Muse 003: Volatility

Origin Story

In Greek and Roman mythology, a muse referred to each of nine goddesses, the daughters of Zeus (god of sky and thunder) and Mnemosyne (goddess of memory), who preside over the arts and sciences. The above is, of course, the definition of a muse as a noun but it can also be used as a verb. That can be defined as “ to be absorbed in thought” or “say to oneself in a thoughtful manner”. I like all of this as it relates to what I intend these writings will to be for both myself, as well as, anyone who finds value in them.

Volatility

The definition of this word is as follows: liability to change rapidly and unpredictably, more specifically in finance, volatility is the degree of variation of a trading price series over time. This is commonly referred to as a “bad” thing but as evidenced by gold prices in early 1920s Germany, priced in that failing currency, and bitcoin in the US over the last decade, priced in that *bleeping* currency, you’ll see that if you lower your time preference (proverbial hat tip to Saifedean) it can actually be a “good” thing.

You see the gold price in 1914-1923 Germany (left/top) and the bitcoin price from 2012-present (right/bottom) were both extremely volatile. The reason for the hyperinflationary spell in Germany was deficit spending, due to a lost war, and leaders choosing to devalue the currency rather than opting for taxation or austerity, however, you could argue the war reparations were much too great to be able to repay with increased taxes or reduced spending but those thoughts will be left for another muse. Sure seems like a parallel could be drawn to the US today. Will be very interesting to see where all this leads when the Fed finally admits that they must pivot. I think most bitcoiners do not care to price an emerging monetary technology in a failing one, alas, we are for now.