Is Bitcoin Racist?
When you look at this graph you should also be aware of what happened with the dollar’s purchasing power in the 100+ years leading up to the creation of the US Federal Reserve. That was the era of the Classical Gold Standard it was mildly deflationary. The graphic below captures the 200 year span from 1800 to 2000. Also look at this table, which shows CPI (Inflation Rate) and the purchasing power of a dollar, year by year from 1800.
Golumbia unsuccessfully tries to debunk this reality:
The comparison of the value of US$1 between 1913 and 2009 is extremely deceptive, because it fails to take into account critical factors such as wage rates, the interest rate on savings, and the possibility of investing that US$1 in capital markets or in industry. A much less conspiratorial take on economic history would point out that US$1 invested in something as simple as a bank savings account using compound interest will typically be worth much more than the simple rate of inflation would provide by 2009; even slightly more aggressive investment would produce even more gains.
I don’t really know how to treat this assertion. “Wrong” doesn’t quite capture it. Economically speaking it’s incoherent, a non-sequitur.
He didn’t invent this, however. A few years ago some guy on twitter tweeted this exact idea and Business Insider, as they are wont to do, cobbled it and wrapped a “story” around it. I wrote about it at the time. I’ve seen similar arguments from proponents of Modern Monetary Theory (MMT) – more on that below, a rather fringe economic school of thought that elevates circular reasoning to an art form.
Today I can do a better job of articulating the problem with this premise: It confuses the purchasing power of a unit of currency with the nominal return of some asset or investment vehicle. By this same logic when one invests $1 into some stock and that stock goes to zero, does that mean the purchasing power of the $1 has declined? Certainly not. The same thing holds if the stock goes up.