Liquidity Crisis hits U.N.; $BTC grossly-undervalued; FIAT is tokenized debt
Issue #0004 October 10th, 2019
Happy Thursday, October 10, 2019!
Wealth Matters 3.0 Focal Point today: A brief history of our current monetary system for context into what got us here and why what is old is about to be new again within the coming decade(s) and how to prepare to read the tea leaves for the opportunities ahead.
“If you owe the bank a hundred thousand dollars, the bank owns you. If you owe the bank a hundred million dollars, you own the bank. -American Proverb ” ~American Proverb
Maybe you are wondering why the world financial system seems to be cracking under liquidity issues? Recent examples include the Fed being forced to inject liquidity into their overnight repo operations now to stabilize their own interest rate targets for the last few weeks, and now the United Nations says it is at risk of running out of cash this month for the first time in a decade if member nations don’t pay up in a timely manner.
What does all this mean for the health of the global economy and investors? I will do my best in under 1000 words (see TL:DW bullets below) to give you context into how we got to the current system, what drives its or harms it, and where crypto and the new digital asset class of money supplies fit into stabilizing, de-stabilizing, augmenting or replacing the current system in the coming decade(s). I am not going to provide you near-term arbitrage or trading viewpoints in this newsletter ever (since that is not my skillset or vantage point) but will do deep and thorough dives into the macro-forces and frameworks that have led us to the current system and that are forming around us all that will dictate the inputs to the next world order as it unfolds since I ultimately believe that a broader understanding of the playing field and rules of the existing and future game are more valuable in the aggregate awareness as it relates to decision making.
Bonus cure for insomnia: U.N. sounds alarm around liquidity crisis; Oct. 8, 2019 briefing:
TL:DW summary of what to take away from today’s newsletter and these supplement videos:
USD and all FIATS are tokenized debt in an analog (paper) format. Tokenization is not a new concept exclusive to crypto-currencies or digital assets. FIAT-”born in debt (spent first and collateralized with taxpayers by decree) money backed by nothing intrinsic”. The paper money we hold in our hands is just the legal tender (token-container) that represents a unit of account on the ledger.
Governments want their own sovereign cryptos (SDR crypto, Chinese crypto, USDcoin, etc) because it gives them the ultimate 3-dimensional form (token-container) to track, tax, transact, and control the FIAT driven/fractional reserve money supplies in the future and to replace the US Dollar as the global reserve currency.
Replacing the USD as global reserve is not only desirable by many nations, but also a necessity for the current financial system to survive, because of the high demand (=strong dollar impact) for USD in the coming months and years due to globally negative interest rates, and the devaluation of other FIATS, that will in the short-run continue to make US Bonds and USD the primary “flight to quality” in uncertainty or degrading currency markets.
Bitcoin is the only free-market (non-debt/sound) form of digital money/currency at scale today that at this point governments can’t kill and would be foolish to ban
Bitcoin network is now the most secure form of wealth storage (highest hash rate in history achieved again this month) with over $200B in infrastructure built by volunteers that wouldn’t even be the replacement cost today if there was even an incentive large enough to build an equal competitive network.
As an analogy, in the 1990s Amazon had to build billions of dollars worth of processing, cloud, and logistics infrastructure to scale its e-commerce operation. In other words, what they ultimately productized as “AWS” (the only place Amazon makes a profit) had its first customer in Amazon.com, and similarly the first customer/application (Capital “B” Bitcoin/$BTC) of the (lowercase “b”) bitcoin network of node operators, miners, and core developers could be thought of directionally as grossly undervalued over time much like the e-commerce side of Amazon was an underpriced stock til it was the top-performing stop 15 years later.
Gold and Silver are the only proven forms of sound money over the last 5000+ years and a good safe-haven hedge for 5-10% of your portfolio, but the timing of their price ascent is unpredictable (yet inevitable) since both are manipulated by the central banks and global elite and held by the top 10 countries trying to ensure their seat at the next Bretton Woods.
Call-to-Action/Understanding: Watch this 3min-video today.
What G. Edward Griffin described as the Mandrake Mechanism is key to understand how liquidity “magically” appears to keep the FED system going and you will know how the U.N. and repo markets work. You don’t need to actually worry about the banks or U.N. running out of money because of this, but the follow-on consequences in society have and will continue to be the devastating “cause and effect” to the wealth/income gaps and inequality we see at scale today and why a “sound money” system that can scale digitally is our best future.
BONUS Call-to-Action/Understanding: Take a Deep dive (1hr 21 minute video)
FREE DOWNLOAD: For the voracious readers and history buffs here is a copy of David’s eBook (click image)
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