The Capital
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The Capital

How much longer can the Fed continue to print money before these megabubbles start blowing apart?

By Dr. Chris Kacher of Hanse Digital Access, KJA Digital Asset Investments and Virtue of Selfish Investing on The Capital

U.S. Dollar’s Days Numbered?

Going back 500 years and beyond, every fiat currency has had a limited shelf life. In terms of the relative standing of great empires through the ages, the U.S. is on the way down (blue line) while China is on the way up (dotted red line). A well thought out article was recently written by Ray Dalio of Bridgewater on how money, debt, interest rates, and government create the long term debt cycles which lead to the destruction of the world’s reserve currency at that time and gets replaced by a new reserve currency from another country. Ray Dalio runs the world’s largest, most successful hedge funds, Bridgewater. He examines issues from many angles, looking back at numerous historical examples, to gain a decent understanding. Dalio’s article underscores some of the work I’ve published on why the stock market probably won’t retest March lows but continue higher in sloppy fashion with sharp, second order corrections along the way due to the unprecedented economic lockdown/house arrest.

A Thousand Years of History

My answer is that as fiat devalues, fiat will invest in more stable assets. This includes gold, stocks, and bonds. Bitcoin has the added advantage of tightening later this month while central banks continue to ease like they’ve never eased before. Real estate and other hard assets depend on demand, so any protracted recession would negatively impact prices even as fiat debases due to any demand shocks.

The End?

We are in the final stages of the long term debt cycle, a cycle which averages 75 years in length. Central banks have run out of their abilities to stimulate credit and economic growth effectively. If central banks try to tighten by any material means, the debt bubble will burst, credit will contract, and with it the economy. Politicians who seek reelection have no interest in creating the mother of all recessions, so historically speaking, once debt reaches these levels, there is no turning back. Central banks have little choice but to continue to create money and credit, which will continue to devalue their currencies.

“History doesn’t repeat but it often rhymes.”

The bursting of the debt bubble, or more gently known as debt restructuring, will lead to a severe global economic contraction. Given the large wealth gap, this will spur social unrest within nations and against other nations. This internal and external fighting will lead to domestic and international political and structural transformations.

Where Best To Invest

Singularly, the world is close to The Tipping Point, but that’s on a relative timescale, which is long, thus this money printing can easily go for another few years as central banks attempt to stretch QE to infinity. Nevertheless, the economic shockwaves from second order effects due to the lockdown will be felt for many quarters out. Fiat debasement will continue to accelerate while economies blow apart plunging the world into deep recession and with it, prices of real estate and other hard assets.

Exponential Growth Technologies

All that said, another wildcard which the likes of Ray Dalio et al have not considered is the exponential growth of tech- AI, VR, blockchain, et al which will help elevate health care, logistics, e-learning/education, work-from-home, and home entertainment, among other industries. Stocks that dominate these areas are the FAANG names as well as MSFT, AMD, and maybe INTC.

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Hanse Digital Access, KJA Digital Asset Inv. & VSI

TriQuantum Technologies: 1) construction equity cap raise using blockchain, 2) Quantum Poodle Cryptofund, 3) NFTs/DeFi. www.hansedigitalaccess.com