The way I understand it is we are using currency debasement as a force to lock up inelastic shelter behind massive lifelong payment obligations, debt to a for-profit bank who stomach none of the risk and who conjure the new money to pay for it out of nothing. Its then CMHC government insured, with full recourse loans, backstopped by a central bank, and supported by all levels of government.
A mortgage is when both parties walk away with present goods they can use in full, even though only one of these goods existed prior to the transactions. The buyer benefits by getting an asset without paying, the seller benefits because it finances more potential buyers who can bid up the price of the home, it is favorable to banks which can create new fiat at zero marginal cost every time a buyer wants to buy a house. The risk is externalized to society at large, who absorb the risk premium via inflation of the money supply.
Now we have talk of a CBDC from the BoC and talk of raising the inflation target. All because the money supply must grow, because the CPI is like a pachinko machine that ignores asset appreciation, substitutes goods for cheaper goods as consumers get poorer, and discounts technological advancements via hedonic adjustments. The whole system is like a form of planned obsolescence; except instead of material goods failing the currency is failing, and it fails to preserve your purchasing power to ever greater degrees, for as long as this dynamic basket doesnt rise in value every year.
The malaise we have now economically seems to be because we hit 0% interest rates with QE and housing prices simply maxed out the available supply of debt relative to income. Now the federal government is buying up 50% of mortgage bonds and extending amortizations to kick the can down the road, at the expense of productivity investment and the Canadian dollars foreign exchange value. We got to 0% because Canadians realized housing never falls, they could always rely on the cantillon effect to prop up their homes value via new debt creation.
The question is whether MSTR is capturing this debt creation arbitrage and funneling it into Bitcoin just like home buyers do with houses. Large liquidity sponges whose scarcity can't inflate is all you need to grow the wealth effect and to grow aggregate demand, if it can shift over to a better store of value than housing maybe this madness will end.
The way I understand it is we are using currency debasement as a force to lock up inelastic shelter behind massive lifelong payment obligations, debt to a for-profit bank who stomach none of the risk and who conjure the new money to pay for it out of nothing. Its then CMHC government insured, with full recourse loans, backstopped by a central bank, and supported by all levels of government.
A mortgage is when both parties walk away with present goods they can use in full, even though only one of these goods existed prior to the transactions. The buyer benefits by getting an asset without paying, the seller benefits because it finances more potential buyers who can bid up the price of the home, it is favorable to banks which can create new fiat at zero marginal cost every time a buyer wants to buy a house. The risk is externalized to society at large, who absorb the risk premium via inflation of the money supply.
Now we have talk of a CBDC from the BoC and talk of raising the inflation target. All because the money supply must grow, because the CPI is like a pachinko machine that ignores asset appreciation, substitutes goods for cheaper goods as consumers get poorer, and discounts technological advancements via hedonic adjustments. The whole system is like a form of planned obsolescence; except instead of material goods failing the currency is failing, and it fails to preserve your purchasing power to ever greater degrees, for as long as this dynamic basket doesnt rise in value every year.
The malaise we have now economically seems to be because we hit 0% interest rates with QE and housing prices simply maxed out the available supply of debt relative to income. Now the federal government is buying up 50% of mortgage bonds and extending amortizations to kick the can down the road, at the expense of productivity investment and the Canadian dollars foreign exchange value. We got to 0% because Canadians realized housing never falls, they could always rely on the cantillon effect to prop up their homes value via new debt creation.
The question is whether MSTR is capturing this debt creation arbitrage and funneling it into Bitcoin just like home buyers do with houses. Large liquidity sponges whose scarcity can't inflate is all you need to grow the wealth effect and to grow aggregate demand, if it can shift over to a better store of value than housing maybe this madness will end.
Great report, right to the point