Debt super-cycles and bitcoin

[paxmao]

The notion of debt super-cycles are relatively easy to understand: When a crisis arrives or a government has leeway to carry an irresponsible economic policy, bad debt is created. Bad debt means spending money you do not have in things that will not have a return on investment (e.g. getting a credit to buy a gaming console, unless you are a pro of that). That happens very often, is very easy to fall into it and only a few countries have citizens that understand that it should not be allowed (Germany for example is culturally adverse to loose policies because they still remember the hyperinflation during the Weimar Republic.

The problem with that rarely governments try to reduce the debt afterwards, so the world spirals into debt and eventually crashes big every century or so.

How would bitcoin do on a massive debt super-cycle crisis?

https://voxeu.org/article/debt-supercycle-not-secular-stagnation

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[stompix]

That happens very often, is very easy to fall into it and only a few countries have citizens that understand that it should not be allowed (Germany for example is culturally adverse to loose policies because they still remember the hyperinflation during the Weimar Republic.

Bitcoin, Jesus, the Avengers, Budha, Rick and Morty, and the entire universe of LOTR wouldn't have been able to prevent what happened then. (unless they would have fought on Germany's side). Imagine Germany had BTC and France demanded LTC while England ETH, both worth about 1/3 of the 21m supply,  what would have happened to the price of Bitcoin? You have a country that went through 4 years of war, 2 million deaths, lost 65k km2, another 7 million in population, all their colonies, and on top of that pay reparation that simply wasn't payable.

Oh, and Germany did the same thing a decade later, they started borrowing again under Hitler, the whole army was made from debt and looking at the current 2 trillion, so I kind of doubt they learned that much. 

How would bitcoin do on a massive debt super-cycle crisis?

Pretty simple, the coin will not collapse but the country will still suffer economically, from ancient Greek and Roman times you still have bankruptcies, even without fiat.

[bitmover]

The notion of debt super-cycles are relatively easy to understand: When a crisis arrives or a government has leeway to carry an irresponsible economic policy, bad debt is created. Bad debt means spending money you do not have in things that will not have a return on investment (e.g. getting a credit to buy a gaming console, unless you are a pro of that). That happens very often, is very easy to fall into it and only a few countries have citizens that understand that it should not be allowed (Germany for example is culturally adverse to loose policies because they still remember the hyperinflation during the Weimar Republic.

The problem with that rarely governments try to reduce the debt afterwards, so the world spirals into debt and eventually crashes big every century or so.

How would bitcoin do on a massive debt super-cycle crisis?

https://voxeu.org/article/debt-supercycle-not-secular-stagnation

I was recently reading an article about US stock cycles, that if US stock do not keep outperforming the rest of the world, the money will flow elsewhere. It has happened before, and it flowed to emerging market's in the 2000s:


https://www.lynalden.com/fraying-petrodollar-system/

There was no bitcoin in 2000s. You can read everywhere that US stocks are highly overvalued. If they can't keep the price going up (and they can't do that forever) the money might flow now to emergent markets only, but to bitcoin as well.

[Ucy]

Ofcourse. Government and others should always lend right.
This should be taken into consideration by loan givers. You don't give loans or credit to businesses/people who won't put into good use and make a good return at the right time. I think such businesses or people could be easily discovered by their spending history/habits, how they make decisions (or how they solve problems) and how profitable they were. So,  don't blame just the borrower when something goes wrong.
And it's important to be careful lending money to those who use it for evil purpose, whether they are profitable or not. You are only helping them to create problems for our world. Only lend to those who are fruitful or bear good fruits. The world economy doesn't really care about this truth. what it's mostly concerned about is profits whether good or bad.

[naira]

Should a country have debt? What is clear is that to meet a country's spending needs that exceed the balance it has or maybe it's because of the lack of state income, the answer is to borrow debt by agreeing on the interest given. As the need for state spending that cannot be postponed, encourages them to accept offers to borrow, for example from the IMF as a container for the state to be shackled.

[jrrsparkles]

Should a country have debt? What is clear is that to meet a country's spending needs that exceed the balance it has or maybe it's because of the lack of state income, the answer is to borrow debt by agreeing on the interest given. As the need for state spending that cannot be postponed, encourages them to accept offers to borrow, for example from the IMF as a container for the state to be shackled.

No country is debt free right so who is giving all these money and where it does came from? From no where right so the policy changes played a huge role why we are in debt now but imagine no one is going to print more money if cryptos becomes the main accepted currency in this world so there won't be any fall in the value for our bills then we can manage the debts from the income we create using the loan.

