This is an article from about six months ago that popped into my head recently. In particular, I was thinking about it after the Federal Reserve announced ‘QE Infinity’ right before markets opened on Monday, March 23rd. As I was sitting there at my desk, mulling the implications of the announcement, the phrase “Bitcoin is everyone’s problem now” popped into my head.
Bitcoin is first and foremost a monetary phenomenon. The social climbers and false prophets who proclaimed it is a payments revolution have either come around or been repudiated by the market and washed out, embittered. Most who understood it that way are now moving on to new things. The world did not need another Paypal. The world needed a new monetary institution.
You see, we are now unmistakably on our way to a new monetary system. The die were already cast after the Fed blew it’s load in the wake of the Great Financial Crisis in 2008 by expanding it’s balance sheet 500%, to bail out the insolvent banking system, and lowering the Fed funds rate to zero bound in an effort to stimulate credit creation, encourage spending (discourage saving), and reflate the contracting money supply.
However, most commentators believed that the Fed was in control, that the Fed would be able to successfully normalize (reduce) its balance sheet and (raise) interest rates after the economy was back on firm footing. But then 2018 happened.
Ten years after the GFC, the Fed attempted to normalize. The Fed raised rates three times over the course of 2018 totaling a meager 75 basis points (0.75%) increase and decreased its balance sheet by a paltry 15%. By the end of the year, the market had crashed 20%, at which point the Fed abruptly reversed course and lowered rates and began expanding it’s balance sheet again. Now it should have been clear that the Fed was cornered, and it was either keep the easy money coming or the financial system falls apart. Print or die.
Yet, some market participants were still in denial. Average Joe was still oblivious. Markets bounced, then continued to all time highs on poor fundamentals. Then a Black Swan emerged. Markets plunged and liquidity dried up. The Fed launched a 1.5 trillion dollar ‘bazooka’ to try and calm markets, but everything continued to plunge. Four days later, the Fed was forced to unleash another emergency rescue package, to no effect. A week later, they burned the boats and announced unlimited asset purchases. QE Infinity. “Whatever it takes.”
Boom. Now it’s plain for everyone to see. The Fed will create tens of trillions of new currency units, an unlimited amount, to attempt to prevent the debt bubble (that it was responsible for creating) from collapsing. The Fed will purchase bad corporate debt and become senior creditors of the country’s companies. Soon it will begin purchasing equities to support the stock market. Stealth nationalization of the economy in a socialist, nay, fascist coup.
If we’re lucky, this results in decades of Japan-like stagflation (low growth and high inflation) that severely reduces prosperity and deteriorates social conditions. If were not so lucky, we get Weimar-like hyperinflation.
And let’s be honest, as evidenced by the last decade of idiocy, it’s clear the Fed has no idea what it’s doing and, contrary to its own belief, has no control over human action and consequently no control of the markets. Things can get out of hand very fast, and the only thing they know how to do is create more money, which increases the likelihood of hyperinflation.
In any event, this will all play out while Bitcoin exists. Asset managers the world over will be seeking to own safe haven assets that provide shelter from currency debasement that is underway. Average Joe will be seeking shelter too. The instinct for self-preservation is strong. Traditionally, they will allocate to gold for this purpose. But now the cat’s out of the bag. The global macro hedge fund crowd is dipping their toes into Bitcoin in addition to gold. And Average Joe is having trouble acquiring physical gold, and instead finding it easier to own Bitcoin. This trend will only continue. On a global scale.
Bitcoin is everyone’s problem now. Well, a problem for the central banking cabal, and the financial and political elite. Bitcoin is like the Terminator of money… “Bitcoin cannot be bargained with. Bitcoin cannot be reasoned with. It doesn’t feel pity, or remorse, or fear. And it absolutely will not stop, ever.”
Bitcoin will continue to exist, the perfect foil to the current monetary system. While the world’s central banks continue to debase their currencies, Bitcoin is a completely separate monetary system with monetary properties diametrically opposite of the prevailing monetary system. It is a harbor in the storm. A way to opt out of the current system that is eroding your wealth and standard of living at an increasing rate.