Inflation, Deflation What About Satflation?


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Now I am no economist, nor do I study economics, but I knew something didn’t seem right. As I went down my Bitcoin path like many of you, I started to question the nature of money and the economic “truths” we’ve been taught or rather accept and do not question. 

I am pretty sure this conversion happens worldwide each year; we sit around and complain about how expensive things have become, food, services and other consumption items. We complain, but we continue in the same fashion, saving in cash and taking out debt to maintain a particular lifestyle. 

Inflation in our currency and the price of the things we need to acquire is not something we look at critically, and we think it will find a healthy equilibrium, something it has not, well at least for me, it hasn’t. My wages have been flat for years while goods and services around me continue to rise in price. 

As inflation erodes your savings, many are being pushed into living a life of debt. Something that doesn’t sit well with me, I am okay with the concept of debt, but not taking out debt for debt’s sake. 

With respect to debt.

I can remember the moment; clearly, the moment that sent me down the alternative path, I had applied for a home loan, having saved up a bit of money. The bank looked at my profile and said, you have no debt record, go out and make minor amounts of debt and pay it back and then we can judge if we can offer you a mortgage. 

For me, this sounded stupid, doesn’t the fact that I save and pay in cash, settling my debts instantly prove that I am trustworthy enough to pay off a debt?

I asked my dad, and you know how these boomers are, it’s just the way it is, nature of the business, part of the game, its the way of the world whatever dismissive cliche they like to use, but for me, this was something I found deeply troubling. 

Why can’t I work, save and invest my way towards the things I want? Why am I forced to take out debt?

The fact I did not realise is that debt is the rational choice; by taking out a loan for a nominal value now and acquiring something that can hold its value, you offset the debt with the loss in purchasing power when you pay back with cheaper fiat currency.

Currency debasement works in their favour and is at the expense of chumps like me who saved in the same store of value. 

The inflation-deflation debate

So this debt thing and currency debasement sent me down this rabbit hole of inflation and deflation, and the more I learned, the more questions I had. I thought it would be a simple answer; given that products and services were getting more expensive, it had to be one answer, right? WRONG!

We live in a complex world with global interactions, we are leveraging more of the world’s resources and labour than ever before, and we have a massive labour pool. Inventions like the internet and other technologies have bought about giant leaps in productivity, and overall, should drive prices down; after all, that’s what businesses and entrepreneurs do, they provide better and cheaper services.

I learned that this constant increase in deflation was not suitable for debt-funded activities, they require inflation to continue, and these two forces fight against one another.

These forces have manifested in a world of 

  • Wage deflation
  • Asset inflation
  • Currency inflation

Becoming more prominent, as time goes by, those working for wages and saving in currency are acquiring less value. At the same time, those sitting on assets, especially debt-funded assets, were the winners. 

As a young South African, one of the born free post-apartheid generations, I didn’t have any assets to inherit; I had my labour and education, and that was it; I had to build my asset base from scratch.  

So going out to acquire assets, I first had to save or access the debt markets; I chose to save. 

A search for a savings solution

So I had all these savings melting in my pocket, not knowing what to do with them; some told me to buy shares which I did; others told me to put them into index funds which I did. Then you’re meant to continue to contribute, but the returns are pretty marginal when you have a small base to work with; sure, a few percentage points are great when you’ve got massive capital to play with, but for a small fry like me that’s the only asset is his labour, this isn’t going to get me very far. 

So while I had those instruments working for me, I knew I needed something better, a need that eventually leads me to Bitcoin. Now my Bitcoin path, like all Bitcoiners, was not a straight line; I shitcoined, got hacked, and traded in and out as I found my way around the Bitcoin ecosystem. 

As a rational economic actor, I wanted to profit as much from Bitcoin as I could, getting in on something with this much asymmetric upside; the potential to make money is enormous. I looked at Bitcoin as a trade, like you would a stock, or a commodity, buy it low, sell it high. A strategy that sounds easy, but it’s far from it, as we humans are emotionally attached to the metric that measures our output in society. 

Eventually, I settled on what has been the realisation that Bitcoin is a savings technology. Sure, you can trade it, but this isn’t where my skill set lies. My skill lies in the job I do, which earns me fiat. I use Bitcoin as my savings tool of choice, each day, I buy small amounts of Bitcoin, and if I have spare fiat that I won’t need, it goes into Bitcoin.

