Future of money in 2022 and beyond

Reading the very good series and predictions about the future of money on Coindesk inspired me to put some of my own reflections down.

These points are drawn from sources like Balaji Srinivasan (here and here), Raoul Pal (here), Robert Breedlove (here), Alex Gladstein (here ) and many others.

If you peruse those talks and videos you will notice that a lot of them are about history, as in order to understand the present you have to understand your history. In order to predict the future, you have to understand the present. Underlying themes driving these predictions include A) Demographics, eg Fourth Turning B) Things can stay the same much longer than what any of us expect (see Japan) and C) Software is eating the world (ref Marc Andreessen).

There will be a monetary battle, a test of wills, between the following forces – Authoritarian capital (Eg China), Western Fiat (Fed, ECB) and Crypto capital. The Authoritarian capital requires the citizens to Submit as it is the Legal authority. Fiat capital / central banks claim to know what is best for the citizens, and the message is ‘sympathize’ so the CBs will spend greatly in order to keep the current house of cards going. Crypto capital is wild, volatile and offers get rich schemes interwoven with real world utility.

Fiat money central banks will, due to the economics of the fiat system, need to continue their QE infinity, but they will mask the fact that the system is broken in a language of social spending, of taking care of the inequalities in society. My prediction is that we will have some type of UBI (Universal Basic Income) or monthly Tax Credit scheme in most western countries within 5 years.

Unfortunately this will lead to further asset price inflation (as it has for the past 20 years) and secondarily to commodity and wage price inflation, so the main effect will be that asset prices (stocks, houses) continue to compound at 10-15% per year in fiat money terms, but measured against M2 money supply staying flat. Houses will cost double from now in 5 years and equities will have doubled as well, and we will still wonder who the hell buys any at those nose-bleed levels. The answer is TINA – There Is No Alternative.

The UBI / Social spending will be carried out via CBDC – Central Bank Digital Currencies that can be spent via your phone / device, as this will be cheaper for merchants than credit cards. Government can track the spending in real-time, can tax your income and purchases (via VAT) in real-time and merchants can provide discounts in real time based on your location, purchase history, memberships etc. Consumers will as usual have chosen convenience over privacy.

There will be some wage pressure due to the “Great Resignation” as especially Baby Boomers are feeling better about their finances while uncertain about their health, meaning there will be fewer job applicants for many open positions. My prediction is that wage inflation will outpace government CPIs (CPIs say 3-4% annually, wages 4-5%) while both will lag asset price inflation. But since asset price inflation ‘doesn’t really count’, government economists will still be wondering why the rich get richer and the poor get poorer. How much actually in ‘real terms’ will be spent to equalize the income/wealth divides will still depend on election results and politics.

Today (Dec 12th, 2021) the combined market size of Crypto is around 2.3 Trillion, Global Equities are around 120 Trillion, Global Government, Household and Corporate Debt around 300 Trillion, and Global Real Estate around 330 Trillion, so we can call the ‘real world’ financial markets a nice round 750 Trillion.

The ‘Defi Matrix’ will be the Crypto markets ‘eating the financial’ world in the 2020s.

In the words of Balaji Srinivasan :

The DeFi matrix may be to the 2020s what the social graph was to the 2010s. Once every asset can be represented in a digital wallet – bitcoin and ethereum, yes, but also CBDCs , stocks, loans, bonds, etc. – all these billions of assets will trade against each other every second of every day around the world.

This is not inevitable because I love crypto, and blockchains will create some utopian society ruled by empathy, code and crypto bros / babes. This is because I think most main-stream thinkers, politicians, businesspeople etc severely underestimate the power of:

A) how blockchains can enable Trust, an objective Truth to flourish in business and personal transactions. This is because Blockchains are a revolution in Accounting – Triple Entry Accounting (Debit, Credit, Public). Imagine for example every invoice sent, on a chain where the payer / payee can instantaneously verify its status, pay the invoice, confirm receipt and dispute it if needed.

B) Linux systems today run about 50% of the worlds webservers, and Linux is about 99% built on free labor, open source. Now imagine a similar system except that the people building the system can be rewarded in the token of the system, they gain as the token appreciates in value and the gain in the token allows creation of more utility, which brings more users, more value – creating a virtuous cycle. * How some-one like Charlie Munger who’s a student of human incentives can not see the benefits in this is beyond me..

C) The utility and financial rewards available in the Crypto / Defi markets will slowly drain away capital and resources from the TradFi world, and while the market size, number of participants in Crypto increases, the volatility and insane rewards fade away slowly.

So in the end some of the value in the 750 Trillion real world value will accrue to the Crypto layer, but obviously not all of it (as the real utility will still be in the actual houses, companies, factories etc). Raoul Pal has thrown around a number of 200 Trillion for Crypto markets, I’d be more ‘cautious’ with guesstimate of a nice 10x (25T-30T) in about 5 years time.

These predictions are basically based on a continuation of ‘more of the same’ as today, and could be upended of course if there were severe financial / monetary system crashes, wars etc. I hope not.. That’s all I got for now, any comments / feedback is always welcome.

Thanks for reading,

Oskar

A deflationary currency is better

As I argued in my previous post the financial system is broken, and it shows itself for example as the poor are getting poorer and the rich getting richer (US gini co-efficient 1990 – 2020). At the root of the financial system is the US dollar, which is no longer backed by anything else than ‘the might of the US army / IRS’, every dollar is an IOU to some-one else.

