Inflation out of control
Printing money inevitably results in inflation, all other things being equal. There was a time when economic growth made it easy to mop up money. It is not difficult to maintain the purchasing power of money as long as there is soil to be depleted, forests to be cut, wells to be drilled, raw materials to be extracted.
Any booby can rule with plenty of oil. But now that peak oil is behind us, the king is naked. The underlings in power discover with terror that their ideology, as well as their supposed intellectual superiority, are only mirages.
Realize that 25% of the public debt has been contracted in the past year. The FED buys back 3/4 of all new debt, pushing inflation expectations to the highest since 2008.
The commodity index of Bloomberg is up 50% over the past year. The price of copper is on the verge of its all-time high. Ditto for corn, which is up 75% from its pre-pandemic level. + 30% for Soybeans. Steel is blown away by more than 50% over the year. Construction timber? + 363% over the last 12 months …
Goldman Sachs expects a barrel price of between $ 70 and $ 80 in the medium term. The Baltic Dry Index – which measures the price of freight per container on the oceans, is up 123%. Highest in over a decade.
All this inflation is already starting to be transmitted to the consumer price index and we should not rely on central bankers or governments to be moved. Inflation makes it possible to reduce the weight of the debt via the theft of our purchasing power, which will encourage millions of people to take refuge in bitcoin to cover themselves.
The Dollar Sinks Again
The other reason why BTC / USD fails to stay on the downward slope for long is the weakness of the dollar. After a booming start to the year, US government lending rates have stopped rising. The US 10-year rate fell from 1.75% to 1.58% at the time of this writing.
The Dollar Index, which allows us to gauge the strength of the greenback against the Euro and a few other important currencies, is down again. The same goes for the USD / CNY exchange rate. The Chinese yuan has resumed its almost uninterrupted advance for a year.
With bitcoin being the candidate displayed to replace the dollar as the international reserve currency, this devaluation is blessed bread.
As such, it should be noted that Russia and China only carry out 25% of their bilateral trade in dollars. Russia got rid of almost 100% of its dollar reserves last year, and we learned this week that less than 50% of its exports are now paid for in dollars.
Likewise, the last digits of the IMF are final. The dollar only represents 59% of international foreign exchange reserves, a decline of 17.5% in two decades. Regarding payments, it is now neck and neck with the euro, which represents 36% of international payments, against 42% for the dollar.
So if bitcoin were included in international foreign exchange reserves, it would already weigh as much as the yen and yuan combined. And if it were to replace all international reserve currencies, a single bitcoin would be worth more than $ 660,000 …
It’s important to understand that it would take a miracle for bitcoin not to become the monetary architecture of the 21st century. What currency can truly compete? A dollar backed by debt increasing by 25% per year? A euro that will end up exploding in flight? A yuan, the currency of a totalitarian country champion of mass surveillance?
Hash rate, Janet Yellen and game theory
Regarding the fundamentals directly affecting bitcoin, note that the hash rate has risen not far from the all-time high after a significant low last month which revealed that the Chinese would ultimately control less than 40% of the hashrate.
In addition, the number of bitcoins on the exchanges continues to sink. If the bleeding continues at this rate, there will not be a single bitcoin on Coinbase within 450 days …
Let’s conclude by pointing out that bitcoin’s latest slack can be attributed to Janet Yellen, the US Treasury Secretary. The former president of the FED hinted on Tuesday, May 4 that interest rates will have to rise, which weighed on gold and BTC.
” We may need to raise interest rates to avoid overheating the economy », She declared during an economic seminar presented by The Atlantic.
It is true that the US Congress took advantage of this mediatically blown pandemic to spend $ 5.3 trillion through a budget deficit of more than $ 3 trillion. And that for 2020 only.
Janet ment like a tooth puller. There is absolutely no way the rates can go up with such debt. Rates have been dropping steadily for 50 years. If rates were to go up, that would mean we’d be grappling with official double-digit inflation, which bodes very well for bitcoin.
We are entering the era of the scarcity of raw materials and the erasure of debt through inflation. The era of bitcoin! Not to mention the strong tensions between the Middle Kingdom and Uncle Sam. The pope of American foreign policy, Henry kissinger, warned that tensions between the two powers could lead to a terrible war.
“For the first time in the history of mankind, it has the capacity to extinguish itself within a finite period of time. Said the architect of the petrodollar, before adding that while nuclear weapons were already large enough to damage the entire earth during the Cold War, advances in nuclear technology and artificial intelligence have multiplied the doomsday threat .
These projections launched last Friday during the forum of McCain institute are one-upmanship in horror. Game theory therefore suggests that we need stateless bitcoin more than ever to defuse this cold war.