As BTB mentions, this article is OVERSIMPLIFIED. Two more ideas come to mind which I think should be shared w/ readers to keep them sane:
1. Lower wages are caused by globalization, and to a smaller degree women entering the workforce, NOT money printing. Basic supply & demand dictates that when labor supply is increased many fold w/o increased demand that wages are going to go down. It's not the government's fault because of money printing if you're broke.
2. Most housing & education cost inflation is due to gov't backed lending, not money printing. Gov't backing these loans and aiming to make them available to anyone has greatly increased the demand for these products while not changing the supply. In this situation people can now buy their houses for much more than they otherwise could have, and pay much more for education than they could without these loans. Sellers are happy to accept the higher prices.
All this to say, the problems with money printing are real but it's not to blame for everything. Lower wages are a natural consequence of globalization and the only thing people can do to help themselves is make themselves more valuable in the labor market or create their own business. Similarly, high housing and education costs is caused by misguided liberal ideals for everyone to own their own house and be educated - good in theory but comes with very painful unintended consequences.
Outstanding, now get into the EuroDollar system and how the Fed doesnt really print money. Wen BTC for interbank collateral loans to fix short term global liquidity?
Fair enough, I agree with points 1 and 2, and being a late millennial i remember the arguments against WTO in the mid 1990s and they seemed to come true, basically just wage arbitraging American workers. Trying balance the inflationary effects seen outside the government subsidized inflation (healthcare/housing/education), leaves me somewhat confused.
1) The federal reserve attempts to induce the banks into injecting more $ into the market by expanding the bank balance sheets. However, the increased bank balance sheets has not necessarily meant a conversion to money printing, ie fractional reserve creation, so a second hypothesis is that there is some liquidity crunch. This make sense when you look at bond rates (the primary tool used by banks int the Eurodollar system to secure liquidity/collateral), if there is a high demand for bond rates, then the rates get depressed, and that is what you are seeing now. If there a high demand for the most liquid and safe asset (USTs) and increasing bank balance sheet, would this not indicate a monetary contraction, or at least an unwillingness to engage in risky asset allocation outside of high grade bonds (at least for banks). This affects the interbank loan system since you need USTs need for collateral (MBSs crashed the system in 2008 since their market dried up and the eurobank lending no longer would take them?) are being bought up by the Federal reserve, does this suck out liquidity for interbank loans?
2) What does this mean for investment vehicles outside the banks? The banks are telling you there is a deflationary contraction and move to safer assets (?), but depressed bond yields are giving you a negative return, what do you do? I am stuck here. Do you assume the bond vigilantes outrun the fed and jack up the UST rates, will the feds allow it since it would tank the equities even though macro might be telling you there is a liquidity crunch in real dollars?
Good thoughts, a couple additional ones for consideration -
1. Jeff Snider is probably smarter than me, but my review of his analysis says it can be technically accurate but not practically useful. E.g. He would say that we're not experiencing inflation, which would have been a bad bet if you took him at face value.
2. History suggests markets experience volatility when a rising rate cycle begins but growth can continue until the bubble is popped (e.g. 2004-2007, 2015-2019). It could be profitable to sell at the beginning of rate rises (2004-2007) or not (2015-2019). Historically BTFD after the bubble pops is hugely profitable as the Fed reverses course into 0% rates and not technically money printing.
This all suggests to me to weather the current volatility while keeping an eye out to rotate more and more into cash, especially after the midterm elections and the UST curve inverts (10y-2y). There's risks on both sides of selling too early or too late. Not financial advice, I'm just a speculator like anyone else.
Dollar is created from debt. If debt is paid off, dollar will go extinct. This won't happen unless another kind of money come into existence. Hence, debt will only increase until everything collapses
Thanks for the article BTB! Somehow I think 2nd and 3rd world countries will get their economies wrecked more than the US. This is probably a moment where the US military will have to make a move so that the dollar keeps it's value in relation to other currencies. I have a feeling that the game is rigged world-wide and somehow, even with the 30T debt, US economy will still come out of this game on top compared to the other countries.
- USTT as "risk-free" loss so the expected value is *always* negative
- BTC might not be able to make it, but it might. The longer it exists the better chance that it will survive, the expected value is unknown
if ppl are rational, they should choose something possible to make it (an extreme is degen aping into obviously risky ohm forks last quarter), rather than something boring and guaranteed losses
Love this. I have also heard this is what happened in Europe before American revolution. Banks grew. Got too big. And people went to America. If you have a book on that, would love to know. History repeats itself
I agree with the ideas. I'd like to push a little on predictions and hypotheses: when does the house of cards fall down? Do you think there are certain gov't actions, certain % or amount of money printed, certain inflation, or some other metric that will indicate the fall is 1-2 years out?