The message we hear in main-stream media is that spending is driving the economy, that the ‘mighty US consumer’ keeps the economy rocking and that ‘2% inflation’ is something the Fed should target as a worthwhile goal so that the economy can ‘grow’. Hold those thoughts in your head for a moment.

Does that work on an individual level? If one person spends all their money, and doesn’t focus on their earning power or saving anything – will that work? No, you will go bankrupt.

Does that work on a household level? No of course not – that family would end up on the street sooner or later.

Does that work for a company? A company spending tons on fancy offices, employee salaries, growing like a weed. Sounds like WeWork, and we know how well that worked. It ONLY worked as long as the company was growing.

So WHY in the world do we think that that advice, those policies are good for a nation?

The current consumerist, wasteful, opaque, spend it now messaging is due to the demands of constant growth, which is inherent in a debt-based, inflationary system.

We saw a small deleveraging happen in after the Financial crisis and the whole system almost came crashing down – because otherwise the costs of servicing debt will become un-tolerable.

https://tradingeconomics.com/united-states/households-debt-to-gdp

I predict that the inflationary, fractional reserve, constant growth mandate will sooner or later inevitably meet the limits of a finite, resource constrained world. We are seeing overconsumption of natural resources, overconsumption of calories / energy, leading to climate change and chronic indebtedness – both public and private. There is only so much debt that households and countries can take on – this is shown even by mainstream economists like Rogoff and Reinhart.

The alternative is a deflationary currency that incentivizes actors to save for the long-term – to adopt a ‘lower time preference’. A lower time preference encourages actors to plan long-term, postpone immediate gratification and encourages global collaboration.

A deflationary currency that is immutable – such as gold or Bitcoin, have inherent properties that are favorable for bringing about a lower time preference. The Gold standard worked well for a long time, and IMO a Bitcoin Standard would work fine as well.

Imagine a nation where politicians were not able to spend money willy-nilly, and budgets actually had to be balanced? Increases in bureaucracies would actually be questioned, instead of just pawned off on consumers to pay – eg 95% of new hires in health-care since 1990 have not been doctors, but administrators.

Imagine a nation where wars actually had to be paid for, and you would have to raise taxes if you wanted to go to war? Eg in World War I – the first thing the combatants did was drop the Gold standard. We’ve just seen how we can spend Two Trillion $ in Afghanistan, without real oversight or deliberation. How many less wars do you think we would have had, and could be avoided in the future?

Imagine a financial system where savers, wage-earners, pensioners were able to keep their earnings, savings in the base layer money and actually earn yield on that, instead of being pushed into equities and junk bonds in a reckless chase for yield, chase to keep the value of your ‘monetary energy’ intact.

And finally as as an investor which asset would you prefer to build your financial house on? The Fed balance sheet has almost 10x since 2007, and the USD is getting devalued at the rate of $120 Billion per month. Meanwhile Bitcoin is algorithmically set to get scarcer (new BTC rate is halving every four years), and has a cap of of 21M coins by 2140.

That’s algorithmically set, immutable, open-source money.

The financial system is broken

I will argue here that the financial system is broken mainly due to these points:

Currently the rich are getting richer (gini coefficient rising), and the poor getting poorer.
The developed country governments and central banks are having to take on more debt to keep the economy going.
It seems the fractional reserve, debt laden Developed economies are getting more fragile, and more challenged to provide the products and services they have promised to their citizens.

So how did we get here? To understand that we have to go back to 1971, and recap a few things.

Today all money is ‘debt’ – it is a claim on the productive resources in the future. New money is today created in two ways:

The Federal Reserve ‘purchases’ eligible collateral – eg Treasuries, and enters a Debit in their Fed ledger, and Credits one of the ‘money center banks (JP Morgan Chase, Citibank etc)
A bank issues a loan for say a mortgage – the ‘money’ is created into existence by crediting the sellers account with the dollars, the mortgage is created as an asset on the banks balance sheet. The mortgage is the home-owners liability – and when the home-owner pays down the principal, dollars (‘money’) as actually leaving the system.

Due the Vietnam war costing the US too much, and foreign governments pulling their gold from the US, the Nixon administration decided to suspend ‘temporarily’ the convertibility of the US Dollar to gold. The untethering of currency from a gold backing since 1971 has enabled the greatest global monetary inflation ever seen – check out the great site called ‘https://wtfhappenedin1971.com/.

The US economy has grown from 1.2 Trillion USD per year in GDP in 1971 (Revenue) to 22 Trillion USD in GDP in 2020 – about 18x. The average household income was $10,600 per annum, rising to $66,000 per annum – about 6x.

So while our economy has grown 18x (nominally) and incomes have grown 6x (nominally), let’s look at what happened on the financial side of the ledger.

In 1971 the amount of financial instruments was about 4.5 Trillion in the US – with the bottom of ‘Exters pyramid’ held down by gold:

While Money & assets (not counting derivatives) are over 150 Trillion today – which is a 33x increase.

So to re-cap -incomes have grown 6x, but assets have grown 33x. In my mind these increases in Debt are driving making the rich richer, and the poor poorer:

To note here – I’m not against rich people per se, most rich people in the US have worked hard most of their lives and I’m sure have earned it. The issue as I see is that the system primarily benefits the ‘Cantillonaires’ today – the megabanks and the 0.1% wealthiest with the first access to money. So while new debt is created – it is mostly an asset for the 0.1%, while it acts as a drag on the economy, for the majority of wage earners.