I get to do what I am good at and then save in Bitcoin as my risk-free rate; no need to worry about earnings calls or following the news on events that could affect my investments.

I am not investing; I am simply saving in a different unit of account; my goal isn’t to have more fiat money. You will always earn and acquire more fiat; your assets will always be worth more in fiat; they’re never going to top creating more monetary units of fiat. 

My goal is to acquire more Bitcoin.

The benefits of satflation

So why focus on getting more Bitcoin? Because it’s my prefered unit of account, I measure the things I want to acquire in satoshis or Bitcoin. If I have 0.1 BTC or 10 million satoshis, I can buy a certain amount of goods and services. Those 10 million satoshis could get me a car today but a house in a few years.

When you save in satoshis, you get to see the world productivity in all its glory; we humans are fantastic at making things faster, cheaper and stronger at a lower cost. Still, we haven’t been able to benefit from it because of monetary inflation. 

When you measure the cost of goods in Bitcoin, you get to see how powerful your previous labour is in compounding value, and you get to see how cheap we are making access to life-improving goods and services. 

Measuring in Bitcoin, you see how cheap things are becoming; everything becomes more inexpensive when you measure and save in Bitcoin. 

Bitcoin doesn’t solve bad decision making.

Everyone who buys and saves in Bitcoin will benefit from the increase in its purchasing power, but that doesn’t mean they will not squander it. Bitcoin is a chance for you to build wealth with equity and not with debt; it’s up to you to decide how to deploy that value. 

Will you use it to free yourself from selling your labour for more years? Will you use it to provide for your family? 

or will you waste it on meaningless trinkets?

I leave that decision up to you.

Disclaimer: This article should not be taken as, and is not intended to provide any investment advice. It is for educational and entertainment purposes only. As of the time posting, the writers may or may not have holdings in some of the coins or tokens they cover. Please conduct your own thorough research before investing in any cryptocurrency, as all investments contain risk. All opinions expressed in these articles are my own and are in no way a reflection of the opinions of The Bitcoin Manual

6 Responses

  1. > “The bank looked at my profile and said, you have no debt record, go out and make minor amounts of debt and pay it back and then we can judge if we can offer you a mortgage.”

    I mean this sentence alone is a head scratcher for me. Stay debt-free due to good cash management but need to prove you can pay debts so get a debt…

    I’m with you though, Bitcoin is my preferred savings account too and we have options should we wish to spend it on things we have to save up for, or even use it as collateral to free up cash and keep the stack. It’s such a unique entity that it can be considered as a savings tool, payment mechanism, digital asset…

    I guess the way we use it depends on the jurisdiction we’re in – buy and save/HODL then borrow against if needed is the play we have in the UK and you too in South Africa.

    That Priced In Bitcoin twitter account is eye opening when you the see the trend of prices of assets as time goes on, once that clicks then you really can’t un-see it lol

    1. At least I got to the point where they would consider my salary workable for a loan, many people don’t even get that luxury, you can’t save, your wages are deflating and then you still have to deal with gatekeepers who enforce loan/interest rate apartheid so it creates a permanent underclass. Bitcoin gives us a chance to build equity in the collateral of the future

  2. Another excellent article Che.
    I’ve read a few now and find them all very informative and solidify my own reasoning and understanding of Bitcoin and it’s potential for not just now but the future. Saving in sats is more than just saving it’s a way of life many are yet to discover. Hopefully with TBM Luno and the Bitcoin Pioneer Programme we can bring it to new heights.

    1. Thanks Pete, glad you’ve been enjoying my regular rants and finding value in them, I think all these initiatives, be it education, or a more active approach like handing people Bitcoin all play it’s part in migration to the Bitcoin standard. I think it’s inevitable, but that doesn’t mean we shouldn’t be putting in the work

  3. the asset holders get wealthier … the working people and frontline heros get screwed, just trying to put food on the table and keep a small residence and education for their kids … the savage game we play,,, until it all crumbles once again like it is crumbling now

    1. The game isn’t fair that’s for sure, different rules for different classes whereas Bitcoin is the same rules for everyone, those who want a fair shot would opt for Bitcoin, those who prefer to win in unfair games will remain in fiat or shitcoin

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