Bitcoin; Where is Global Macro leading us?

Can the Fed control inflation?  That is the billion dollar question.  They may raise rates by 75 bps today, that appears likely.  Could be 100 bps.  Any less than that, and the market will likely dump on inflation fears.  We all know CPI inflation is now at 8.6%.  This next chart shows a more likely glance, at what real inflation is:

 

 

These price increases average 18%.  That is close to the average US real inflation number presently.  We believe it ranges from 17% to over 20% (CA, NY, MA).

 

Looking at the buying power of the US Dollar since it was established in 1913.  It appears the USD has lost 98% of it’s buying power in 109 years!:

 

 

Here is a quick look at total Federal debt (unfunded liability), GDP, M2 money supply, and base money in a chart.  This is a basis for the rest of this discussion on the global macro situation.  Also, keep in mind Federal debt is approaching $31 trillion, which is not on this chart below:

 

 

The trend is obvious.  The Fed has two options now, only two.  Inflation or Debt crisis.  They have to pick one.  It is coming to a head.  Brent Johnson of Santiago Fund discusses the dollar milkshake theory in this video.  It is interesting, click here to view on twitter.

 

The DXY index (USD index) is at 105.51.  Highest since 2002.  According to the dollar milkshake theory, the dollar is in a long term crack up boom.  Interest rates should rise faster now, we will know soon, what the rate hike announcement is.  Once the Federal Fund Rate (FFR) gets to 3%.  Currently it is 0.8%.  The debt service cost for the Fed to pay back the $31 trillion in Federal debt (assuming an FFR of 3%), is $1 trilliion per year.  25% of the tax income the federal government takes in.  Can the Fed afford to pay 25% of tax income in debt service, just to fight inflation?  No they cannot afford that!  Therefore, the DXY, USD index, will grind up for now.  Until, the Fed can no longer afford the cost of the debt service.  Then, there will be a Fed pivot.  By letting inflation run, the Fed is inflating away the value of it’s debt.  If the Fed does NOT pivot.  Then they chose the other option, a debt crisis.  Neutral ATM thinks the debt crisis would tear apart the fabric of humanity, and would lead to world war.  It is the worse of the two evils.  The point is.  That the status quo cannot go on forever.  The monetary system we are in now, fiat.  It is at the END of it's useful life.  If, in a few years central banks role out CBDC, central bank digital currency.  That is worse still.  CBDC would speed up inflation!  As we have said for a long time on this blog, CBDC is behavioral economics.  The currency can be cut off from an individual account if they’re not doing whatever the central bank requires.  The accounts will have time limits for them to be spent so that the velocity of money is increased.  Higher velocity of money means higher inflation.  This is good for central banks, but bad for individuals.  Most people would not want the private central bankers to pry into their financial lives.  Not a good situation, for most people.  This is quite likely in terms of a future outcome.  CBDC represents the new system we are likely to be pushed into, after fiat is no longer viable.  When that day will come, we have to wait and see.

 

Let’s look at the history of Fed rate hikes.  Thanks to Mark Moss for these next four charts!  Everytime the Fed hikes rates up to a plauteau level, the markets crash!  In the below chart, the blue line is FFR, Fed Funds Rate.  The vertical grey columns are recessions.  In 2000, FFR got to 6%, then a crash.  In 2008, FFR got to 4.5%, then a crash.  FFR has climbed from 0% to 0.8% this year, and it will most likely get to 1.5% after this next rate hike.  Possibly 1.8%.  However, once the Fed brings the FFR above 2.5%.  It runs out of room to raise rates due to the exorbident debt service cost.  Here is the chart below:

 

 

This next chart shows commodities indexed and charted.  They consist of Gold, Wheat, Silver, Nickel, Soy, Corn, Oil, Natural Gas.  Commodities have seen the beginning of a super cycle in terms of their prices.  See the chart below:

 

 

Then look at this next chart with the S&P500 priced in commodities:
 

If CPI inflation went from 8.5% to 8.3% to 8.6% over the last three months, while rates are being raised during that same time.  Then, these rate hikes have not impacted inflation.  Historically, the only way to stop inflation in it’s tracks is for rates to be higher than CPI inflation.  8.6%, yet if the Fed had an FFR of 8.6%, the debt service cost would be $3 trillion per year!  There is no way that is going to happen.  Neutral ATM believes CBDC will come out before the FFR gets anywhere close to 8.6%.  Also, by the time CBDC does come out, CPI inflation will be higher than 8.6%.  In closing, we do not see how the Fed can afford to get above the 2.5% to 3% FFR range.  We just heard the rate hike was 75bps, just announced!  So as expected, the Fed is not being too aggressive.  We really feel that they will try to kick this can down the road further.  Until they run out of room, above 2.5% FFR.  Then, they either roll out CBDC or they pivot and go dovish.  Which means rate decreases and more inflation.  We see more inflation long term.  Further out, CBDC.  Can the Fed control inflation?  No!  Will the population readily accept CBDC, a majority will not.  Bitcoin is the life boat.  It is digital, on a proof of work blockchain.  It is the only currency based off of energy which is a feature not a bug!  Bitcoin is the viable escape hatch for this inflationary and debased monetary system.  We see few if any alternatives.  Gold is one, maybe Silver.  They pail compared to Bitcoin though.  See the returns since 2009.

 

$1.00 USD=1,309.03 BTC10/05/2009

In dollar terms $1 invested in BTC in late 2009, would be worth $27.8 Million today!  Over a 1 billion % ROI!  Gold was worth $1040/ oz in late 2009.  That is a 20% increase for Gold, over 1 billion % increase for Bitcoin since 2009.  More recent years that gap is narrowed, but Bitcoin is the obvious winner.  Both Gold and Bitcoin are suppressed today.  Yet, when the DXY reverses, and it will.  When the Fed pivots, and they will.  Bitcoin will shoot up like a rocket.  We don’t know when.  So get invested in it while it is cheap.  This is a generational wealth transfer underway right now.  Bitcoin will be the asset that wins in the end.  It is transformational.  It is humanitarian.  It does not pick winners and losers like the current monetary system does.  It is strictly free market and backed by energy.  Natural resources back a free market monetary system.  What could be better than that?  Bitcoin mining from solar, gas, wind, volcanoes, hydro and more natural resources backing this currency.  It is scarce, it has global adoption.  What more could you want in a monetary system for the next millennium!  We are not financial advisors, and this is not financial advise.  The life boat can be boarded cheap right now.  This opportunity does not last long.  Climb on board!!

 

Neutral ATM is here to get everyone off of zero Bitcoin.

 

Give Neutral ATM a try.  We have low rates, convenient locations and we are expanding. Contact Neutral ATM, we will answer all your questions about Bitcoin and using our ATM machines. Find a Neutral ATM Bitcoin machine location near you.