So who are these Cantillonaires you ask? It’s named after a French economist – Richard Cantillon – who realized that when new money is created – it benefits most those who first gain access to it – they get to enjoy the purchasing power undiluted. By the time that the new money reaches the regular wage-earner, prices and interest rates have risen to account for the new money, so the nominal amount they benefit – say from a stimulus check – is counteracted by the rise in prices.

We also saw in the aftermath of the 2008 financial crisis how we don’t really have a functioning capitalism anymore where those who take risks are allowed to fail (hence ‘too big to fail’). We have instead a capitalism for the cantillionaires, a crony capitalism where the 0.1% reap the profits, but the losses are socialized – i.e. paid for by the tax payers.

Finally today in we are not only taking on new debt, but we are printing more money – the Fed’s is buying 120B in assets (80B in Treasuries, 40B in MBS) – as this extra ‘support’ is needed to carry 30-40% of the US government spending, while it in actuality it is digging a deeper hole for the majority of people. We are following in the footsteps of Japan, down a Keynesian folly where any mishaps are resolved by ‘printing more, stimulating more’. I’d be very interested to discuss or hear how the developed countries are going to get out of this mess we are in today.

Thanks for reading,

Oskar

A short story on the evolution of money

Different people in different locations and times have used different instruments – seashells, squirrel hides, large stones and metals to conduct trade. The first commodity money – coins – were minted in Mesopotamia about 5000 years ago.

The key thing here is that money is a human agreement – based on a narrative that recognizes its value. The narrative exists only in a network, and the larger the network the stronger the narrative.

Over time precious metals (mainly gold and silver) emerged as the best monetary instruments – freely chosen by the market because people agreed so, because the monetary metals had these main criteria:

Recognizable
Divisible
Durable
Incorruptible
Scarce
Fungible
Units of account

The First point to understand about ‘money’ is that its value primarily exists due to its salability – to transfer Value over Time and Space.

In a free-market humans have over time selected gold and silver to be used as money, mainly due to the aforementioned criteria – and because you can’t easily find/create more of it compared to existing stock (ie Gold has a High ‘stock to flow’ ratio).

The Second point to understand about Money is that Money is a Network. The more nodes in the network, the more valuable the network becomes – this is often called ‘Metcalfe’s Law’. Only with money in a network can it be used as ‘currency’ or a medium of exchange.

With these two main points established:

Currency / money is a network between humans
Desirable qualities of money resemble those of gold.

..We can then contemplate how should we act should a better money emerge? In a rational, free market humans would choose the money which best fulfills the criteria of money (ie that Best transfer Value over Time and Space).

The case that Bitcoin is better than Gold at being the ‘base layer’ of money is elegantly argued by the Winklewoss Twins in their piece “The case for 500k Bitcoin“.

For example this table shows that in many aspects of being money – Bitcoin is better than gold:

So why do we need a new money or alternatives to the fiat moneys – USDs, Euros and pesetas of the world? Because money is at the base of the financial system, and the current financial system is broken.

The rich are getting richer, the poor are getting left behind -and I will argue in the next post – that no amount ‘UBI’, ‘MMT” or ‘taxing the rich’ will resolve the fundamental issues.

El Salvador Chose the Hardest money – Bitcoin

Currencies are in constant competition between each other, and people choose to hold currencies for various reasons. In countries like Argentina, Venezuela and El Salvador people have long held US Dollars, as the US dollar has been a ‘harder’ currency than their own currencies.

So what does it mean that one currency is harder than the other? Easy money will be more easily inflated out of existence, it will not hold its value over time, and conversely the harder money/currency will hold its value better over time.

Before 1971 the world was on a Gold standard, mainly because gold historically has the highest stock to flow at about 71 /1, while silvers’ stock to flow can ramp up to 20/1 .

So how is this relevant to our situation today in 2021?

Saifedean tells eloquently the story of how India and China in the 1800s chose silver as their monetary standard, while Western nations chose gold. Over several decades the corroding effects of constantly slipping purchasing power in China/India meant that the big Asian nations languished.

Compared to the Western countries where the nations/companies/people were able to maintain and even increase their purchasing power, over time meant that the Western nations were able to dominate the world economical, political and military arenas.

To quote from the Bitcoin Standard by Saifedean Ammous:

The demonetization of silver had a significantly negative effect on the nations that were using it as a monetary standard at the time. India witnessed a continuous devaluation of its rupee compared to gold‐based European countries, which led the British colonial government to increase taxes to finance its operation, leading to growing unrest and resentment of British colonialism. By the time India shifted the backing of its rupee to the gold‐backed pound sterling in 1898, the silver backing its rupee had lost 56% of its value in the 27 years since the end of the Franco‐Prussian War.
For China, which stayed on the silver standard until 1935, its silver (in various names and forms) lost 78% of its value over the period. It is the author’s opinion that the history of China and India, and their failure to catch up to the West during the twentieth century, is inextricably linked to this massive destruction of wealth and capital brought about by the demonetization of the monetary metal these countries utilized. The demonetization of silver in effect left the Chinese and Indians in a situation similar to west Africans holding aggri beads as Europeans arrived: domestic hard money was easy money for foreigners, and was being driven out by foreign hard money, which allowed foreigners to control and own increasing quantities of the capital and resources of China and India during the period. This is a historical lesson of immense significance, and should be kept in mind by anyone who thinks his refusal of Bitcoin means he doesn’t have to deal with it.

