Will the cure be worse than the disease?
In Wuhan, China, there’s what’s known as a “wet” market where meat, poultry, and seafood are sold alongside live animals for consumption. It’s speculated that the Corona Virus, otherwise known as Covid-19, started here as a zoonotic disease, meaning the disease jumping from animal to human.
And now the world is in lockdown, hoping to flatten the curve of the spread of the novel coronavirus. In addition, world economies are implementing legislation to lessen the financial blow of this black swan event
“The black swan theory or theory of black swan events is a metaphor that describes an event that comes as a surprise, has a major effect, and is often inappropriately rationalised after the fact with the benefit of hindsight. The term is based on an ancient saying that presumed black swans did not exist — a saying that became reinterpreted to teach a different lesson after black swans were discovered in the wild.” ~ https://en.wikipedia.org/wiki/Black_swan_theory
The US just passed a bill allocating 2 trillion dollars to help industry, as well as individuals, weather this particular black swan event. With the common flu killing tens of thousands per year, why is this virus demanding Trillions in order to save the economy?
Fragility in the Markets
Didn’t we play this game in 2008–2009? Didn’t we try to solve this the same way we are doing now — by injecting trillions into the economy to prop up the failing mortgage-backed securities threatening to take down the entire financial system?
Here we go again.
This time it’s not just the mortgage backed derivatives being traded, it’s corporate debt everywhere, in every industry. Any collection of debts, bound up in a bond and sold to the suckers like retirement, and hedge funds seeking increased yields.
So, this time it’s not just mortgage-backed securities — it’s debts everywhere all the time. Student debt, corporate debt, and yes once again: mortgage-backed debt.
With a global virus exposing it all.
How ‘bout Unemployment?
Unemployment rose by 3.28 million just last week.
This doesn’t include this week, or next week, or the next.
No money, no buying. No more making mortgage payments, or the Great American Pastime of buying stuff.
With no one buying, and no one selling, we have hit both a supply shock, and demand shock — simultaneously. And with no one buying, shops closing for the virus (and lack of business), employees getting fired, laid off, sidelined — and unemployment grows.
What about last time?
Corporations used the last bailout, not to strengthen their businesses to make sure this type of thing didn’t happen again, but instead for stock buy backs to artificially increase their stock prices, and enriched compensation packages for executive golden parachutes.
On top of that, Trump’s 2017 tax deal granting corporations huge tax windfalls again were used for stock buybacks instead of for strengthening their individual businesses.
“I’m outraged that after receiving a huge windfall from the 2017 tax law, many companies chose to spend billions on stock buybacks instead of making long-term investments in their company and their workers,” Senator Tammy Baldwin, a Democrat from Wisconsin, told CNN Business in an email. ~ https://www.cnn.com/2020/03/24/business/bailout-buybacks-airlines-boeing/index.html
With the Covid-19 virus providing cover, the US will (once again) dump the QE of QE’s, a helicopter drop of trillions of make-believe money onto the world stage. And instead of letting these mismanaged companies rightfully fail from self-inflicted wounds, they get billions in funny money to prop them back up, and to re-inflate the economic balloon threatening to blowup the world.
The Right Environment for Bitcoin
The Wuhan wet market provided the right set of circumstances for the blooming of the novel corona virus. It brought the largest mass of humans next to exotic, disease-carrying animals together in a viral soup.
Simultaneously, the perfect environment has just set its table on the world stage for the Fiat Virus to bloom.
The Fiat Virus has been growing out of control since we completely went off the gold standard in 1971. In 1972 in Colorado, you could buy a 3 bedroom, 2 bath house at a 16% interest mortgage rate for $22,000. Today, that same house is worth a half-a-million dollars.
It’s not that the house improved 2,172%, it’s just that the price increased by that much.
Yet further back, FDR forbade the exchange of dollars for gold. For the same price you could pay for one Big Mac today, back then you could have bought 26.
Inflation is a sh#t sandwich, and everyone gets to take a bite.
And now the Fed is again breaking out the helicopter with its trillions of money to rain down upon us.
Inflation everywhere, all the time.
Bitcoin, as many know, was born from the ashes of the financial crisis of 2008. A sort of virgin birth of a “novel” currency with unique characteristics unlike the other world currencies. One: it’s not created or backed by any nation state, making it decentralized. Two: Uninflatable, with a strict limit of 21 million bitcoin to ever be created, and a release schedule every 10 minutes, with a halving of its supply every 4 years.
In 10 years it went from no value to (currently) $6430.
Nothing to something.
In March 2010, the price of Bitcoin was $0.003 cents. ~ https://en.wikipedia.org/wiki/History_of_bitcoin
A stunning 214,333,233% rise.
Yet, the rise of Bitcoin is far from over, it was just biding its time for the perfect Wuhan-like wet market to appear.
It’s Not just for Mortgage Debt
Another QE, yet this time it’s not just to bailout banks over-leveraged mortgages, it’s for every industry — viruses spare no one. Much like 2008, corporations used their tax windfalls to increase their stock prices. Why prepare for a recession/depression when they know Uncle Sam will bail them out? Much easier to look like a genius with the stock chart going from the lower left to the upper right — right?
