1AKHViYgBGbmxi8qiJkNvoHNeDu9m3MfPE (622) ·
MV = PQ
BTC folks think that low (V)elocity means low (P)rice of goods, therefore, high value of BTC.
But imagine Twetch without (V)elocity. There would also be no Twetches.
V and Q have a causal relationship that is unexplored, and in fact, ignored.
Replies
1AKHViYgBGbmxi8qiJkNvoHNeDu9m3MfPE (622) ·
And because Q is causally related to V, and they each represent actualized mutually beneficial exchange from Supply and Demand (respectively,) and actualized Demand cannot occur without goods being produced, Q leads V.
1AKHViYgBGbmxi8qiJkNvoHNeDu9m3MfPE (622) ·
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1AKHViYgBGbmxi8qiJkNvoHNeDu9m3MfPE (622) ·
Additionally, the "something for nothing" mentality precludes productive activities.
This is especially true if I exchange out of the currency under analysis in order to exchange, thus driving Q towards that alternative asset, such as fiat.
1AKHViYgBGbmxi8qiJkNvoHNeDu9m3MfPE (622) ·
In fact, when (M)oney supply is stable, (Q)uantity of goods/services created (and therefore, sold,) is ALWAYS the driver of both (V)elocity increases and (P)rice decreases.
The extent to which V is increased and/or P decreased depends on market actors.
1AKHViYgBGbmxi8qiJkNvoHNeDu9m3MfPE (622) ·
In BitCoin, M is fixed or falling (21m cap,) over the long run.
P is, then, a completely resultant factor of M (constant,) V, and Q.
1AKHViYgBGbmxi8qiJkNvoHNeDu9m3MfPE (622) ·
To put it differently...
Q is Supply, only including completed exchanges
V is Demand, only including completed exchanges
Value, then, is a result of Q and V, not of M or P.
1AKHViYgBGbmxi8qiJkNvoHNeDu9m3MfPE (622) ·
Hodling stagnates productive activities.
Refusing to exchange doesn't increase value, rather, it decreases it, even if paper wealth appears to increase. There is less Q in the system.
1AKHViYgBGbmxi8qiJkNvoHNeDu9m3MfPE (622) ·
To put it differently...
Increased production leads to increased wages and/or decreased prices.
But you can't possibly get this if you refuse to do real work, to produce real goods and services, to exchange for the currency you want to have in hand.
1AKHViYgBGbmxi8qiJkNvoHNeDu9m3MfPE (622) ·
But, all consensual exchange is, by virtue of being consensual, expected to be mutually beneficial.
This implies that all (Q) of goods/services are sold at a profit, and all (V)elocity to be the most valuable exchange that can be made with that money.
1AKHViYgBGbmxi8qiJkNvoHNeDu9m3MfPE (622) ·
Lower (P)rices = deflation, which is the natural result of greater productivity in an economy.
Higher (V)elocity = higher wages, which is also the natural result of greater productivity.
1AKHViYgBGbmxi8qiJkNvoHNeDu9m3MfPE (622) ·
So, what is the causal relationship?
How can you sell a good/service without exchanging for something, which in this case would be the currency under analysis?
All V implies Q.
All Q implies V.
1AKHViYgBGbmxi8qiJkNvoHNeDu9m3MfPE (622) ·
Said differently...
In order for there to be more V, there must be more Q.
But... There doesn't need to be more V.
In fact either lower (P)rices, OR higher (V)elocity could result from higher Q.
1AKHViYgBGbmxi8qiJkNvoHNeDu9m3MfPE (622) ·
And it must be made clear that (Q)uantity of goods/services is far more important for the value of a currency than either (M)oney supply or (V)elocity alone.
This is because production is the source of all value, not the holding or exchange of money.