Ammous, Saifedean. The Bitcoin Standard (pp. 49-50). Wiley. Kindle Edition.

So how does this relate to current events and Bitcoin? I believe the following:

Storing wealth (= saved labor) in a superior currency (Bitcoin) can
have long-lasting positive effects, with increasing returns as more
individuals, companies and ultimately nations converge on it.
This means returns in excess of investment returns to be found in
traditional markets.
Why is that?
Because Bitcoin introduces a stable system that people can trust, that can not be manipulated or inflated away by any actors, and Bitcoin is programmed to have a high stock to flow ratio. In 2025 Bitcoin will have a higher stock to flow ratio than gold, and the flow is programmed to be halved every four years after that.
Why is this good?
Bc as more people learn about Bitcoin, learn WHY they can trust Bitcoin as the
hardest, best money in existence, they will want to keep their money (savings)
in Bitcoin.Currently only about 5% of people in the industrialized nations have tried cryptocurrency, so the penetration level among individuals is low, and it is almost non-existent among companies and countries.
Why is the current state bad? Because storing wealth in a currency that is depreciating, being inflated away at about 15%-20% per year due to money printing, will have long-lasting deleterious effects in inflating away the stored value that we/you have worked hard to accumulate.
In particular for El Salvador- Bitcoin and the Lightning network allows El Salvadoreans massive efficiency gains by removing the money transfer middle-men that deduct about 4-5% of their GDP.

On Sep 7th 2021 El Salvador became the first country in the world to adopt Bitcoin as Legal tender, and I believe / hope that El Salvador will blaze a path for many other countries to come.

Happy Bitcoin day!

Review of “the Bitcoin Standard”

The book “the Bitcoin Standard” by Saifedean Ammous was really influential in convincing me there is value in Bitcoin. Money is a complex, emotionally laden topic, with a rich history, and this book definitively deserves a read. Here is a summary of the 10 key points from my perspective.

#1 Money is a concept

Any value in a currency is an agreement between humans that there actually IS value there. I.e. no chimpanzee will agree there is value in the USD, Yuan, gold, seashells etc. Money – starting out as a medium of exchange – is a concept, such as the nation state or a company and does not ‘exist’ in the physical world.

#2 – Money Transfers Value over Time and Space

For ‘money’ the value primarily exists due to its salability – to transfer Value over Time and Space. In a free market humans have over time selected gold over millennia to be used as money, mainly due to criteria – such as being scarce, it’s divisible, it’s recognizable, other humans agree there is value there and you can’t easily find/create more of it – i.e. it has a high ‘stock to flow’ ratio. (stock to flow ratio means how much exists ‘in stock’ – eg above ground gold – compared to how much new flow – eg gold can be dug up – annually). The high stock to flow ratio is key as it means that the money can’t be inflated by market actors.

#3 – Money is a Network

Currency / money is a network between humans, and desirable qualities of money resemble those of gold. However should a better money emerge (say Bitcoin), in a free market humans would choose the money which best fulfills the criteria of money (ie that Best transfer Value over Time and Space). We have learned the hard way in some countries like Venezuela, Argentina what happens if Money doesn’t transfer Value over time.

#4 Bitcoin is open source Money

The number of Bitcoin is set algorithmically –there will be 21M bitcoins by 2140, the stock to flow ratio of Bitcoin will in 2025 be lower than that of gold, and the flow will be halved every four years.

It is also a remarkable innovation in terms of solving in code the ‘Byzantine Generals Problem’, that is how to co-ordinate distributed forces (think nodes) where some nodes might be traitors or corrupt. This solution establishes a consensus in the network about which transactions are legitimate, so it resolves the double-spending problem.

That is “Bitcoin can be best understood as distributed software that allows for transfer of value using a currency protected from unexpected inflation without relying on third parties”.

#5 Bitcoin network value

You can track the number of humans who agree there is Value in Bitcoin by tracking different metrics – eg market cap, number of wallets, hash rate, price etc. As more people consider it a store of value, that is the price grows higher, it also incentivizes more miners to secure the network – which in turn makes the network safer.

The value in Bitcoin is there due to network effects, and there are real switching costs involved- eg a fork won’t do any good. It’s the difference between an open source library that is copied, waiting to be executed, and a Live network that is running with transactions, users, data etc.

#6 Money printer go “Brrr”

Recent actions by central banks to print money – eg 5 Trillion in the US in response to the Covid pandemic – alter the perception humans have of their national currencies, and as central banks are inflating the supply, they are increasing the flow compared to the stock, and eroding the value in the currency.

While most of the world trusts markets for the pricing, allocation of capital goods – nonetheless there is a central planning board in every country of the world for the most important market – the market of capital.

#7 – Keynesian economics

JM Keynes was an influential economist in the 1930s who has influenced governments around the world that in a recession, governments should ‘stimulate’ the economy to make up for the slack from the private sector. Keynesian economics are the mainstream economics that are taught in Economics schools, opposed to classical/Austrian economics, with one of the main tenets of Keynesianism being that inflation is good, and should be ‘managed’ to about 2% per year. What is then not often mentioned is that the money in your wallet declines by 2% per year.

