Gold, Bitcoin, USD, and Inflation

Hello everyone. I would like to post a little bit of research I've conducted about Gold, Bitcoin, the USD, and inflation.

First I'd like to define what inflation is. I'm not talking about the Consumer Price Index (CPI), or the Personal Core Expenditures Index (PCE). These are measures of a change in the relative price of a chosen selection of goods. They are often used for headline inflation numbers, and a modified version of the PCE is what the Federal Reserve currently uses to help gauge "inflation" in the United States. This is that 0% to 2% figure you often hear about.

I'm talking about monetary inflation. This is the inflation of the supply of money, also called "money stock", for a given currency. If there are 100 dollars and we print 5 in a year we have a monetary inflation rate of 5%. This is important because if all five of those dollars went to a hermit in the woods they would have no impact upon price levels. All else held equal this would result in a price-level inflation rate of 0% v. a monetary inflation rate of 5%. This is very important to remember as we talk about the individual currencies.

Gold. Gold is the old-school currency that pirates and nations fought over for a long time. As far as I can tell current supply is stated to be around 170,000 tonnes. 1 tonne is 35,274 ounces, and one ounce of gold will cost you about $1250 in today's market. Add all this up and we come to a total gold market capitalization of about $7,500,000,000,000, or $7.50T. Depending on who you ask about 2500 to 3000 tonnes of gold is mined annually, or about 1.5% of the current supply per year.

Bitcoin. Bitcoin is the new-school currency that a lot of people have a lot of differing opinions on. Current market supply is around 17,400,000BTC and the price as of this posting is about $4,000 per coin. This gives us a market capitalization of a little less than $70,000,000,000, or $0.07T. Current production is around 657,000BTC per year for an inflation rate of around 3.8%. This rate will cut in half around May of 2020 at a supply of around 18,400,000 giving a new inflation rate of roughly 1.8%. This rate will again halve around 2024 to around 0.8%.

United States Dollar. The USD is one of the most accepted fiat currencies worldwide. International business is often conducted in it, and commodities are often priced in it. There are currently around $14,275,000,000,000, or $14.28T, outstanding according to the US Federal Reserve's M2 Money Stock publication. With some variation this amount has grown somewhere around 5% to 6%/yr for nearly 80 years on the long-term average. This 5% to 6% figure is our monetary inflation rate for the USD.

Here is a table to compare these figures. The final figure is the number of years for the supply to double.

Measurement	Gold	Bitcoin	USD
Inflation	1.5%	3.8%	5.5%
Market Cap	$7.50T	$0.07T	$14.28T
Supply 2x	~48yrs*	~19yrs**	~13yrs

* Gold's supply is limited by how much there is in the ground. This amount is not agreed upon.

** Bitcoin has a limited supply of 21,000,000 coins that will be reached some time around the year 2140.

I will refrain from drawing conclusions here as that is not my intent. I provide this information in the hope that you, the reader, will look further into these three units, their history, context, and use, and draw your own conclusions about their future.

Thanks for reading!

Edit: Thanks for the silver! :)

Submitted November 26, 2018 at 04:42AM by gta3uzi https://ift.tt/2P0hvh7