As your other assets swell, Bitcoin can protect your savings

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The following is taken from the latest monthly report from Deep Dive, Bitcoin Magazine’s premium market newsletter. To be among the first to receive this and other on-chain bitcoin market analysis straight to your inbox, subscribe now.

A rising stock market is now a matter of national security in the United States. This is a very little recognized reality of the current economic system, but it is the truth.

Following the Bretton Woods Agreement which established the US dollar as the world’s reserve currency in 1944, as well as the Nixon shock in 1971 which introduced the world economy to floating fiat currencies, the United States is in a rather precarious situation. position.

Source

Due to Triffin’s dilemma (featured briefly in The Daily Dive # 041), the United States served as a rare case study of a nation with a double deficit (both a trade balance deficit and a budget deficit ).

Source: Yardeni

The economist Robert Triffin explained the reasons for this in 1960,

“If the United States stopped running balance of payments deficits, the international community would lose its biggest source of additions to reserves. The resulting liquidity shortage could drag the global economy into a downward spiral, leading to instability.

“If US deficits continued, a steady flow of dollars would continue to fuel global economic growth. However, excessive US deficits (glut of dollars) would erode confidence in the value of the US dollar. Without confidence in the dollar, it would no longer be accepted as a global reserve currency. The fixed exchange rate system could collapse, causing instability. – The International Monetary Fund

Source: Knoema

In just two decades, the United States has gone from being a world trade leader to being completely overtaken by the nascent state superpower, China. In the end, Triffin’s concerns turned out to be justified and the United States is left with two distinct paths:

Option 1: Reverse the course and “defend the dollar” by asking the Federal Reserve to raise interest rates and reduce asset purchases, thereby dragging the global economy into an unprecedented depression, while pushing away more of an already polarized society as unemployment soars, asset values ​​fall and the real costs of debt soar.

Or

Option 2: Continue to devalue the dollar as stocks, real estate and other asset classes continue to melt in nominal terms, as the United States attempts to relocate the manufacturing industry that has moved from its borders to the United States. over the past two decades, while keeping the hustle and bustle to a minimum.

Source: Yardeni

It is not a mistake that the market continues to melt higher with minimal volatility, but rather, it is completely intentional. Market participants know that the thinking heads of the Federal Reserve and political power have no choice but to devalue the currency.

Source: Holger Zschaepitz

As former credit market trader Greg Foss likes to say:

“In a debt / GDP spiral, fiat money is the error term. It is pure mathematics. It is a spiral to which there is no mathematical escape.

This is not a new phenomenon, and in fact debt cycles similar to what is unfolding today – not only in the United States but around the world – have happened several times before (but not this time. scale in a technologically interconnected world).

All the debt crises examined in history ended in the same way:

“Money printing / debt monetization and government guarantees are inevitable in times of depression where interest rate cuts will not work, although these tools are of little value in countries that are limited in printing or have no assets to support printing and can’t easily negotiate redistributions of the debt burden. All the deleverages we have studied (which are for the most part those that have occurred over the past hundred years) ultimately led to large waves of money creation, budget deficits and currency devaluations (against gold, commodities and stocks). – Ray Dalio, “Principles of debt crisis management”

Our solution to this problem is clear: bitcoin. The reasons we highlighted the basic supply and demand dynamics of the bitcoin monetary network at the start of this report are why it serves as a solution to the great monetary inflation.

There are a few basics about investing during hyperinflation: selling the currency short, doing everything in your power to get your money out of the country, buying commodities, and investing in commodity industries (like gold , coal and metals). Buying stocks is a mixed bag: investing in the stock market becomes a losing proposition as inflation turns to hyperinflation.

“Instead of there being a strong correlation between the exchange rate and the stock price, there is a growing divergence between stock prices and the exchange rate. So, during this period, gold becomes the preferred asset to hold, stocks are a disaster even if they rise in local currency, and bonds are wiped out. “- Ray Dalio,” Principles of Debt Crisis Management “

The solution is simple:

Take your money out of the country and store it in the Bitcoin immutable monetary network. Short the currency (i.e. borrow dollars based on term, collateral, and interest rate) and acquire durable assets with a cost of production.

The reason that gold has always been the preferred asset to hold during debt crises is not because of the metal’s shiny metallic nature, or because of its industrial use cases, but rather the tamper-proof cost of the asset. A marginal unit of gold was / is more difficult to produce relative to the exceptional supply than any other fungible product.

With bitcoin, we have a monetary asset with 24/7/365 liquidity in every jurisdiction and market on the planet, with capped supply, with a direct economic incentive to sell all / all excess energy to the grid, the reinforcing in the process while increasing the marginal cost of unit production (due to the difficulty of adjustment, as explained above).

Bitcoin is not just an asset one should hold in times of unprecedented economic turmoil.

Bitcoin is unequivocally the most certain asset on the planet, and unlike gold during past debt crises, bitcoin is monetizing today, leading us to believe that a 10,000% increase is not only possible, but likely over the next decade.

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