Ammous points out the example of the ‘depression that never happened’ – in 1921, where the government did not take ANY action, wages initially dropped 10%, but within 9 months the economy was strongly growing again leading to the ‘roaring 1920s’.

This is in opposition to the Depression in 1933 where the government froze wages, stimulated with public works programs and by confiscating US gold reserves, and eventually devalued the dollar 70% from $20/oz of gold to $35/oz.

#8 – A deflationary currency leads to lower time-preferences

An individual with a low time preference chooses to defer gratification, and work on items where the pay-off is further out in the future. We know from psychology this is good for individuals, and economics tells as investment in the future is beneficial. Therefore a money that is deflationary, that retains or increases in value, should be preferred by society and individuals alike.

However the opposite is taught today as beneficial – more consumer spending to satisfy cravings, wants, and less saving is good. Less capital therefore available for investment and growth, and pressure on companies to perform in the short term.

#9 – Bitcoin as a concept is many things

A concept has the ability to be multiple things at the same time – that is Bitcoin was initially planned to be a digital currency to be used for day to day purchases, however at the moment due to the price volatility and transaction speeds it is not feasible for that at the moment. There are eg second layer solutions (eg Lightning network or Strike ) that are working to resolve the issues. Taxation issues would have to be resolved as well.

#10 – Bitcoin as an option / hedge

Currently Bitcoin can more appropriately be thought of as

an option (hedge) towards central banks eroding the value in national currencies
an option on a true global money
a volatile investment with a lot of possible upside
but also a chance of going to zero.

If you’ve made it this far – I will again recommend you check out this book – “the Bitcoin Standard” by Saifedean Ammous. It can change how you think about money, as it did for me.

Thanks for reading,

Oskar

Our solar installation

Hi there,

This is a note on our experiences and lessons learned from doing a home solar installation, with the ‘GoLive’ date in March 2020.

Lesson #1 – long time-line

We decided to go ahead with the installation in Sep 2019, and the system was finally productive -meaning turned on and grid connected on March 3rd 2020, about six months later. The timeline roughly went like this:

Sep 2019 : We signed up with Energy Sage as they had good educational resources and they had several providers available in our area.

We receive three proposals and we end up selecting Unicity Solar. The main factors we liked about Unicity were their price was quite competitive (more about that later), they offer good warranties for everything (panels, system output, workmanship etc). We signed contracts by mid-Sep, and Unicity submits the permit application to Oldsmar city building department.

October 2019: Permit application stalls. I initially check in with Unicity, get responses that essentially are saying “yes we are checking”, but nothing progresses. I contact the building department directly.

November 2019: Permit application winds itself through the bureaucracy, physical paper applications (!! 2020 !!) and back and forth emails.

December 2019: Finally Dec 4th the application is approved, it is sent by snail mail to Unicity so they receive it on Dec 12th. This is un-fn believable in this day and age.

December 24th – Installation day.

The Unicity team arrive, install the panels and are done by the end of the day. Yay! (you would think..)

January 2020: Unicity has provided the information to our utility company Teco, Teco needs to come inspect the installation so that they can confirm the interconnection to the electrical grid. Inspection happens on January 13th, and we sign the interconnection agreement.

February 2020: Waiting for final paperwork to arrive.. This is getting frustrating..

March 4th 2020: We get the final go-ahead to turn-on the system… We are just more relieved than happy at this point.

Lesson #2 – good economics

One of the keys for us to go with the Unicity Solar offering was that their offer made sense from a financial perspective. Here’s how the numbers worked out:

We bought a 8.1 kw system, made up of 27 Silfab 300 watt panels, 27 Enphase inverters and these associated warranties. It included also an Intelliflo pool pump that reduces our electricity consumption.

The total cost of the system was $19,158, which after the 30% tax credit works out to be $13,410.
The cost per watt is $1.66 ($13410 / 8100 watt). This is really good considering this is cheap even for Florida (source).

Our electricity bill used to be around $150 / month ($1700 / year) and that has now been cut to $17 / month.
Assuming savings of $133 per month the payback period is 8 years.
Knowing that after 8 years we will have ‘free’ energy for at least another 17 years, and that we are not producing carbon emissions from the house is feeling pretty good.

Lesson # 3- Solid production numbers

The overview of the production per year (the initial grey zone in Feb was as we were not connected to the grid yet) :

The system has been producing over 1000 kwh per month and around 37 kwh per day, here a 6 month sample that I have full data for:

From a carbon footprint reduction perspective this looks good as we’ve cut our carbon emissions from about 17000 lbs / year to effectively zero (source).

Previous emissions:

Revised emissions:

That vehicle number could be cut, hmm… Anyway this looks great right? Not so fast 🙁

Lesson #4 – Production numbers ≠ what the utility company receives

Note that for Sep 2020 our system produced 988 kwh according to our inverter (Enphase):

Now this is the Sep 2020 electricity bill:

So apparently what’s going on here (according to Unicity) is that the system also funnels electricity to the house, so whatever the utility company received is after our consumption has been removed.

Summary

Overall we’re happy with the results as we’ve replaced almost 100% of our consumption, the system is performing well, it’s fun to monitor it, and there’s a small positive feeling of doing something for the environment.

As usual when doing more long-lasting changes – if it’s worth it it will take you three times longer to get there than you initially imagined, but the positive effects can carry for a long time – when you remind yourself of them.

