Debt Spiral has overtaken the US Treasury, now it is coming for Derivatives! Got Bitcoin?
We will continue to stay on the global macro topic. Although, we do see faint signs that Bitcoin will begin a recovery in early/mid 2023. For now, global macro is center stage! Twitter is now owned by Elon Musk, and have been delisted from the NYSE as of last Friday:
Twitter is now private and have already let a substantial percentage of the directors go. Jack Dorsey, and CZ are helping Elon Musk now with a project within Twitter called X. Elon always dreamed of a digital payments network, he is now assembling a Bitcoin focused team to make that a reality within Twitter. X will be the payment network, it will use the lightning network from the Bitcoin blockchain. This will allow Bitcoin payments on Twitter and Square using the X payment network. Elon knows CBDC’s are coming from central banks. To combat this the X payment network will eventually be online, making lightning payments possible for anything a Twitter user needs to make a payment for. Remember, back in 2017 Elon bought the X domain (X.com) back from Paypal (The company he founded with Peter Theil). Buying Twitter after buying the X.com domain, and then bringing in Jack Dorsey, CZ (Binance) to help build out the payment network. Musk projects 100 million users of this payment network by 2026. This is WHY he bought Twitter. The payment network will be based on Bitcoin. Which as we know, is decentralized and has no counterparty risk unlike fiat currencies, and stocks, bonds. Also, Bitcoin is fungible and a much better medium of exchange than Gold and Silver. So let’s watch this X payment network, and how it evolves! Could be huge for Bitcoin!
Now, see this headline below whereby the risk of a sell off of treasuries, could lead to bank runs, and a financial collapse in the US:
Keep in mind the treasury has a market cap of $15 Trillion. If that becomes insolvent, it leads to a run on derivatives in the future. Which is a $2 Quadrillion market cap. Derivatives collapsing is the end of the financial system as we know it. Here is an exerpt from the Bloomberg article:
Consider that the US Fed is selling US Treasuries to do quantitative tightening. Japan is selling US treasuries to stabilize the Yen. China is selling US treasuries to stabilize the Yuan. There is already a cascade of selling pressure against the US T Bill. Selling these treasuries brings in USD into these struggling economies. This spikes the DXY (USD index), however, that only signals a currency crisis around the corner. See this chart below from Mark Moss about every time the DXY peaks, currencies somewhere begin to collapse. This time is going to be more global, and widespread than in 2008. Here is the chart to further explain this:
T bills are being exchanged for US dollars to stabilize failing currencies globally. See this chart below:
The blue line are foreign Treasury holdings, the red line is the DXY (USD index). As the T bills are sold off the US dollar gains strength! Below is more commentary on how severe this financial situation really is!:
“Ramifications for US debt markets”. What that means is:
Fed rate hikes = stronger US dollar (DXY) = increase in bankruptcy and unemployment = increased credit default = global banking/credit collapse = global sell off of US debt (T bills) = US is the sole buyer = US exports crash = Fed Reserve Pivot = US dollar collapse (hyperinflation) = Great Reset
(two choices CBDC – servitude, or Gold, Silver and Bitcoin – sovereignty)!
For anyone who thinks banks cannot collapse this next section is for you:
Fractional Reserve Banking:
This means that banks can loan out money and operate hedge funds for investors at 10:1 up to 50:1 debt to reserve balance ratios. In other words, banks can loan out your money 10, 15, and up to 50 times over, on a dollar by dollar basis. This means that if, and when there are bank runs. So many depositors will try to pull out their money from the bank, that the bank goes bankrupt, overnight. Hence the term, bank run. Be expecting US major banks to begin experiencing this. Quite possibly next year some time. We cannot predict timing.
We are keeping bank deposits very low, buying up Bitcoin and Silver. Not as much Gold, holding appreciating hard assets. The more scarce the better.
FDIC Insurance:
Also, you actually think the FDIC insurance stands in place if the bank is insolvent and declares a Bail-In? Bail-In situations OVERRIDE FDIC insurance, or FSDS in Europe. If there is a Bail-In the FDIC Insurance is null and void. A Bail-Out is when the government bails out a corporation. This debases the buying power of a currency. It is a hidden tax we know as inflation. A Bail-In is when the depositors money bails out an insolvent bank directly. This is what happens AFTER the Bail-Out. There have been FOIA requests made and central banks dodged this question. They have overrides written in, in the scenario of a Bail-In. Let that sink in! These overrides are legislative. We have copies from the FOIA requests! Banks can over ride FDIC insurance, therefore, your money in the bank is NOT safe in the case of a bank collapse and subsequent Bail-In. See Cyprus, Lebannon, and Greece for examples of Bank Bail-Ins recently. Germany will likely be next. These next two charts are German CPI, and the lower chart is German CPI/PPI:
This means that inflation in Germany is beginning to go out of control. Winter is coming and they have a Diesel shortage. In fact, the Diesel shortage in the US is not much better. 24 days of Diesel remains in the SPR (strategic petroleum reserve). So by December, the US will not be able to import via tanker and rail road engines rely on Diesel as well. Thus, we can expect food shortages and major raw material and supply chain disruptions lasting well into 2023.
Financially, this will kick off quantitative easing, money printing and will begin the hyperinflation similar to what Europe is beginning to feel. Time will tell how long this lasts, and how bad it gets. The Diesel shortage is a ticking time bomb! See this chart below:
Without Diesel, shelves will go empty. We must have it to deliver supplies and raw materials. Heating oil in cold climates will not be available. This is a disaster that will cost many lives if it is not rectified. It will also kick off massive inflation as the fuel, and energy costs are the basis for real inflation. It will be subdued greatly in the CPI numbers governments use to calculate inflation. Once this shortage gets close to zero days of Diesel supply. See how this changes the landscape from a geopolitical standpoint. It will get very Ugly! Inflation will skyrocket. Meanwhile, Jerome Powell just announced a 75 basis point rate hike a few minutes ago!
Counterparty risk is going to become a problem. A central bank or a commercial bank, is a counterparty to you getting your money withdrawn. This is only true when banks have liquidity issues, which is the first article attached on this blog. Perhaps having no middle man between you and your money is worth considering. With all of this uncertainty and risk. Bitcoin (if you hold your own keys) is secure, decentralized, seizure resistant, and it is quickly becoming a great medium of exchange! Development in that area is on the way, thanks to Elon Musk! Billionaire hedge fund managers were many of the first institutional investors to invest in it in 2020 and 2021. They know what is coming next! They are protecting their wealth. We are not financial advisors, and this is not financial advise. We just know that this monetary system is on it’s very last leg. Once it is shut down, the fireworks will start. Don’t be left in the cold. Hold Bitcoin offline, and hold your own keys!
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