Everyone believing total collapse is coming in a few years has been wrong from 1980 to near-present ... our track record is almost that of climate doomsayers. When do we take a hard look at the data, and revise the hypothesis, vs saying 'it'll be a few more years'?
Impossible to predict a when. Even looking into the past no one can quite point to when the Roman empire collapsed, many living within it believed themselves to be a continued extension of it. The Germans genuinely believed they were Rome for another 1,500 years as the HRE. Will be similar here. No one can quite say when it collapsed. 100 years from now there may be people that argued the collapse occurred in 2020, and there may be others arguing against them that it actually happened in 2060. All we can say is that interesting times lay ahead. We may get to participate in the separation of finance and state. Who wouldn't want to live in that time and be a part of that if they could?
I never did any finance or economics during any of my time in school. Now in my early 30s through the rabbit hole of Bitcoin 4 years ago I have learned more about economics and money. I've been stacking books and all the good information I can get. I've never been more hungry to learn about it all.
Any good books you or fellow jungle readers recommend?
Currently starting 'When Money Dies'. About the hyper inflation of Germany in the 1920s.
Not have traded any NFT on OpenSea so I'm not eligible for the airdrop; might be still a good idea to buy a small chunk to allocate money reserved for microcaps bets? (net worth <100k)
Let us know what your skills are. You have a US Token flow issue if you're thinking about net worth terms. If you can increase your US Token flows it would allow you to buy small degen plays and the large caps with a lot less stress. At $100K net worth, if you only make $10K extra in a year thats 10%. Big move for you percent wise
As BTB mentions, this article is OVERSIMPLIFIED. Two more ideas come to mind which I think should be shared w/ readers to keep them sane:
1. Lower wages are caused by globalization, and to a smaller degree women entering the workforce, NOT money printing. Basic supply & demand dictates that when labor supply is increased many fold w/o increased demand that wages are going to go down. It's not the government's fault because of money printing if you're broke.
2. Most housing & education cost inflation is due to gov't backed lending, not money printing. Gov't backing these loans and aiming to make them available to anyone has greatly increased the demand for these products while not changing the supply. In this situation people can now buy their houses for much more than they otherwise could have, and pay much more for education than they could without these loans. Sellers are happy to accept the higher prices.
All this to say, the problems with money printing are real but it's not to blame for everything. Lower wages are a natural consequence of globalization and the only thing people can do to help themselves is make themselves more valuable in the labor market or create their own business. Similarly, high housing and education costs is caused by misguided liberal ideals for everyone to own their own house and be educated - good in theory but comes with very painful unintended consequences.
Good summary!
Outstanding, now get into the EuroDollar system and how the Fed doesnt really print money. Wen BTC for interbank collateral loans to fix short term global liquidity?
Feel free to add on relevant details, but if all you have is a couple irrelevant mid IQ comments then I can see why you kept it short.
Fair enough, I agree with points 1 and 2, and being a late millennial i remember the arguments against WTO in the mid 1990s and they seemed to come true, basically just wage arbitraging American workers. Trying balance the inflationary effects seen outside the government subsidized inflation (healthcare/housing/education), leaves me somewhat confused.
1) The federal reserve attempts to induce the banks into injecting more $ into the market by expanding the bank balance sheets. However, the increased bank balance sheets has not necessarily meant a conversion to money printing, ie fractional reserve creation, so a second hypothesis is that there is some liquidity crunch. This make sense when you look at bond rates (the primary tool used by banks int the Eurodollar system to secure liquidity/collateral), if there is a high demand for bond rates, then the rates get depressed, and that is what you are seeing now. If there a high demand for the most liquid and safe asset (USTs) and increasing bank balance sheet, would this not indicate a monetary contraction, or at least an unwillingness to engage in risky asset allocation outside of high grade bonds (at least for banks). This affects the interbank loan system since you need USTs need for collateral (MBSs crashed the system in 2008 since their market dried up and the eurobank lending no longer would take them?) are being bought up by the Federal reserve, does this suck out liquidity for interbank loans?
2) What does this mean for investment vehicles outside the banks? The banks are telling you there is a deflationary contraction and move to safer assets (?), but depressed bond yields are giving you a negative return, what do you do? I am stuck here. Do you assume the bond vigilantes outrun the fed and jack up the UST rates, will the feds allow it since it would tank the equities even though macro might be telling you there is a liquidity crunch in real dollars?
Maybe i read too much Jeff Snider.
Good thoughts, a couple additional ones for consideration -
1. Jeff Snider is probably smarter than me, but my review of his analysis says it can be technically accurate but not practically useful. E.g. He would say that we're not experiencing inflation, which would have been a bad bet if you took him at face value.
