The Economy

That is a bit circular, in that you are telling me that there is a niche market out there in which people are trading binary data (a crypto) for binary data (an NFT) over a single network that both of those types of binary data are tied to.

The market for those digital assets may or may not be anything except a valueless fad when the smoke clears. It represents a tiny playworld right now, in which people may be transacting in nebulous things that may prove to be worthless at some point in the future.

Even if that doesn't turn out to be the case, the market for NFTs worldwide represents .0000000000001 percent of the total economy. Maybe I am not envisioning the future correctly, but I don't see how a closed ecosystem of people buying digital things that are tied to a network using a digital crytocurrency that is also tied to that network, necessarily represents anything beyond that closed ecosystem. If it ever translates to people buying their groceries or paying their rent with that binary data (and using that network) as a medium of exchange, maybe we can have that conversation. But if you think about it, it is a solution that doesn't really solve any problem. There are much easier ways to transact using existing technologies. It's also an imperfect solution for the reasons I was saying. In order for something to be a good medium of exchange, its value relative to other things can't swing as wildly as the values of the various crytocurrencies are.

 

Not a ponzi or pyramid.

It's one of two things: a boom or a bubble. Or it can be both.

If it is a boom, it means that we are at the dawn of a new era in which something transformative is happening. Booms often come with overinvestment, and things get ahead of themselves as a result, and then need to pull back and consolidate and let reality catch up with promise. And that might be happening. Think about the development of the Internet and ecommerce, for example, the dot.com bubble in the late 90s. Things got ridiculously overvalued, but it doesn't mean the technology was worthless. It was the exact opposite.

If it's a bubble, it's Tulipmania.

The reason I lean (but don't know) more toward bubble than boom is that I am very keyed in on what specifically has caused the bubble. And it isn't just limited to this. We are in a bit of an "everything bubble" right now with a lot of assets (ranging from things that actually have value but have just become overvalued to things that will be worthless) having run up in cost. And the reason has been real interest rates that are negative due to what central banks around the world have done over the last several decades, culminating with them going to even bigger extremes to keep rates negative (and debt growing) when the pandemic hit to hold off the credit crisis that is going to be the result of their reckelessness.

When you distort the debt markets the way they have, you push people into riskier and riskier behavior. ... and at the extreme, you get a lot of companies that don't earn anything and assets that are very pet-rock-like that develop speculative manias around them. It's the same kind of behavior they stoked that led to the housing crisis in the mid to late 2000s by creating distortions. Except rather than letting the defaults happen, they kicked the can down the road by creating exponentially more and more debt since then to prop everything up. That debt = leverage. Which gets people drunk. Money needs to cost something for people to value it properly. When you distort that cost and make it cheaper than free, people treat it like it is free (for example, people's home values have run up in value, and there is evidence that more and more people are pulling equity out in the form of loans. ... and using that money to speculate). And that is what I think has been going on with NFTs and cryptocurrencies (and more tangible things like exotic sports cars and rare art). But whether cryptocurrencies and NFTs actually have some utility (and therefore value) when the speculative fervor ends is the question I don't feel as confident guessing about.

 

I've always had Hondas and yup, just keep up the maintenance and they run great. My 2011 CRV had 245,000 on it. Still running great, but I wanted an upgrade so I got a new CRV about four months ago. Great cars.