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Check out my latest piece:
"The Conclusion Of The Long-Term Debt Cycle And The Rise Of Bitcoin"
https://bitcoinmagazine.com/markets/the-conclusion-of-the-long-term-debt-cycle-and-the-rise-of-bitcoin
Here's a quick summary
:
"The Conclusion Of The Long-Term Debt Cycle And The Rise Of Bitcoin"
https://bitcoinmagazine.com/markets/the-conclusion-of-the-long-term-debt-cycle-and-the-rise-of-bitcoin
Here's a quick summary
:
1. Debt is Cyclical
Buying something you cannot afford today means that you are spending more than you make: you are borrowing not only from the lender but also from your future productivity.
Increases buying power today at the expense of the buying power of your future self.
Buying something you cannot afford today means that you are spending more than you make: you are borrowing not only from the lender but also from your future productivity.
Increases buying power today at the expense of the buying power of your future self.
2. This holds true at both the individual and macroeconomic levels. When an individual borrows money to consume or invest & does not receive a positive return, it decreases that person’s future investment/spending. The same framework applies to an economic system as a whole.
3. Many are familiar with the short term debt cycle, or commonly known as "the business cycle".
What is far less common is an understanding of the long term debt cycle, its implications, and what can be done to "resolve" it.
What is far less common is an understanding of the long term debt cycle, its implications, and what can be done to "resolve" it.
4. Over the last 40 years, interest rates have been in a secular downtrend.
The response to every slowdown in economic activity has been more monetary stimulus, in various forms.
The response to every slowdown in economic activity has been more monetary stimulus, in various forms.
5. Monetary Policy (broadly) comes in 3 different forms.
MP1: Interest rate-driven monetary policy
MP2: QE, or "printing money" to buy financial assets
MP3: Putting cash directly in the hands of the people
MP1: Interest rate-driven monetary policy
MP2: QE, or "printing money" to buy financial assets
MP3: Putting cash directly in the hands of the people
6. MP1 is the most common and effective monetary policy. This is because lowering rates:
1) raises the present value of assets
2) makes it easier to buy items and invest with credit
3) reduces the debt-servicing burden
1) raises the present value of assets
2) makes it easier to buy items and invest with credit
3) reduces the debt-servicing burden
7. When interest rates hit the lower zero bound, policy makers no longer can stimulate w/ rate cuts. Thus, they are limited to QE (which pumps asset prices), and fiscal stimulus (likely financed by the CB)
8. QE helps to re-inflate the economy temporarily, but is simply a short term fix. QE is used help "fix" a debt problem, but all it does is enable and incentivize more credit expansion, exacerbating the existing problems and widening the wealth gap drastically.
9. The second order effects of QE are seen across the society.
Social unrest and political polarization grow in prevalence, as people realize they are being cheated, but most are unsure exactly how, or why...
Social unrest and political polarization grow in prevalence, as people realize they are being cheated, but most are unsure exactly how, or why...
10. The rise of socialist policies can be partially attributed to years/decades of easy money monetary policy warping the incentives and natural market process of capitalism.
The only "solution" that policy makers and central bankers know is more monetary expansion/stimulus.
The only "solution" that policy makers and central bankers know is more monetary expansion/stimulus.
11. Over the long term, inflationary monetary policy is incompatible with technological deflation.
In an attempt to keep a dying system alive, government power and influence continues grow. History tells us that this is never a good sign.
In an attempt to keep a dying system alive, government power and influence continues grow. History tells us that this is never a good sign.
12. The solution: Bitcoin.
"As a result of rates being stuck at the zero lower bound and exponentially increasing debt monetization, the mass default does not occur explicitly but implicitly. The error term is the value of the currency itself, which in this case, is the dollar."
"As a result of rates being stuck at the zero lower bound and exponentially increasing debt monetization, the mass default does not occur explicitly but implicitly. The error term is the value of the currency itself, which in this case, is the dollar."
13. "The debt jubilee comes in the form of the creditors having their purchasing power wiped out.The rational economic incentive during a debt monetization is to protect one's wealth by seeking out assets that cannot be devalued or printed, which is exactly what is playing out."
14. The incumbent monetary order is irreversibly broken.
We are lucky that this process is occurring in parallel to the rise of the Bitcoin Network, a beacon of hope, freedom, and economic empowerment for all.
We are lucky that this process is occurring in parallel to the rise of the Bitcoin Network, a beacon of hope, freedom, and economic empowerment for all.
Hey @RayDalio, here's the solution to the problem, as I'm sure you're in the process of coming to terms with...
