How to Profit from the Coming Cryptocurrency Boom
And now in France, for example, there’s about 30% of GDPthat goes to welfare spending. France is quite famous for that. It has one of the best medical systems, but it also goes with how you support people that are unemployed. Different stimulus payments help for home allowances and this kind of thing,that is, of course, good for people that need it, but is only necessarybecause of these actions that are taken beforehand. More recently, we know social spending has increased due to the COVID crisis,so we can only presume that the chart now looks more like this.
We are seeing another measure increasing quickly – the monetary supply. Monetary supply is the total amount of one currencythat is currently available in the economy. The more government creates new money, the more the supply increases. This money supply is directly correlated to the devaluation of our currencies. Many like to inverse these charts in order to show this devaluation.
Because the more a currency is produced, the less it is scarce. Therefore, the more it loses value. We have all heard stories from our elderssaying, money had a different value back thenand have seen archive images illustrating this. Like this McDonald’s menu from 1972 that had a Big Mac for $0.65. The increase in money supply is the reason why this happens.
In 2020 alone, the money supply has had a big jump. This is the money that was printed in order to finance the war against COVID. And in the U.S. since the beginning of 2020, we have seen an increase of over 30% in the amount of U.S. dollars in circulation.
Although this isn’t felt instantly in the economy, the long termeffects will be felt by the population that have zero allocation in assetssuch as real estate, stocks and so on. The long term consequences of this are very wide. To illustrate, take technologyby definition, technology should drop in pricebecause it becomes more efficient and easier to produce. Yet, due to inflation, prices are not going down,essentially making it harder to develop new technologies. Governments use many reasons, including climate change, as an excuse to print trillions.
But down the road, this printing can lead to adverse resultsbecause of the effects this new monetary supply can have on the development of the right technologiesthat could help us transition to a more renewable energy consuming world. But the central banks will have a different message. This is in order to avoid the spread of panic concerning the financial markets and their currencies,which could lead people to rush to banks to withdraw their money. This obviously would be unsustainable for the economy. A nation in which faith in a currency is lost will see recessions and will take decades to recover.
Instead, central banks use the consumer price index,also called the CPI. The CPI is a flawed indicator, yet is the mostcommonly accepted indicator to measure inflation and its effects on prices. The CPI follows the price of a basket of products that are consumed by people. This, in essence, is the way an indicator like this one should work. But the CPI is flawed because of the waythis basket of products is selected.
It is selected based on what people choose to buy. So every year, new products will be added to this basketwhile others will be removed. But what they choose to buy depends on the price of the product. If inflation goes up, people will change their basketof products in order to accommodate for the price increase. This essentially makes it a new basket of products.
The CPI will not track the price of the previous basket of products. It will track the price of the new basket of products afterthe consumer decision has been made in response to price increases. Saifedean Ammous illustrates this properly in the Fiat standard. Imagine you earn $10 a day and spend them all on eating a delicious rib-eye steak that gives you all the nutrients you need for the day. In this simple consumer basket of goods, the CPI is $10.
Now imagine one day hyperinflation strikes the economy,and the price of your rib-eye increases to $100while your daily wage remains $10. What happens to the price of your basket of goods?It cannot rise tenfold because you cannot afford the $100 rib-eyeInstead, you make do with the chemical shitstormthat is a soy burger for $10. The CPI magically shows zero inflation. Remember that governments will never show us the trueinflation numbers, and they will not attribute itto the increase in our monetary supply because of their management. If people actually understood this, they would never be re-elected.
We’ve talked about debt so much, it is time to look at these numbers, too. We can see the sharp increase of the global debt even in just the most recent years. To add more context, here is what this debt represents as share of global GDP. 356%. We have 3.5 times more debt than actual created value.
Now, this debt bubble could be stopped or at least be slowed downif the central banks were to increase interest rates,making it more expensive to borrow. Giving a breather to the entire system. But today it’s likely too late. The U.S. central bank (the FED) attempted this in 2018because they believe the economy looked to have recovered from the global financial crisis of 2007.
