If Hashcoins Were Real, Would There Be Inflation? – Cannabis News, Lifestyle

If you’re a fan of the Trailer Park Boys show, you’ve probably heard of hashcoins. In the show, one of the main characters compresses his hash into circular coin-like objects and uses them as currency in the local economy. It’s a funny look at a small cannabis grower who’s always short on cash but full of weed. But the broader implications are intriguing. Suppose “hashcoins” were real. Would there be inflation? How does “hashcoin inflation” happen when hashcoins emerge as free market money?

What is inflation?

Inflation used to mean an increase in the money supply. Now it means a general rise in prices. Banks and governments create inflation, but it is now assumed to be a natural part of the market economy. And when central banks allow inflation to spiral out of control, as in our current situation, they blame the Russians.

Central banks engage in “inflation targeting”, ie their way of inflating the currency without causing a drastic increase in price. It’s part of the illusion that inflation is a naturally occurring economic issue. That the central bank acts as custodian.

As if inflation were a bear out of its cage at the zoo. And central bankers were the keepers who lured him back onto the premises. Of course, in a free market economy, prices shouldn’t even rise by 2% a year. The bear must never leave its cage. But central bankers are leaving the cell unlocked and the door open, telling people it’s business as usual.

Marginal utility explains hashcoin inflation

Why do some goods cost more than others? Why are THC drinks more expensive than flower? Supply and demand are the simple answers. The diminishing marginal utility is the more technical.

The best way to explain this is to think about your satisfaction with cannabis products. Let’s say one gram of Blue Dream. Your happiness from consuming a second gram may not be as great as it was with the first gram. Your satisfaction with the third gram will likely continue to decrease. And so on with the fourth and fifth and sixth grams.

The more of a good we consume in a given period of time, the less satisfaction or benefit we derive from each additional or marginal unit.

So your enjoyment of Blue Dream may diminish over time. You will want to try something new. But not only that, the price you are willing to pay for a gram of Blue Dream is also going down.

Mainstream economists calculate marginal utility as an objective property that they can measure. In reality, your value of cannabis products is entirely subjective to you. You might find someone who has the same preferences as you when it comes to a gram of Blue Dream. But there is no “utility” that economists can study the way you study chemistry or physics.

In addition to supply and demand, marginal utility can also apply to money. This could lead to hashcoin inflation.

Inflation in the cannabis industry

Currently, Canadian cannabis is not experiencing higher prices. As the country faces record-high inflation rates, cannabis products have either stayed the same or gotten cheaper. There are many factors for this.

First, cannabis retailers are trying to compete with the legacy market, so they’re willing to squeeze their margins to stay open. Two major LPs are selling their cannabis at a loss to starve out the competition.

For these reasons, cannabis prices have not skyrocketed like other prices in the economy. And because mainstream economists (and the press) define inflation as a general increase in prices and not an increase in the money supply, they incorrectly say that there is no inflation in the cannabis industry.

But that is a fallacy. Inflation is money creation. When new money is created, the purchasing power of existing money decreases. And it’s not consistent across the economy. The inflation of the past twenty years has found its way into real estate while other commodities have been left relatively untouched.

But now inflation is driving up food and fuel prices due to the government’s COVID response. Because everyone has different values, and therefore different utility rankings, the impact of inflation on the economy becomes nuanced.

The general “price level” to which economists refer is a statistical construct. Numbers influenced by institutional interests. In other words, many economic statisticians are not doing science. They do astrology for politicians and provide cover for the banks.

A Brief History of Inflation

To understand how hashcoin inflation might occur, we need to briefly review the origins of money. Money goes back thousands of years. Nobody invented it; Money arose from the spontaneous actions of people. Barter could only get us so far. But people liked how shiny and durable gold and silver were. Also easy to transport.

Eventually, gold and silver became a medium of exchange. For example, radio is a medium for music or the Internet is a medium for streaming movies. Money is the medium through which people trade goods and services.

Fast forward to modern times and money is no longer gold or silver. Throughout the 20th century, governments and banks slowly but surely separated society’s medium of exchange from a scarce commodity that was subject to the laws of supply and demand.

But there is no escaping the laws of marginal utility. For this reason, cryptocurrencies are on everyone’s lips. They are digitally scarce and subject to supply and demand. This makes them stores of value like gold or silver.

In contrast, dollars are infinitely printed pieces of paper. And those who get their hands on the new dollars first have greater purchasing power than those who get their hands on the new dollars last. What usually works out is that the banks reap the rewards while seniors on fixed incomes struggle to pay the bills.

A Hashcoin Economy – Is There Inflation?

Commodity-based funds, like hashcoins, are not just a hedge against inflation, but a powerful tool against the elites. What greater power is there for the masses than the ability to withdraw financial support from institutions that have become corrupt?

This is where hashcoins come into play. You can’t print a hash; Manufacturing requires time, energy and resources. To make more money, you have to spend money. This is what makes cryptocurrencies work. Spent time, energy and resources “mining” cryptos to anchor them in the market economy.

In contrast, central bankers tap numbers on a computer screen and create more money with ease. Your profit is free. In this way, the creation of money is inflationary. It doesn’t contribute to the economy and steals your purchasing power. Inflation is nothing more than a hidden tax – legalized counterfeiting. And just because something is legal doesn’t make it legal.

Hashcoin inflation?

Let’s say the global economy has adopted a hashcoin standard. Would there still be inflation?

To answer this we must go back to 16th-century Spain. The Spanish sent ships to the New World, which returned with an influx of gold and silver. While 500 years ago it took time, energy and resources to send ships across the Atlantic, the amount of gold returned has more than tripled its original investment.

Our hashcoin equivalent would be finding an abandoned warehouse garage filled to the brim with blocks of hash. One would only have to press them into coins and suddenly they are rich with minimal effort.

So what happened in Spain? First, they were rich. But by the late 17th century prices had adjusted to reflect this influx of gold. It was a temporary benefit. In a free market economy, it is not money itself that is valuable, but what you can buy with it.

Finally

Hashcoin inflation is possible. But it would not be what we experience today. Inflation in the cannabis industry exists because inflation exists throughout the economy. Since the First World War there has been a systemic devaluation of the purchasing power of money. It is no coincidence that the century of inflation coincides with the century of great government and endless wars.

Rising prices have not reached the cannabis sector for several reasons. However, since cannabis products are priced in dollars, the price per gram does not necessarily have to increase to indicate inflation. If your income loses purchasing power, prices can stay the same. The price itself is not that important. It’s how much your money can buy.