Yet, when everyone loses their jobs, mortgages stop being paid, cheap crap from China stops being bought. Debt, corporate and otherwise, start looking like bad investments all of a sudden. How can mortgage backed securities be secure when people stop paying their mortgages? How can corporations pay their bondholders when everyone stops buying, and revenue gets squelched to a trickle?
This latest bailout will have the government become the creditor of last resort, become in a sense the creditor of creditors.
And this time it’s for everyone everywhere — businesses, banks, individuals. You thought the last QE was big? This time unlimited amounts of helicopter money will descend from the skies — leading to what?
There are certain economic rules, modern economic theory be damned, that lead to inescapable conclusions. One of them is if you increase the money supply you create inflation.
Too much demand meeting lowered supplies. Prices go up. Too many dollars chasing too few things.
But that’s only when things are denominated in US dollars. What will the price be in Bitcoin terms, the alternative currency? One that is limited in quantity, nay decreasing in supply, with an end-game of 21 million to ever be created?
Everything is relative.
Pre-bitcoin, all currencies were inflated fiat, not backed by anything. Inflatable nothings. And Central Banks raced each other to offer the lower yield. And when zero wasn’t enough they went for negative rates. Pay to hold your so-called savings in interest-negative accounts.
Only those owning actual things like houses, or skyscrapers, things with actual value — can actually benefit from this helicopter brrrr machine. They will inflate in price as they always have.
The rich get richer, and the poor can suck it!
Into this perfect environment of hyper-inflation, free money to everyone, and negative interest rates; entering this is the novel currency of Bitcoin.
A million new users per day, 365 Million new users a year. Some estimate that Bitcoin users double every year.
If this holds true, half the world will use bitcoin in 7 years.
The curve will steepen in the face of this latest QE of QE’s. Give it a year or two.
The QE of QEs
During Bitcoin’s last halving the price rose 4,000%. And that was without the benefit of a QE. With another round of QE, people will see the purchasing power of the dollar go down dramatically. Prices will rise — for houses, for food, for healthcare — anything really.
Money will first go towards what people know, such as stocks, bonds, and the price of gold will rise. Yet, corporate welfare will only go so far without buyers. Everything will be at a standstill with no one buying what people are selling. Corporate debt will be paid down, and stock will be bought back to attempt to fuel a second rise.
But you can’t eat money.
With revenue falling, stock prices will fall along with them. Money will go where it’s treated best. Right now, despite the QE, it’s US dollars. Since it’s the petrodollar, and because everyone is dancing the QE dance.
That will only last for so long. When the middle class becomes poor, and the poor get poorer, they will ask: what about me?
Savings were already below current levels of inflation, and now we’re looking into the inevitable negative rates.
And the new gold — Bitcoin, will see a surge of new users seeking alpha, trying to keep their savings as savings, not to be diluted away in a sea of increasingly filthy lucre.
Money goes where it’s treated best. Bitcoin is the single currency not inflating, and its price can only zoom up.
Like clockwork, Bitcoin will see the mining rewards per block reduced by half. 2016 was the previous halvening, and in 2017 the price of bitcoin went from $1,000 to $20,000.
In less than a month everyone will be receiving their first covid-19 checks, and in less than a month the 3rd bitcoin halving will occur.
The perfect environment for bitcoin’s rise: infinite inflation, and a scared populace wanting to keep their savings as savings.
The timing is nigh well supernatural.
This year the Halvening will come as a shock. A supply shock. Miners sell BTC in order to pay for new servers, employees and facilities to house their mining machines. Miners sell their mined BTC on the OTC, selling to exchanges, hedge funds, and well-moneyed individuals.
There’s no way they will sell at current prices. Much like OPEC, the miner’s control the new supply of BTC. No need for collusion, they will not sell until they see a price they like.
It’s an easy 10x.
Exchanges need liquidity, and hedge funds are looking to buy — at any cost. Because the price right now is cheap. Pre-ETF, pre-helicopter money, pre-inflated USD, pre-halvening, the time to strike is yesterday.
Because of the simultaneous supply and demand shock, nothing will move. So much money, and nothing to buy.
With rates down to zero, and soon to be negative, where is the everyman supposed to park his cash?
Bitcoin — forever pumping
Why trade when hodling works better than anything? Buy at the top of any bitcoin cycle, and wait 4 years, and the lowest return is 10x. Buy at the low and it could be 4,000% or more. As long as the dollar gets inflated Bitcoin will rise — guaranteed. Yet, since inception, 1 bitcoin is always worth 1 bitcoin.
It’s only in comparison to the fiat currencies where you get these valuations.
Bitcoin never lacks for descriptive superlatives. It’s the Apex Predator of currencies, the Fiat Destroyer, the Currency Blackhole. The Bitcoin Virus, adding a million users a day, doubling in users every year.
But, the real virus is not Bitcoin — it’s fiat money. Helicoptering millions to corporations who fly the flags of foreign nations in order to not pay tax. Who sell debt, because usury is big business. They say it’s a safe debt — people will pay their mortgages, and AAA companies will do so as well — until they don’t.
It only took Mother Nature to expose it all.
Bitcoin is not the virus. Infinitely-expanding-infinitely-inflating Fiat is the virus.
Bitcoin is the cure.
Nothing in this article is to be construed as investment advice. Neither the author nor the publication takes any responsibility or liability for any investments, profits or losses you may incur as a result of this information.