[paxmao]

That happens very often, is very easy to fall into it and only a few countries have citizens that understand that it should not be allowed (Germany for example is culturally adverse to loose policies because they still remember the hyperinflation during the Weimar Republic.

Bitcoin, Jesus, the Avengers, Budha, Rick and Morty, and the entire universe of LOTR wouldn't have been able to prevent what happened then. (unless they would have fought on Germany's side). Imagine Germany had BTC and France demanded LTC while England ETH, both worth about 1/3 of the 21m supply,  what would have happened to the price of Bitcoin? You have a country that went through 4 years of war, 2 million deaths, lost 65k km2, another 7 million in population, all their colonies, and on top of that pay reparation that simply wasn't payable.

Oh, and Germany did the same thing a decade later, they started borrowing again under Hitler, the whole army was made from debt and looking at the current 2 trillion, so I kind of doubt they learned that much. 

How would bitcoin do on a massive debt super-cycle crisis?

Pretty simple, the coin will not collapse but the country will still suffer economically, from ancient Greek and Roman times you still have bankruptcies, even without fiat.

I am not speculating of what would bitcoin mean at that time, but rather on how it may behave under a secular debt crisis. Would it drop in price due to a general state of economic emergency and lack of funds or would it actually become the reference, as it cannot be printed? It is clear to me that bitcoin is not made nor has a clear use case on saving countries or governments that do not do their homework - El Salvador may prove me wrong.

I am talking about the current German generation an the orthodoxy, until COVID, of the debt management obviously. Whatever the Nazi government did was the result of the inflation and collapse of the Republic and thus the reason why it is now in the collective memory as a mistake (to put it softly).

[mu_enrico]

Country's debt different from the Firm's debt. It is more complicated than just borrower must pay the debt "or else."
Imagine if the US goes default, do you think the "international community" can impose sanctions? They will be too scared of the nuke...
Hence, I think this debt issue will manifest in a war if it involves a powerful country. Anyway, Bitcoin is a tool, not a solution. It depends on how and who uses it.

[kryptqnick]

The notion of debt super-cycles are relatively easy to understand: When a crisis arrives or a government has leeway to carry an irresponsible economic policy, bad debt is created. Bad debt means spending money you do not have in things that will not have a return on investment (e.g. getting a credit to buy a gaming console, unless you are a pro of that). That happens very often, is very easy to fall into it and only a few countries have citizens that understand that it should not be allowed (Germany for example is culturally adverse to loose policies because they still remember the hyperinflation during the Weimar Republic.

The problem with that rarely governments try to reduce the debt afterwards, so the world spirals into debt and eventually crashes big every century or so.

How would bitcoin do on a massive debt super-cycle crisis?

https://voxeu.org/article/debt-supercycle-not-secular-stagnation

Unfortunately, if a crash only happens once a century, this won't stop anybody from giving at a shot, cause, chances are, they won't be here once the effect hits the future generations. But I believe it's once a century if we focus on a global-level catastrophe, whereas small countries with a heavily dependent fiat currency and poor economies fall into the nets of hyperinflation quite regularly.
As for Bitcoin, I think it would initially be heavily hit because of all the panic selling people do in a bad economic situation, but that after a couple of months of this, it will actually skyrocket once people figure out that it's one of the few ways of saving their wealth because Bitcoin is not truly susceptible to debt cycles.

[tyz]

There was no bitcoin in 2000s. You can read everywhere that US stocks are highly overvalued. If they can't keep the price going up (and they can't do that forever) the money might flow now to emergent markets only, but to bitcoin as well.

That's right, at least it has been in the past. But, the emerging markets, especially China, are slowly reaching their growth limit and accordingly the EMs have developed significantly worse in recent years than the rest of the world. Good indicators are the MSCI World (+25% this year) and the MSCI EM (+6% this year). And who would want to invest their money in China, where the state is currently taking extremely tough action. The profit therefore no longer corresponds to risk.

[Sterbens]

The problem with that rarely governments try to reduce the debt afterwards, so the world spirals into debt and eventually crashes big every century or so.

How would bitcoin do on a massive debt super-cycle crisis?

https://voxeu.org/article/debt-supercycle-not-secular-stagnation

Especially when after everything has started to improve the post-pandemic economy, countries receive a message to immediately borrow funds from the world bank and start repairing infrastructure which was delayed due to the Covid barrier constraints. The peak debt is piling up. Unfortunately if the government at that time was aware of Bitcoin and wasn't selfish about the bad things that the mainstream media spread, maybe we would have seen many countries like El Salvador have already started their economic recovery.

