U.S. Dollar vs. The World
By Dr. Chris Kacher of Hanse Digital Access, KJA Digital Asset Investments and Virtue of Selfish Investing on The Capital
The (R)Evolution Will Not Be Centralized™
Professor Philipp Sandner who heads the Frankfurt School Blockchain Center enjoyed my recent piece on where things are likely headed on the basis of 500 years worth of historical cycles where I discussed quantitative easing, interest rates, global debt, the U.S. dollar, and the U.S. stock market. As a suggested add-on to my piece, he shared with me some interesting graphs including how the U.S. dollar is dominating all other currencies. Around $12 trillion worth of U.S. dollar denominated debt is debt owed to the U.S. by other countries.
As the dollar continues to strengthen, foreign countries must pay more in their own currency to service the debt. They can only do one thing: Print their own currency, sell it, and buy dollars. The more that is printed, the more the local currency is devalued. In consequence, the dollar could turn into a wrecking ball for global economies, especially emerging economies that are more vulnerable to devaluing their own currencies. The whole world will be pushed into dollars and U.S. treasury bonds, which will further devalue their local currency while the dollar is further strengthened.
This will have onerous second order effects where the U.S. stock market continues to climb as its companies are operating in more stable environments which attract foreign capital. Due to the strong dollar, the price of imports drops, while exports decline drastically as USD denominated products are now too expensive and noncompetitive. This could further trigger additional stimulus by the Fed though the US is not an export-led country, so it should continue to maintain its pole position.
Stocks and Bitcoin to Benefit
Both U.S. stocks and bitcoin will be the beneficiaries up until there remains no choice but to restructure the record levels of debt as we are at the 11th hour in this long term debt cycle. This suggests debt restructuring within the next several years, a small span of time within the context of the average length of long term debt cycles. Money printing can go a lot longer then people expect. Thus, in the meantime, over the next few years, the price of bitcoin should continue its exponential rate of appreciation.
The bitcoin price low of Dec-2018 is likely the major low, not to be retested as tailwinds abound from the May halving, to collapsing economies buying bitcoin, to millennials preferring it to gold, to institutional onboarding, to a broad array of bullish metrics such as hash rate, transaction volume, market value to realized value, usage doubling each year, Moore’s law 4x, realized value to transaction volume, VWAP ratio, on-chain momentum, and others. So, just as Jan-2015 was the major low for bitcoin which then embarked on the start of a long bull market run, slowly at first then accelerating, Dec-2018 was the major low from which a new bull market began, also slow at first, with accelerations in price likely to come over the next 12–24 months.
Then, once debt is restructured, a euphemistic way of saying the debt bubble has burst, in a few to several years, everything including bitcoin will experience steep corrections, much as happened in late 2008, but bitcoin and gold are likely to bounce to new highs first, being the prime beneficiaries of such a situation.