Thoughts on Cryptocurrency and Bitcoin

Hello there,

I’ve been thinking about what money is , what it will be in the future for a while now. I own some minimal stakes in BTC, ETH – for now to be ‘along for the ride’ and partially as a hedge against central banker mistakes. Central bankers may have PhDs, but we’re all human, and I don’t think they know the future. (Before we jump in -if you need a primer on cryptocurrencies, you can for example read Mark Susters’ great piece on cryptocurrencies – the cases for and against.)

Writing this in August 2020, we are in the throes of the COVID-19 pandemic, and the US Federal Reserve has just deemed it necessary to expand their balance sheet by about 5 Trillion USD.

My main premise in this post is that every-one should seriously learn about cryptocurrency today, and potentially invest a small stake to better understand the ‘nature of this particular beast’. It could be very important.

So why now?

The 5 Trillion in new money from the Federal Reserve will flow out into the economy via the commercial banks, from there to the larger companies, regional banks and from there on down to Main Street. Unfortunately the current financial system is leading to greater concentrations of wealth – the 0.1% getting richer and richer, while the 80% struggle with the cost of basic goods (food, health care, education, housing etc) increasing. We can already see it in that the stock market as of now is back to all-time highs, while on Main street the unemployment rate is high and many small businesses are turning off the lights.

Most people don’t think about the role of our country’s currency – and one of the key points which argue against cryptos becoming mainstream is the level of ignorance most people have re: what money/ currency – really is.

So understanding the different characteristics of money is a good starting point:

store of value – it needs to keep it’s value, be relatively stable
medium of exchange – you need to be able to transact with it
fungibility – one ‘dollar bill’ needs to be exactly the same as the next ‘dollar bill’
recognizability – you need to know it when you see it
unit of account – you need to be able to split it and record it in myriad ways
Fiat money vs commodity money – and finally – it will be either ‘fiat’ – that is credit money, or it will have some backing to it (like gold).

How many people you associate with understand these characteristics, and have questioned these for your country’s currency? In most developed countries most people just ‘use’ money, like clean water coming from the taps. We don’t have to understand how it got there.

We don’t use the Dollars, the Euro’s because they are excellent mediums of exchange or stores of value. I’ve lived in three developed countries (Finland, Singapore, US) and I can tell personally it didn’t really matter whether I was transacting in SGD, EUR or USD. The features were the same, you’d earn very little interest and lose out on inflation if you held cash in those. Today’s money is primarily a ‘unit of account’ that you use to track your income, spending, loans and savings – and for most people they don’t question WHAT that base unit actually IS.

Another main reason we use currencies today is because the government in the country where we reside are legally requiring (‘forcing’ to use the libertarian lingo) us to use that currency – at least for paying taxes. I fully agree that governments will NOT cede monetary control easily – since the whole government & country apparatus is transacting in that particular currency, and the government benefits from what’s called ‘Seigniorage‘ – that is where sovereign-issued securities are exchanged for newly-printed banknotes by a central bank, allowing the sovereign to “borrow” without needing to repay.

Understanding that modern money is based on the electronic deposit system controlled by the banking system, and that this Fiat money is created as credit through the loan creation process, is crucial. In today’s electronic money system money exists largely as a record of account in databases as a result of the money being created via loan generation. Meaning that all of the ‘money’ in today’s world are actually just IOU’s. This also means that the USD’s , EURs of the world need to have inflation, as you and I need oxygen. We saw in 2009 what happened when even small amounts of deflation threatened to bring down the whole deck of cards.

So why is a deflationary currency better? Glad you asked.

Because with a deflationary currency (eg Bitcoin) it would not be possible to ‘bail out’ Wall Street / speculators who have used too much money on stock buy-backs over the last 10 years, and kept nothing in reserves. We are rewarding stupidity – the bankruptcy process is needed to dis-incentivize speculation.
An inflationary currency allows us to inflate and borrow almost limitless amounts, and spend money we don’t have – sacrificing not only our own futures, but our children’s future. A deflationary currency focuses you to spend on what you truly need, and some wants. It’s better for the environment, because you will not buy unnecessary ‘stuff’ because your money will be worth more in the future.
A gold-backed currency is inherently deflationary – the US Dollar was gold-backed until 1971, and folks back then didn’t die of a ‘deflationary death spiral’ as some would want you to believe. Some of the greatest ‘real’ – (i.e. growth in earnings / wealth, accounting for inflation) – growth periods in US history happened in the 1870s-1880s with rail-roads being built, industrialization getting started.
With eg Bitcoin there is a fixed limit to the number of Bitcoin that will ever be released, and the mining process is ardous and expensive, so there is a mathematical guarantee that only a certain number of Bitcoin will ever be created (21 million to be exact, by 2140). The Bitcoin Blockchain has not been hacked since it’s inception in 2009, and I would suppose the likely hood is extremely low.

So how could a transition to using more Crypto / Bitcoin then happen? One route is via the recognition of wider parts of the population – eg because of a currency crisis – that a crypto can provide a better store of value – eg ‘Bitcoin as digital gold‘. Currently it’s more of an option / hedge as mentioned.

Also if there is a wider recognition, adoption, then it should naturally lead to Gresham’s law (bad money drives good money out of circulation) – people holding that currency (eg crypto) for it’s value preservation abilities, and transacting in some other medium of exchange. Basically if you’ve bought Bitcoin, you would hold them as you’d believe they will store value / appreciate in the future – and you would transact in your local fiat currency.

