The Monetary Duration Dilemma

The bottom line is, you can’t have it both ways. You either have to accept money at a stable short-term value and eroding long-term value OR you need to accept that financial assets that are a good long-term value will tend to earn that risk premium by being unstable short-term stores of value. But the key point is, money, being an inherently short-term instrument, designed to service our short-term spending needs, is inherently a bad store of short-term value if it’s to serve its primary role as a stable medium of exchange.

¹ – Gold, interestingly, is a terrible form of money because it has an unstable short-term value and is rarely accepted in exchange for goods and services. 

NB – This is the inherent flaw in Bitcoin as a form of money. In order to be a good form of money it needs to have a stable value, however, it can’t have a stable value because it has no cash flows or intrinsic value which can be applied to it. 

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