pranavvinod

[pranavvinod]

Since US treasuries are backed by the government, the likelihood that they may default on the payments is indubitably low. The US also enjoys the status of being the world's biggest economy and the prerogative of a reserve currency. Usually, the strength of the dollar increases when investors demand dollars in exchange for their currency holdings or when foreign investors invest in US bonds or US equity. Thence, more foreign investors are looking to invest in US bonds to hedge the risk of bad times.

This may not be bad on the superficial level as the government is happy when the demand is high and the yield is low. This also means that the government may be incentivized to take upon a diverse set of welfare schemes or reduce taxes for the poor or increase public expenditure. The biggest concern is how leveraged the government is becoming. The dominant reason why not many worry about the levels of debt is chiefly because payments are guaranteed. However, this is a considerable issue as other reserve currencies like the euro and the yuan are burgeoning in popularity. The demand for the dollar and its reserve currency status won't change in the short term. With US's trade deficit and its public expenditure proliferating, it could be alarming in some time.

[pranavvinod]

Investors/People tend to invest in mutual funds that have showcased good performance in the past on the assumption that the future prospect would be representative of the past performance. Thus, a larger volume of purchases occur in the top quintile of past annual returns. This may seem justifiable on a superficial level as past performance is an easy metric to judge potential returns. The issue, however, lies with the fact that investors tend to be chimerically buoyant about the possibility that these funds will perform well in the future as they have performed well in the past. Sometimes these funds may perform exemplarily well not due to the fundmanager, it may simply be due to chance.

However, an investor may contemplate it differently and invest in it for better returns and this how one could succumb to the representative bias.

[pranavvinod]

Bitcoin’s ability to mediate transactions is less, due to nature and regulation, so it wouldn’t really store value as a currency and wouldn’t really classify as a currency. Bitcoin is an investment & technological product unlike currency which is an economic & social product.

But these aren’t the only reasons behind why it can’t really function as a currency right now in its current state?

Do check out the article if interested.