Eventually you would also want to start getting paid in crypto (more value) instead of the fiat, should the ball start rolling this way.

To sum it up – I don’t have a crystal ball, and can’t predict the future – and have yet to find any-one that can. So pls consider these points:

The current monetary system seems to reward a very small portion of humanity disproportionately – why not try to find a better tool in this arena?
As humans we are experimenting with different technologies and tools all the time, so shouldn’t we try to discuss, experiment and improve also on how money works, rather than leaving it to a select committee?
Given what we know about human fallibility and central banker prediction capabilities – is it not prudent to have a small portion of ones net-worth invested in alternative vehicles (like crypto, gold) that are not tied to the current monetary systems?

Thanks for reading,

Oskar

Stay at Home Dad

Hi there,

For the past year one of my roles has been as a ‘stay at home dad’. It started with our ‘road-schooling experiment‘ August to October 2016, then once our kids started ‘regular school’ in November 2016, it gave me some time to learn Python programming, Machine learning , chatbots and more recently about blockchain technologies. Now that I’ve started a full-time role in a new company (here) – I wanted to jot down my thoughts related to being a ‘stay at home Dad’, with a simple totally subjective scoring – A to F – about how this experiment has worked out.

Financial – C

Not having a consistent, solid income has been stressful and the heart ache of not having your own income can be strong. It has made me feel like a ‘kept man’, useless – for not providing more monetary value to my family, to society. I know the days / stereotypes of men being the ‘primary bread-winner’ are gone, but stereotypes die hard and the fact is that we all want to ‘get ahead’ financially -not just tread water.

While giving us the time / flexibility to take road trips, for example with Sam’s soccer – we’ve missed travel – as longer, bigger trips would tap into savings.

On the other hand I feel energised by the break, I’m really enjoying the new gig and I know that the new technologies / methods I’ve learned will be very valuable. Already in my new role the things I’ve learned about machine learning, chatbots etc have become useful.

Parenting – A

The best part of my day has been meeting my kids after school. Walking home with Kate, with her holding my hand. Sam always cool and enthusiastic when he gets home, wanting to discuss my day.

It’s given me time to find out how new technology is impacting kids and adults alike, as Simon Sinek discusses here re: millenials. And not only to tell them ‘get off the phone’ – but to have the time to sit down and play a board game, take a swim or just chat. Really it comes down to having the TIME to support the kids fully – listening to them, discussing with them, supporting them.

It’s given us time to cook dinner as a family – with ‘Hellofresh‘ we’ve been getting two meals per week. The packages include all the ingredients you need to fix something a bit more fancy than what a ‘normal parent’ (ie me) would be able to pull off. The easy to follow recipes have given the kids a good start in their cooking skills.

Daily routines – B

Any ‘non-work’ tasks in the home that need to be done – those have largely fallen to me the past year – picking up kids, groceries, fixes around house, drive to practice, etc etc. Of course Jolene did a bunch too, but with her work being a priority, it’s been my work that gets interrupted, takes second place – which hasn’t felt great. However it’s also taken a load off Jolene so she’s relatively less stressed.

Health – A

It’s given me TIME to focus on my health, try out Crossfit. Health = Wealth in some sense, and I’m happy to have found CrossFit. I’ve been training about 6 times per week during this year, and I feel really great about having found a ‘practice’ that will keep me strong, energetic and mobile for many years to come… Three hard workouts per week, three easy (stretching, mobilizing, getting blood going) workouts is just good for staving off mid-life bloat and identity crises..

Conclusion

Overall (one C, two A’s, one B ) – a B+ average, which is not too bad. Would I take this type of a ‘creative / family’ break again if given the opportunity? Right now I’m not sure. However, give me another 3-4 years in technology (project management / innovation / HR) and I just might need it 🙂

Thanks for reading,

Oskar

Three months of Crossfit

Hi there,

Over the past three months I’ve tried Crossfit (what’s Crossfit?)- and thought I’d put down my impressions and lessons learned. To give some background on these points, brief ‘physical’ information about me:

Male, 43 years old
6’2″, #195 lbs (88kg, # = lbs) on July 1st. Body fat 14.5%.
Lifts in the gym during 2017, before July 1st: Bench #235 , Squat #305, Dead lift #455, 15 chin-ups, 12 pull-ups. Aerobic capacity – not great :-). Mobility – not great.
From November 1st 2016 to June 30th 2017 I was training at GoPrimal in Gainesville, which did introduce to me to some of the methods / lifts used in Crossfit, and I had a fantastic time there. My routine was roughly 2-3 strength workouts / week and 1 conditioning workout / week during this time. Also did a 10-week body-comp challenge with them where I dropped from 18.5% body fat to 14.5%.

