The essence of investing is lost on many of us; we’re so focused on increasing the number of currency units we own or can gain access to that we don’t think of what we are doing. Accumulating resources is all about investing your time today in a way that will give you more time and less uncertainty in the future.
Time is the finite resource we have on this planet, and each of us has no idea how much time we have here. To ensure that our time is used effectively, we find ways to monetise our labour and time for greater output. When we create an economic surplus in value and time that we don’t need to consume right away, we need a way to store it across space and time.
A function that money is meant to perform, but it is a function that is lost under the fiat system. When we save our excess productivity in fiat currency, it is liable for a range of taxes and, of course, inflation. Storing your time and productivity in fiat is like holding water in a leaky bucket with holes that continue to expand in size leaking faster and faster.
How much time am I losing?
Each year we accept that our local currency will lose value; our governments actively tell us this through the CPI, a calculation that is very much up for debate. Regardless of the pace at which currency loses value, I think we can all accept the fact that it does. Each time we complain about things being “expensive” or “going up in price”, that is the end effects of inflation at play.
When the supply of money increases faster than the rate of production of something or when the time value of holding the currency carries more risk, prices increase. A merchant or individual will charge more due to costs they incur and additional taxes. A merchant is also going to charge more if they have to sit on a currency that debases while they figure out how to deploy it.
The faster it debases, the more the merchant needs to be compensated for that time loss and thus hiking up prices. As prices increase, the labour and time you gave up to acquire that currency units are lost to you. You still have the fixed unit of currency, but the relative purchasing power is stripped and passed on to those who can better attain more value units than you can, primarily through investing in assets.
By not having a currency that can store value across time, each year, inflation strips from you a bit more purchasing power, the left compounds. If we look at average global M2 money supply growth, it’s around 14% meaning every five years, we all collectively lose half of our stored time to inflation.
If, however, you decided to store your time in bitcoin, you would be receiving an increased time compounding effect. Instead of working one day to cheap 12 hours in 5 years, you reap far more hours worth of value back in the future.
Don’t believe me? Check out the graphs below.
Note: If you would like to see how much time bitcoin has saved you or could have saved you had you converted a days salary into Bitcoin on that specific day, check out the application below or visit their site and support the creators.
Explore the store of time site here
Inflation discourages saving and better capital allocation.
When currency continues to lose value each year, savers are the ones who are punished, while investors are the ones who are rewarded. You can see it in the culture today; every kid with a Robinhood account thinks they are the next Warren Buffet. Saving is lame; it’s going to get you nowhere; but degen apeing in and buying “YOLO” out of the money put or call options is where it’s at, risking it all on speculation.
The more savers are hurt, the more they are forced into the market. When you are forced into investing, you move into parts of the financial system where others have more experience and more significant players have all the advantages.
People are encouraged to buy anything that goes up in price; some certain favour stocks, others prefer index funds or real estate. Financial assets are the new mattress, and people are stuffing it with cash, hoping to get a return.
The fact people have not yet come to grips with is that real estate, equities and bonds can only absorb so much of the monetary premium before they become grossly overvalued and exhaust the pool of buyers willing to continue to bid up prices.
I feel we’re getting closer to that end game every day, and when governments become the buyer of last resort in other markets outside bonds, inflation can run rampant.
Investing is adding more risk into the system.
Inflation encourages forcing capital anywhere to try and get a return, and as people transition from saving to investing, they take on more risk. People are naturally following the incentives and acting rationally. Yes, it can seem irrational when you see stories of NFTs, SPACs and leverage trading, but these are the outliers.
Wanting to preserve or create wealth is a rational decision; inflation has merely corrupted the means of achieving it. All investments have different levels of risk; lower-risk investments tend to carry lower returns while higher-risk investments tend to compensate you with higher returns.
However, as more people invest, they drive down yields and what was once seen as a risky investment seems derisked when we compare the return to beating inflation.
Investors are then encouraged to go further out the risk curve to try and secure better returns, and you can see where all this rampant speculation comes from. Eventually, it leads to all-out gambling, where fortunes are made and lost over short periods.
Finding a risk free rate you can verify.
Traditionally when economies run hot, investors would flock towards a safe haven, a non-correlated asset that would expose the misallocation of capital. The asset of choice would be gold, but gold has not appreciated as rapidly as other asset classes, so investors have not taken too kindly to it as an option. Gold bugs will tell you it’s only a matter of time that the markets are suppressed, and I would agree with their sentiments.
My issue is not with their theory; my issue comes with the optionality to do anything about it. I can’t do anything about the suppression of precious metals through paper markets and trading contracts, nor can I do anything about the centralised custody of gold.
When you hold gold, many are not taking physical ownership, and if you aren’t, you are taking on third party risk. Gold is also rather impractical a tool for the modern age and cannot be monetised as efficiently for cross-border payments without the help of third parties.
I am not saying there is anything wrong with gold, just that it has obvious shortcomings as a hedge against time theft.
Have the time of your life.
When you purchase bitcoin, you’re locking in a time value today in exchange for time in the future. I am not saying bitcoin will always exponentially increase, but you have far more surety that it will still be there in the future compared to locking your time in any fiat currency. As an early bitcoiner, you are taking on more “risk”, watching bitcoin grow from a smaller market cap and liquidity base. However, you are rewarded with multiples of your time back in future value for your network support.
Bitcoin is rewarding everyone who chooses to save in bitcoin, and that’s what savings are all about; bitcoin is saving for the modern future.
When you have an asset like bitcoin that can store value across space and time, it is cheap to move across space and time and affordable enough to take full custody; you set a new paradigm.
Despite its apparent volatility now, I think these features, along with a predictable and verifiable monetary policy, turn bitcoin into the new risk-free rate over time. Instead of the US 10 year bond set as the risk-free rate of the world, it will be the bitcoin CAGR.
Your time is finite; your labour is valuable. Don’t you owe it to yourself to store it in the best way possible? So that you and your family can fully benefit from your work and time on this planet?