Ten years have now passed since the depths of the financial crisis,a painful part of our history that cost many Americans their jobs,their homes and for some, their hopes and dreams. In addition to holding interest rates low to support the recovery,we have also taken many steps to make the financial system safer. I’m confident that the system today is strongerand in a far better position to support the financial needsof households and businesses through good times and bad. They decided to increase these interest rates, and because of that,the entire market dropped in the space of a couple of weeks, and NASDAQand the S&P 500 dropped over 20% in just a couple of weeks. Only because the markets were reacting to these actions that were done by the central bank.
The DOW is moving back towards the lows of the day. All 30 DOW stocks are now in the red,and the DOW’s gains for the year are gone, a distant memory. The S&P 500 has fallen into correction. That’s a drop of 10% or more from recent highs. All sectors and this is key, are in the red at this moment,and the NASDAQ is now at a seven month low.
Look at the CNN Business Fear and Greed Index. I know you don’t want to see it, we got to give it to you. It measures volatility, momentum and demand for safe havens. It’s pointing to extreme fear. So as soon as it started dropping, the central bankcame publicly and said, OK, we’re going to stop this.
We’re going to go back to normal level of interest rates. And from that moment on, by the end, in 2019,they started again offering these interest ratesand they lowered them from all the way 2.5% to 0.25%,according to a lot of finance books and what people study at university;the scenario we’re in today with negative interest ratesis impossible, right? So what happens then? It’s hard to say, no one really knows. We’ll have to find out because anyway, central banks have no other option. The only thing they can do is print more money. In reality, the only thing that the central banks can do is printmore money and cover for all this debt that is never being paid back.
They will work with governments to continue increasing taxes,welfare spending and de-valuating currency. This isn’t to say that these people are ill intended. They use the tools that are available to them and have simply reached the point where their backs are against the walland they’re forced to abuse these tools. And they’re looking for solutions to take the entire economy out of this situation. Although these solutions are not necessarily in the best interestsof citizens and their personal freedom.
It isn’t without reason that the World Economic Forums initiative is calledthe Great Reset, the name that inspired this documentary. Part of their plan is the creation of central bank digital currencies – CBDCs. This would allow central banks to have a new monetary systemthat they can detach from the current one, allowing people to transition into this new debt free systemand slowly de-leveraging and dropping the debt from the previous onewithout adding risk to their currencies. So central bank digital currency is coming alive. It’s not going to happen today.
I think they have a twelve month experimental period thatthey want to go through before they actually launch for good. The status of it is we’re working hard on it right now. But let me tell you what it is, really. We’re going to address digital payments broadly. So that means stablecoins, it means it means crypto assets,it means a CBDC.
That whole group of issuesand payment mechanisms, which we think arereally at a critical point. Would you say that the corona crisis has even revealed morethe need to have a digital central bank currency or currencies?Well, yes, I think the corona crisis has accelerated very much technical changeand use of digital innovations across the board. I mean, it’s not only in financial transactions,but in e-commerce and the show business. I mean, there are so many examples that, you know, bu yest, it is a fact. Pretty much all central banks are thinking about this.
In the last few weeks of 2020, the People’s Bank of Chinarolled out a pilot program in the eastern Chinese city of Suzhou. They had to download an app and have it on the phone. In a macro way, you have a sense of how money flows through the economy. On a micro scale, and this is something that many in the West would probably not be comfortable withand many in China frankly, would not be comfortable with is that it would allow authorities to be able to track precisely how you or my neighboror the person down the street is spending the money on. They’re spending the money on buying things they shouldn’t be buying.
Whatever, however you define that. Are they gambling with their money? Are they doing this or that with the money? They say it’s just to replace physical cash,but of course, this could just be the first step. Adoption will come for these CBDC’s. In fact, it will be forced adoption. The government will start supporting citizens in need by only giving them stimulus paymentsthrough a wallet controlled directly by the central bank.