On to the Crossfit experience –

On July 1st I started at Tern Crossfit and as I had a good base of the regular strength lifts (squats, dead-lifts, presses, chins et) I quickly got into the workouts, how to do the new movements etc.
There is a structure to the workouts:
1. Warm-ups – dynamic, movement, aerobic – about 10 min
2. Skill movement – usually a practice of a skill movement like hand-stand push-ups (HSPU), double-unders (DU), rope-climb etc. Another 10 min maybe.
3. Strength/ Olympic lifting movement – could be a 5×2 front squat EOM (every other minute), could be 5×1 snatch EOM, then 3×1 @ 90% of the max lift, could be push-press etc etc. Another 10-25 min.
4. Workout of the Day (WOD) – this is the ‘High Intensity Training’ portion which can take from 10 min to 30 min total (usually 10-15 min). This is when carry out a combination of strength, olympic, cardio, strongman etc movement – usually trying to do as much work as possible, as quickly as possible…

The positive experiences:

I’ve really enjoyed learning new movements / lifts etc. For example I didn’t know that I could at 43 years old learn to do a hand-stand push-up (against the wall). I’ve gone from not being able to do a snatch, to #135 snatch. OK, this is still what the competitive teen girls are warming up with, but with my mobility I consider it a win :-). So currently I’m working on stringing together more double-unders, getting better at HSPU’s etc.
I’m kinda beginning to ‘embrace the suck‘ – especially in the WOD’s. There’s this zone usually about 5-8 minutes into the WOD where your lungs are burning, your eyes are stinging from sweat and you wonder if you can make it through. But then you remember to just focus on the next rep, making it through the current set, that pain is temporary and really – this suffering is actually not ‘that bad’…
Aerobically challenging – as most workouts are very aerobically challenging for me, my work capacity has gone up, but I don’t have an objective measurement for this one, more of a feeling. Even to the point that I’m OK if the WOD includes a run these days. For example yesterdays WOD was:
- AMRAP (As many rounds as possible) for scaled Level 2:
- 2 burpee / pull-up – so you do a burpee, and then jump up to the bar for a pull-up, then
- 4 Pike push-ups off box, then
- 8 Kettlebells swings, with #70 – that’s one round.
- I ended up doing 15 rounds, 6 reps in 15 minutes, and not totally dying.
Effortlessly stronger. On some lifts it feels like I’m getting effortlessly stronger. Eg. due to many WOD’s including pull-ups, squats, those lifts have gone up:
- Max Chin-ups: 15 ->18
- Max Pull-ups: 12 -> 16
- Max front squat: #245 to #260
Progressions. It’s a fundamental aspect of CrossFit that any workout can be scaled to a person’s skill / mobility / strength levels. This really means that ANYONE can / should try it. Progressions also give you a motivating factor to first of be able to do any workout and also something to aim for if you can’t do the workout as ‘rx’ (as written). Bar muscle-ups – here I come 🙂
Overhead squats / snatches. So I’m a taller guy who’s had a lifetime of sitting in front of computers, laptops – causing the regular forward head tilt, tight hips. I feel that doing overhead squats, snatches, where you strengthen the postural muscles involved in keeping your head upright, has actually improved my posture. And I’ve gone from barely being able to overhead squats with the bar – due to mobility – to OHS #135, so I feel this aspect will be very beneficial for me in the long run.
Standards for lifts / movements. I think it’s very cool, useful to have standards to be able compare where your strengths, weaknesses are – so you know where you’d need to improve. Eg. my pulling strength is fine, but I need a lot of work on the skill movements, pushing strength, mobility etc. Greg Amundsen in ‘Firebreather fitness’ has a very detailed standards definition – broken down by gender, age, skill level – that I highly recommend.
Expect and thrive on the unexpected. As I’d started lifting in my ‘adult’ life more actively at 34, by the time I’d reached 42 years old – I was pretty much in a rut. Yes I was enjoying the lifting, and there was some variation – but it was getting boring. With a CrossFit workout I never know until the day of, what will be thrown at me and there is tons of variation in the workouts. And I’m fine with the unknown, I know I’ll make it through to the other side, even though it’ll be painful in the middle. It takes a special kind of genius to be able to give folks that confidence.
Eating / body-comp. Ever since doing the body-comp challenge in the Spring I’ve sorta maintained a ‘paleo’ / high-fat / high-protein diet which ‘Crossfitters’ usually ascribe to – about 85%-90% of the time. I’m at #198 now, and I’m guessing I’m a bit slimmer than three months ago. Bottom-line due to the WOD’s I think I could quite easily lose some body-fat if I felt like it. To give you an idea, my breakfast can be for example:
1. Omelette, four eggs, slice of cheese, two strips of bacon, bulletproof coffee
2. Shake with avocado, spinach, celery, whey protein, greek yoghurt, bulletproof coffee.
Kids cross-fit. Many CrossFit boxes have kids classes, and I think in terms of general ‘fitness’ (strength, mobility, endurance, skills etc) I doubt you could find a better alternative for your kids. CrossFit will prepare them for pretty much any athletic endeavour they’d wanna pursue.

The ‘meh’ experiences:

I’m missing doing heavy, unhurried strength work. You know the ones where you do one set of heavy 5, then rest until you are ready – say 3-4 minutes to go again. I’ve had to make up for this by going to open gym at 8AM on Sundays to do it, so it says something about how much I miss it.
Kipping pull-ups, kipping this and that. I feel that some of the gymnastic movements put the shoulders in a very exposed position, and I’ve had some shoulder pain for the past month or so. Then again doing some WODs with strict PU’s is just ‘hard’ – so that’s how it needs to be done then 🙂

Conclusions

So clearly my experiences are largely positive, and I will absolutely recommend ANYONE to try out CrossFit. Give yourself at least two-three months to see how your body will react – if you are untrained, you will be sore. However if you’re ready to give it a go, see what you’re made of? I won’t say it will not hurt – because it will – but that’s OK too.

Cheers

Oskar