While at dinner with clients at Serbia, while we talked about the current state of the financial world, one said that the crash is coming of the normal cycles of the economy. I have always found this quite an interesting position and while it is true that the economy works on boom and bust cycles, I do not think there is anything normal in it - it is just what we have decided is normal.
Imagine waking up each morning to go to work and not knowing if the car is going to start this week, but next week it might be okay. Or if your microwave intermittently stopped working. At some point, you would say, this is not normal and replace it or get it repaired. However, apply the same concept to the economy and it is expected that it is going to crash (yet many are still surprised) time and time again without anything being done to repair or replace it.
I think that it is too far gone for "repair" as the imbalance it has created is much too severe to return from without a bloody revolution that will just reset it, not correct it. However, I think that what we are going through now is the process of replacement where brick by brick the old institutions will be dismantled and have those bricks moved over to blocks. And block by block, the blockchains will grow in value as their use case continually ramps up to support a wide spread of economic diversity and mass.
Regardless of my belief however, emotionally I go through much the same process as an economy with boom and bust cycles of thought where sometimes I feel that we are moving toward a peak, and sometimes I feel that the trough we are in is an inescapable crevasse. The thing is with feelings though is - they aren't real.
They feel real and they can definitely affect our behavior, but what evokes them needn't be real at all, it could just be a miscommunication, a misunderstanding or commonly, a fear of loss. This loss is the issue when it comes to investing into something and the longer term and lower the feedback it is, the more fear that can creep into the psyche to give rise to the sense of bust.
One of the most valuable things that I have learned in my time on Steem is to better cope with my fear cycles and push my investment time frames further into the distance. I think that this is a necessary skill to develop when looking at getting significant returns relatively consistently.
From close up, the crypto cycles look highly volatile and when compared with traditional investment portfolios they definitely are. However, those traditional stocks, those bluechip investments have had many decades of operating in the current boom and bust cycles of the economy as it stands and as a result, benefit from the stability of institutional support.
But, what happens as the global economy starts shifting?
We can already see that government policy is no longer capable of maintaining economic order as the tools they use were designed for a different purpose. The likes of Keynes never imagined and therefore never factored in the likes of Google and Facebook, mega corporations that span the globe, offer very little tangible and can pick and choose how and where they pay their taxes. Government policy is only able to affect what is within its borders of control, and a lot of the economy that affects it, lays outside of those borders.
Even the likes of Amazon has made massive changes to economy as people have more freedom to order outside of their borders and in so doing, send more financial flow off-shore. Everyone wants their country's economy to be strong, yet they also want the freedom to consume global resources. This puts various stress points on how an economy performs and we are seeing the continued breakdown of national economy while simultaneously seeing the rise of economic and personal wealth in a small minority of the global population.
So while the economies of the world shift in form and habit, the tools available become less useful and effective, kind of like trying to use a hammer to repair a watch. But, as the rise of new tools like blockchain and crypto continues to take hold, the volatility of the old increases and the stability of the new decreases and in time, the critical mass point is reached and the pendulum swings from old to new and gathers momentum.
The goal is of course to create a healthy economy where people do not consider economic breakdown and dysfunction normal and instead create a supply and demand that is more balanced and stable. Perhaps the stability will come through distribution and decentralization as rather than all economies relying on the performance of a narrow set, many blockchains can carry various values and efficiencies and even as they individually have their booms and busts according to supply and demand, the spread across makes volatility lower.
It is interesting to note that at any one time the supply and demand of goods and services don't change much as a whole, yet the economies will swing wildly on the idea that they are. This is of course the manipulation inherent in the system at play, not the reality of the economy itself as in general, people consume with relative stability and predictability.
I think that when it is time for SMTs to take their economic place, they will develop stability for the Steem economy by distributing risk across tokens and again, while each can have their booms and busts, Steem as a whole can become quite rigid as a framework to build upon and benefit from. It is because of this that I believe that holding Steem is so valuable.
When it comes to investing, the speculative markets are likely the places that are going to see the largest swings in short-term values and are therefore where the biggest wins as well as losses will be made. However, when it comes to long-term investing, it is the goods that have utility and where the people will consume from that will have staying power to become the bluechip stocks of the future.
Once upon a time, the megacorps of today's world were garage startups that found it hard to get traction and went through many iterations to get to where they are today. While many of them are damaging, the economies and businesses of the future are going to piggyback on their work and eventually find ways to replace them by undermining their value propositions by providing a more equitable and stable experience for users. This of course isn't an overnight process though as to make the shifts to break the economies we all know and despise, takes a paradigm shift across the globe.
Where we are now started well before this moment and where we will be tomorrow will be a reflection of our actions today. While the emotions of the boom and bust can make us all cautious, change at the scale we are looking for was never going to be comfortable so, better get used to living in uncertainty and discomfort at some level.
After all, due to the "normal" economies we know now, we should all be used to the crash anyway.
Taraz
[ a Steem original ]