[ven7net]

The notion of debt super-cycles are relatively easy to understand: When a crisis arrives or a government has leeway to carry an irresponsible economic policy, bad debt is created. Bad debt means spending money you do not have in things that will not have a return on investment (e.g. getting a credit to buy a gaming console, unless you are a pro of that). That happens very often, is very easy to fall into it and only a few countries have citizens that understand that it should not be allowed (Germany for example is culturally adverse to loose policies because they still remember the hyperinflation during the Weimar Republic.

The problem with that rarely governments try to reduce the debt afterwards, so the world spirals into debt and eventually crashes big every century or so.

How would bitcoin do on a massive debt super-cycle crisis?

https://voxeu.org/article/debt-supercycle-not-secular-stagnation

Unfortunately, I believe that BTC and cryptocurrencies in general will not be able to cope with this problem. The thing is that cryptocurrencies were created parallel to the financial system and for several years they have been walking shoulder to shoulder with it, and to some extent cryptocurrencies also depend on the current financial system. If BTC were launched as a solution to this problem, then with the advent of BTC and cryptocurrencies, the current financial system has exhausted, and cryptocurrencies would become a replacement for old money. Since this did not happen, I believe that BTC and cryptocurrencies are another financial instrument after the stock market, created to keep the financial system afloat and to help the growth of digital companies.

[Kakmakr]

The problem is.... Governments lack the vision to see that the debt that they make today... will be carried by 3 generations of children that will have to carry that burden in the future. The printing of toilet paper money is a sickness that has to be done to match the debt that are spiraling out of control.   

Also, Bitcoin cannot stop governments and individuals from making more debt... because it is just money. The change that can happen is that it is more difficult to "print" money from thin air... like they are doing with fiat currencies. 

[Fortify]

The notion of debt super-cycles are relatively easy to understand: When a crisis arrives or a government has leeway to carry an irresponsible economic policy, bad debt is created. Bad debt means spending money you do not have in things that will not have a return on investment (e.g. getting a credit to buy a gaming console, unless you are a pro of that). That happens very often, is very easy to fall into it and only a few countries have citizens that understand that it should not be allowed (Germany for example is culturally adverse to loose policies because they still remember the hyperinflation during the Weimar Republic.

The problem with that rarely governments try to reduce the debt afterwards, so the world spirals into debt and eventually crashes big every century or so.

How would bitcoin do on a massive debt super-cycle crisis?

https://voxeu.org/article/debt-supercycle-not-secular-stagnation

The thing is, governments are usually wise enough to understand what policies are reckless but politicians have relatively short careers in the grand scheme of things. What might help get a politician re-elected (e.g. promising to continue house price growth) is not necessarily the best long term course of action for the country, but it's what many people in the general population will be after. They will vote for any party that promises to improve their short term circumstances out of ignorance or greed. Combine that with central banks that are often meant to be independent of government and you can have a lot of conflicting interests that just care about what will happen in the next year, rather than 5 or ten years away. The end result, as you say, it just a super bubble that usually grows much bigger than any previous one.

[el kaka22]

No country is debt free right so who is giving all these money and where it does came from? From no where right so the policy changes played a huge role why we are in debt now but imagine no one is going to print more money if cryptos becomes the main accepted currency in this world so there won't be any fall in the value for our bills then we can manage the debts from the income we create using the loan.

I would assume that they are in debited to each other and to the companies as well. For example our nation has a social retirement deal, which means that you pay the government a retirement tax every month, and then when you retire, they pay you every month, so you could have a better retirement, which is not enough at all and they pay very little but at least they do.

It means government could be in debt to even their own citizens. There are tons of ways that a government could get in debt, buy weapons from USA and have debt to them, buy tons of products for Microsoft and be in debt to them, buy land in another nation for power plant and be in debt to that. So, basically a government could always have purchases that causes them to be paying debt for decades. Look at USA, they sure found a way to be in debt a ton, they have 20+ trillion dollars in debt.

[magneto]

When the debt crisis sets on from all the stimulus of COVID, BTC will flourish.

Quite frankly it is one of the only asset classes that is truly independent of any centralized entity, which is exactly what will be hit hardest in a debt crisis.

However, normal adoption will progress the network just fine and I don't really believe that we need an unwinding of all the debt for bitcoin to become mainstream.

