Reader

I was on the treadmill this morning pondering macroeconomics and whether cryptocurrency is part of the M1 or M2 money supply. (Darn impressive, huh?)

And, as I considered my confusion about cryptocurrencies, I sensed something familiar from my youth. What was it? And then it hit me – cryptocurrencies are like baseball cards!

Baseball cards and crypto

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Then: “I have a Mickey Mantle. I’ll trade for a Hank Aaron and a Moose Skowron.”

Now: How many Dogecoins can I get for a Bitcoin?

Then: Should I hold on to my Ernie Banks rookie card? It may be worth a bunch when the Cubs win the World Series.

Today: I bought Bitcoin at $19,677. Should I hold it until it goes back above $50,000?

Then: I speculated on the value of every rookie card I got in my Tops Bubblegum pack. Hold on or get rid of it?

Today: Should I hold on to one of the “exotic” cryptocurrencies? It might go through the roof someday.

Wearing my macroeconomics hat (much more serious than my Cubs hat)

Disclaimer: I am NOT an economist like my friend Kay. But I like to think (also like my friend Kay).

Money has three functions:

• Medium of exchange (You can buy stuff with it).

• Unit of account (It acts as a standard measure of the value of something).

• Store of value (You can save it for a future use).

The macroeconomics of my baseball cards

OK, let’s consider the cards from my youth.

• Medium of exchange: Even though I valued them as a precious commodity, Bud down at B&A Grocery would not accept any of them (even my Ernie Banks card!) for a fudgesicle on a hot summer day.

• Unit of account: Have you ever swapped baseball cards? How could Tom even think that his Hank Aaron was worth more than my Ted William? He was nuts! (But I did slip a Stan Musial past him.)

• Store of value: Ernie Banks always predicted a winning year for the Cubs and my “full roster” pack was worth a bunch at the beginning of the season. However, it lost “considerable” value when they visited the cellar (again).

Crypto and the functions of money

This story, unfortunately, is like my baseball cards.

• Medium of exchange: I know I live in the backwaters of Colorado, but I can’t find a single store that will take crypto. The heathens want “real” money.

• Unit of account: Let’s just say it’s not stable. Is my used Honda worth three Bitcoins or a half of a Bitcoin? Am I living on the edge of poverty, or should I book that chateau in Switzerland? It depends on the day of the week.

• Store of value: As crypto inflates and deflates I’m not sure if I should dump it, hold it, or get more. I know what it’s worth today but tomorrow is another adventure in crypto-land.

Big disclaimer

I’m an engineer who likes to think about weird stuff and explain it in ways I can understand. I’m not an economist. I’m not a banker. Don’t take my advice (but maybe you should have kept that old Mickey Mantle rookie card).

Cheers,

Bill

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