2. History suggests markets experience volatility when a rising rate cycle begins but growth can continue until the bubble is popped (e.g. 2004-2007, 2015-2019). It could be profitable to sell at the beginning of rate rises (2004-2007) or not (2015-2019). Historically BTFD after the bubble pops is hugely profitable as the Fed reverses course into 0% rates and not technically money printing.
This all suggests to me to weather the current volatility while keeping an eye out to rotate more and more into cash, especially after the midterm elections and the UST curve inverts (10y-2y). There's risks on both sides of selling too early or too late. Not financial advice, I'm just a speculator like anyone else.
There is no Illuminati but there is a jungle. #2035
Indeed.
Fnord
Dollar is created from debt. If debt is paid off, dollar will go extinct. This won't happen unless another kind of money come into existence. Hence, debt will only increase until everything collapses
Thanks for the article BTB! Somehow I think 2nd and 3rd world countries will get their economies wrecked more than the US. This is probably a moment where the US military will have to make a move so that the dollar keeps it's value in relation to other currencies. I have a feeling that the game is rigged world-wide and somehow, even with the 30T debt, US economy will still come out of this game on top compared to the other countries.
That's just my two cents on the matter!
Great input thanks!
purely from a risk-reward perspective:
- USTT as "risk-free" loss so the expected value is *always* negative
- BTC might not be able to make it, but it might. The longer it exists the better chance that it will survive, the expected value is unknown
if ppl are rational, they should choose something possible to make it (an extreme is degen aping into obviously risky ohm forks last quarter), rather than something boring and guaranteed losses
Great posts! Thank you!
what a frikin article... and that quote at the end!!
There is no timestamp for the collapse. We've been obsessing about collapses throughout history.
But I do like this paraphrased quote from hemingway : how did you go bankrupt? Slowly, then suddenly.
Love this. I have also heard this is what happened in Europe before American revolution. Banks grew. Got too big. And people went to America. If you have a book on that, would love to know. History repeats itself
The Ascent of Money by Niall Ferguson is a great read!
Especially interesting is the life of John Law. A Convicted murderer and compulsive gambler who, in the early 1700s was
"simultaneously running all five hundred of the top US corporations, the US Treasury and the Federal Reserve System."
Amazing. Thank you!
Solid write up and easily understood.
I agree with the ideas. I'd like to push a little on predictions and hypotheses: when does the house of cards fall down? Do you think there are certain gov't actions, certain % or amount of money printed, certain inflation, or some other metric that will indicate the fall is 1-2 years out?
Everyone believing total collapse is coming in a few years has been wrong from 1980 to near-present ... our track record is almost that of climate doomsayers. When do we take a hard look at the data, and revise the hypothesis, vs saying 'it'll be a few more years'?
Impossible to predict a when. Even looking into the past no one can quite point to when the Roman empire collapsed, many living within it believed themselves to be a continued extension of it. The Germans genuinely believed they were Rome for another 1,500 years as the HRE. Will be similar here. No one can quite say when it collapsed. 100 years from now there may be people that argued the collapse occurred in 2020, and there may be others arguing against them that it actually happened in 2060. All we can say is that interesting times lay ahead. We may get to participate in the separation of finance and state. Who wouldn't want to live in that time and be a part of that if they could?
While written about the stock market, the phrase "The market can remain irrational longer than you can remain solvent" applies.
just sharing: https://www.singlelunch.com/2022/01/09/an-anatomy-of-bitcoin-price-manipulation/
Along your ideas of institutional wiping out levered players
great post - sometimes get lost in the weeds and forget what it's all about
thanks BTB
Excellent break down. How should I view crypto in terms of, “how much do I need to ensure the future for my children”….is there a benchmark?
I never did any finance or economics during any of my time in school. Now in my early 30s through the rabbit hole of Bitcoin 4 years ago I have learned more about economics and money. I've been stacking books and all the good information I can get. I've never been more hungry to learn about it all.
Any good books you or fellow jungle readers recommend?
Currently starting 'When Money Dies'. About the hyper inflation of Germany in the 1920s.
Good article. You guys are knocking it out.
Not have traded any NFT on OpenSea so I'm not eligible for the airdrop; might be still a good idea to buy a small chunk to allocate money reserved for microcaps bets? (net worth <100k)
It seems there is quite some enthusiasm on CT
Let us know what your skills are. You have a US Token flow issue if you're thinking about net worth terms. If you can increase your US Token flows it would allow you to buy small degen plays and the large caps with a lot less stress. At $100K net worth, if you only make $10K extra in a year thats 10%. Big move for you percent wise
<30 working as management consultant in Europe, so lacking hard skilla to monetize as a freelance/private consulting.
Thinking about starting an e-commerce but honestly hard to choose a niche and hit the ground.
Bull posted recommended allocation % by wealth bracket a few posts back.
Don't chase enthusiasm for NFT's on CT. Most are shills.