and how they imagine it might play out. People are overl fearful, yet will put zero weighting on the possibility of their fiat going poof overnight, say, due to being personally targeted. Low, but not zero risk.\n\nThe more compelling and robust version of this article focuses on the corporate balance sheet where the liabilities are more pressing and much shorter duration. Similarly, the elderly retiree. From the mismatch problem it can be pointed out that an index that actually tracks the liabilities directly would be superior to fiat. You want food? Ok, you are a fool to only hold dollars and zero CALM shares for food you want in 3 months for fear of volatility, especially if you want to eat eggs.",
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