[Hydrogen]

only a few countries have citizens that understand that it should not be allowed (Germany for example is culturally adverse to loose policies because they still remember the hyperinflation during the Weimar Republic.

The united states had policies like glass steagall meant to prevent occurrences similar to the Great Depression from happening again.

The problem is, those safety measures were repealed in 1999.

Most do not pay attention to the news and current events. Which leaves them unprepared and uninformed as to the major shifts occurring which will undoubtedly affect their future. Already we can see the american national debt mounting, supply chain issues worsening, oil crisis expanding, inflation concerns growing. The media does nothing to inform people on the potential dangers headed their way.

Most believe they are better off not knowing anything. They believe governments and politicians exist to prevent them from ever having to think about real problems.

Current events today will play a large role in our future. A meeting is being held now to determine what that future will look like. Most decided not caring about it is their best policy. They have allowed others to determine every aspect of their lives and future and will not like what they end up with.

[fiulpro]

There are various traditions perse in different countries. When you talk about countries like the UK there are some sites which only receives the payment through *credit cards* which does mean that credit cards there are taken *super essential*. People also take credit cards with 0% interests making it harder for them to understand the fact that they are just getting trapped in the whole cycle of debt. With massive student loans as well it's a hard talk for the younger generation to get out of.

When we are talking about bitcoins. There are new lending services available now, these lending services gives people the possibility to have some bitcoins to trade which I do think is not a good idea. Bitcoins would not work well on this lending platform. Since :
- the volatility would make the initial owners panic in times of market crashes, which would be harder to solve now.

[jaberwock]

There are various traditions perse in different countries. When you talk about countries like the UK there are some sites which only receives the payment through *credit cards* which does mean that credit cards there are taken *super essential*. People also take credit cards with 0% interests making it harder for them to understand the fact that they are just getting trapped in the whole cycle of debt. With massive student loans as well it's a hard talk for the younger generation to get out of.

When we are talking about bitcoins. There are new lending services available now, these lending services gives people the possibility to have some bitcoins to trade which I do think is not a good idea. Bitcoins would not work well on this lending platform. Since :
- the volatility would make the initial owners panic in times of market crashes, which would be harder to solve now.

I doubt that would work in most nations, 0% rate is unheard of where I am from because of inflation. If you have 0% interest on the spending that you do, then making a debt is actually quite good. Why? Because you are going to pay more because of inflation if you do not buy it right now. Make a huge debt buying everything you want, even if they do not make you any profit, be happy with them, and then pay slowly. Gradually paying a debt that is under the inflation rate is where we make our money.

My nation has huge inflation whereas it has very little interest rates as well, which allows me to buy whatever I want, put it in 36 month installments if I want to, and then I end up paying very little for it considering my money is a lot more by the end of it and the item is 2x more expensive. Just in the last 1 year, PS5 prices shot 2x higher in my nation, that should tell you how valuable it is.

[hyudien]

The notion of debt super-cycles are relatively easy to understand: When a crisis arrives or a government has leeway to carry an irresponsible economic policy, bad debt is created. Bad debt means spending money you do not have in things that will not have a return on investment (e.g. getting a credit to buy a gaming console, unless you are a pro of that). That happens very often, is very easy to fall into it and only a few countries have citizens that understand that it should not be allowed (Germany for example is culturally adverse to loose policies because they still remember the hyperinflation during the Weimar Republic.

The problem with that rarely governments try to reduce the debt afterwards, so the world spirals into debt and eventually crashes big every century or so.

How would bitcoin do on a massive debt super-cycle crisis?

https://voxeu.org/article/debt-supercycle-not-secular-stagnation

When it comes to the debt I always ask who does the United States borrows during a pandemic? Instead, other countries finally tried to complain about the rules to survive during the lockdown. This happened where I lived the government said we wanted or not to borrow and allowed inflation to develop longer.
You say Germany, they are even higher in terms of jumping inflation. They really are at a pretty high level and it's hard to get out of it. It's just Germany, so what about other countries that just sit idly by? will be even more difficult.

The phenomenon of German inflation that continues to soar

Interesting question from you "How did bitcoin perform in the big debt supercycle crisis?".
My answer: Bitcoin is still fine, and from the start, it has provided insurance, that Bitcoin serves them to get out of crisis problems. It's just a matter of choosing, embracing Bitcoin before it's all destroyed, or you'll just be on the other side of the road where only the ruling state will pass by without offering a ride. We are on the verge of major inflation. 2022 will certainly be very clear if Bitcoin is not adopted by developing countries.