Speculation on monetary inflation rate of BTC vs. USD

[Rothgar]

I speculate that the monetary inflation rate of the US dollar will outpace that of bitcoin, next year.

I define the monetary inflation rate as the percentage of newly created money compared of existing money.  I'm speculating that QE3 will be announced by the fed, and will be in the range of $1,100B.  Given that the US monetary base is under $2,800B (http://research.stlouisfed.org/fred2/series/BASE ).  This would make the monetary inflation of the USD just under 40%.

Meanwhile, we know that the monetary inflation of bitcoin will be close to 12.5%, so if QE3 is the magnitude I expect there will be a significant difference in monetary inflation rates.

If this turns out to be the case, then BTC will in fact be a better store of wealth compared to the dollar.  It would actually make sense to buy BTC just to hold.  In the past buy and hold would be a strategy that you would use only if you thought that the BTC economy would grow.  In the future, even if the BTC economy stays the same size a buy and hold strategy would make sense.  2013 should be an interesting year indeed. 

Of course BTC is relatively new, there could still be a major flaw in the ability to scale.  2013 still should be an interesting year for bitcoin.

[JMAHH]

1100B? Read this.
http://www.zerohedge.com/news/scary-math-behind-mechanics-qe3-and-why-bernankes-hands-may-be-tied

[Rothgar]

I have already read that.  There is discussion that QE3 will include the purchase of mortgage backed securities.  I don't expect all the moneys to go into treasury bonds.  The author of that article tacitly assumes that all of QE3 will go into treasury bonds.

[JMAHH]

The author (who bases himself on UBS research) also discusses MBS. Explicitly.

"the Fed owns all but $650 billion of 10-30 year nominal Treasuries."

So.. $650 billion in treasuries (which is the max) and another $500 billion in MBS? $1100B is never gonna happen.

[Rothgar]

And $1.4 to $1.6 trillion of treasures issued over the next year.  Who will buy them?

[Rothgar]

Well, now we have more information.  $40B per month.  That translates to $480B per year.  Recall that the fed's announcement left open the possibility of "other asset purchases," and that $1.1T number does not sound out of range.  At any rate, assuming that the fed does not cancel QE3 next year.  We can expect US monetary inflation of 16.6% next year.  Bitcoin monetary inflation 12.5%.  Next year could be the first year that USD monetary inflation surpasses BTC monetary inflation.

If the USD lasts through the next four years it'll be interesting to see the exchange rate change when bitcoin monetary inflation is less than 5%.

[smoothie]

I speculate that the monetary inflation rate of the US dollar will outpace that of bitcoin, next year.

I define the monetary inflation rate as the percentage of newly created money compared of existing money.  I'm speculating that QE3 will be announced by the fed, and will be in the range of $1,100B.  Given that the US monetary base is under $2,800B (http://research.stlouisfed.org/fred2/series/BASE ).  This would make the monetary inflation of the USD just under 40%.

Meanwhile, we know that the monetary inflation of bitcoin will be close to 12.5%, so if QE3 is the magnitude I expect there will be a significant difference in monetary inflation rates.

If this turns out to be the case, then BTC will in fact be a better store of wealth compared to the dollar.  It would actually make sense to buy BTC just to hold.  In the past buy and hold would be a strategy that you would use only if you thought that the BTC economy would grow.  In the future, even if the BTC economy stays the same size a buy and hold strategy would make sense.  2013 should be an interesting year indeed. 

Of course BTC is relatively new, there could still be a major flaw in the ability to scale.  2013 still should be an interesting year for bitcoin.

Wow you have such foresight to make a "speculation".

Bitcoins created at 25 per 10 minutes.

USD created at probably $1,000,000 per 10 minutes.

lol

[oOoOo]

USD created at probably $1,000,000 per 10 minutes.

Actually it's $9,259,259.26 per 10min. (40,000,000,000 / 30 /24 / 6)
.

[Fjordbit]

USD created at probably $1,000,000 per 10 minutes.

Actually it's $9,259,259.26 per 10min. (40,000,000,000 / 30 /24 / 6)
.

Or $370,370.37/btc.

RALLY!

[Rothgar]

This thread was started before QE3.  The orriginal speculation was $1.1T of QE next year.  Right now it looks like $0.5T of QE.  However, the fed left "other asset purchases" open ended.  How much QE do you think will happen next year (in the US?)

[Rothgar]

But $1T is not out of the question at all.   

[Rothgar]

Sorry I forgot

http://finance.yahoo.com/news/morgan-stanley-could-see-qe4-135126762.html   

[Wekkel]

And $1.4 to $1.6 trillion of treasures issued over the next year.  Who will buy them?

Word is that the FED takes 75% of current issues. Recipe for (future) disaster.

[Rothgar]

The Fed is now printing $85Billion every month.  That makes 3%/month monetary inflation for the USD.  Compare this to Bitcoinns 1%/month.  That guy at zero hedge was being silly with his article.  Of course the Fed could buy other "assets" besides treasuries. 

[arsenische]

So did anybody check whether this prediction appeared to be correct?