Oddbean

The really sad thing about constant currency devaluation throughout the world is that it benefits those who have the most access to cheap credit at the expense of those who do not. People on the lower end of the income spectrum in Egypt are generally dealing with cash. Their wages and savings get debased, and they own fewer hard assets, so they have fewer offsets. Their ability to buy imported goods diminishes, their ability to travel outside of Egypt diminishes, and their costs in general rise. People on the higher end of the income spectrum in Egypt have access to foreign bank accounts and/or have multi-year domestic property loans, which are basically currency shorts. They mitigate the impact from the ongoing devaluation, or in some cases benefit by it. As a tangible example, last year I took out a 7-year loan or currency short against the Egyptian pound, and used it to buy a villa that houses a 9-person extended family (7 when my husband and I are not there). The money supply goes up by 20% per year but my interest rate is 3%, which is an ultra-cheap long-term currency short. Within the first six months of the term, the Egyptian pound was already cut in half relative to the dollar. Who knows what the exchange rate will be over the next 6.5 years. The past four decades of global Fiat World have been like a game of Blackjack. In Blackjack, you try to get to 21 without going over. In Fiat World, you get into a position so that you can take out low interest debt and buy scarcer assets with it, and you do that as much as you can but without going bust in a downturn. The major governments can do that the most. The big banks are next. The big funds and asset managers and public corporations are next. The wealthy individuals are next. Then the middle class, and then the working class and the poor. And the global aspect of Fiat World is important. An asset allocator can operate globally, so among the 160+ currencies out there, they can arbitrage them. They short a currency with negative real interest rates, and buy good assets somewhere with it. I personally did it in Egypt not to make money (we don't plan to sell for the foreseeable future) but to ensure good housing for the family at modest expense. But global firms do this around the world to make money. As the global economy got more and more financialized over the past four decades, a lot of professional talent shifted from engineering or medicine or wherever else and moved toward financial arbitrage. Weak money financializes everything else. Strong money can de-financialize everything else. https://m.primal.net/HaIx.png

If the money is broken everything else becomes money. nostr:nevent1qqsyh2nmng0cj38xq27kd5wvju70fyw3n9j23x3wga8dz4fcdvl34mqpz3mhxue69uhhyetvv9ujuerpd46hxtnfdupzp64suatdx2uqhn2xfu7cgjuqgqcrqadp864uxkv6wckf43atj860qvzqqqqqqy7mhynh

Global firms would use the villa as mortgage to take another loan with low interest rate to buy another villa etc. Thanks for informing us about the currency sotuation in Egypt. A question if i may. Are there any significant benefits for Egyptian exports coming from the devaluation or is just shrinking the economy?

"Their wages and savings get debased" if it's pure inflation then those get debased at the same rate what's your problem. If they can buy fewer things from abroad then that's because the Egyptian Pound gets debased faster than the general trend. That's a problem with a shithole country not with inflation in general. Where I'm from poor people have loans whereas rich people are lenders so the poor win.

This is why I Bitcoin. Perfect example by Lyn nostr:nevent1qqsyh2nmng0cj38xq27kd5wvju70fyw3n9j23x3wga8dz4fcdvl34mqpvemhxue69uhkv6tvw3jhytnwdaehgu3wwa5kuef0dec82c338pkhx7nrxsuny6mwwv6x6dfcwejhqm350pnxzvek0guhsamjvy6h2enjwu6x2decva3k2entxfsnyvr68pckkarjxdekx0mzwfhkzerrv9ehg0t5wf6k2q3qa2cww4kn9wqte4ry70vyfwqyqvpswksna27rtxd8vty6c74era8sxpqqqqqqzhcehgc

This tracks very well with what @saifedean was saying in terms of loans in the future under a Bitcoin standard. Good chance they will be reduced or have no interest rates. It’s like seeing the flip side of this situation.

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The cantillion-effect is in my opinion one of the most unerrated thing in Normieland. A friend of mine bought a house with a 5:1 leverage and he didn't thought 1 second about the consequences for him and for everybody else and about his immense privilege.

Ha, didn‘t think of my mortgage as a currency short yet. But that‘s correct and the reason why I‘m not lowering the mortgage. In Switzerland it‘s common to have high mortgages. Almost nobody pays it off. Although the the Swiss Franc is very stable compared to other currencies. That‘s interesting and counterintuitive to your argument.