It is a conflicting time to be Asian American in the year of the Coronavirus. As strange as this time is, I do know without fail that Asian people are savers and a lot of savers just watched their savings get destroyed. Watching the economy and health of nations spiral downwards while stuck at home behind a laptop watching paint dry is perhaps the all time oddest vibe. But the Coronavirus has exposed all of us to the dominos that connect our financial markets.
Start with what I knew prior to Corona…
- US Dollars haven’t backed by gold since 1933.
- We all played along with the glaring delusion of stocks being overvalued.
- We live in the era of the “everything bubble”.
- The stock market bubble was the loudest symbol of American success during Trump’s presidency. Defend at all costs because our supremacy is no longer obvious.
- What separates America from most first world countries is we hunt our own people here. America is the proverbial Lion. Have you seen how Lion’s treat young cubs which are not theirs? It’s called infanticide.
What I learned when Coronavirus pricked our bubble…
- The US Dollar (and all fiat currencies) is a debt based system down to it’s core. This is important because debt based systems are inflationary in nature. As more debt is created more debt is required to service that debt.
- Here’s a live counter of the US debt clock. This is a visualization of how much debt exists in the world.
- 100% of debt based systems fail. 100%.
- This debt based system starts and ends in this order… treasury > fed > banks > businesses & individuals. As it makes it’s way out from the center it creates layer upon layer of IOU. Everything in America is an IOU.
- Physical Gold is considered real money because it’s not backed by anything. It is universally acknowledged as a base unit of money. This is an important concept: A brick of gold has no IOU.
- When you have an asset that does not require an IOU because it in and of itself is a base money and it has properties of money it has a shot at being a savings based system.
Why does this matter?
Because what’s happening to us right now will continue. I’ve lived through several of these cycles. The tech bubble in 2003, the housing bubble of 2008, and now the everything bubble of 2020. Each one worse than the previous. And at this point in America’s mature economy that trend is a near guarantee to repeat.
In 2003 the tech bubble exploded. I can’t recall how much was required to bail us out of that one. I do remember people batting around the idea of $1 Billion. And that being absolutely crazy. Liken that one to being pushed off a 1 story building. Might need a cast but you’ll walk it off.
In 2008 the housing bubble burnt the entirety of the country shaking the banking industry to its core. That one blew the top off the hundreds of billion dollar number. That’s when billions became normalized. The tagline being the banks are “too big to fail”. Liken that to being pushed off a 2 story building. Might need to call the ambulance on this one.
In 2020 we have the everything bubble. Stock market, student loans, commercial mortgages, entire industry collapse, auto loans, hedge funds, bond markets, you name it it’s a bubble. This time we’re talking trillions and the reality is people aren’t even shocked. It’s expected. Liken this to being pushed out a 4 story building. You ok bro? We survived because our Government is run by a gang of smooth criminals.
So for the casual consumer the reaction at this point is so what, there’s always a next 000 to tack on the end of that. There’s no doubting the flawlessness in this bro science. If you haven’t yet looked it up yet the word is Quadrillion. Pretty cool word. It looks like this $1,000,000,000,000,000.
This matters because if you are trying to save money and find it to be a losing battle it may be because this is the ugly truth about a country going broke with rampant debt. The American Dream keeps slides closer to the Russian Oligopoly.
Here are some side effects from one crash to the next…
- You need to save even more aggressively than ever before. This means investing in riskier asset types just to achieve the same outputs from the previous cycle. It’s often those exact riskier assets that got you in trouble so it’s a catch 22.
- It resets the clock on hardworking savers in the lower and middle class. The 1% remains unfazed because their enormous cash positions cushion their fall. Byproduct is widening wealth inequality chasm.
- Now we have to work harder, stress more, and take bigger risks to pay for the debt we financed to survive the previous crash.
- Crash after crash. It gets predictably worse.
- This is a psychotic cycle.
To all of my fellow millennial savers out there, you know how challenging it is to save for your future. Here is a question you’ve never been asked: What percent of your assets are debt based instruments?
For Millennials there are only two answers to this question.
- “I carry a diversified portfolio of IOU’s” (cash, stocks, bonds, houses, cars, etc.)
- “Fuck off you insensitive prick, I am buried in debt”
The reason you’ve never been asked this question is because flavors of debt are the only option you’ve ever had to choose from.
If You Say Bitcoin Right Now I’m Gonna Slap You
Before you hang up on me think about how fucked you are. And I get it. On the surface there are a million reasons to write off Bitcoin…
- “But Bitcoin dropped 50% in one day!”
- “It’s a nerd pipe dream it will never happen”
- “The fed will never accept bitcoin”
- “I missed my opportunity when it was $X and now it’s too late to get in”
One of my friends said “it all depends on your time horizon”. For young savers this is the key. You have time on your side. And if you are willing to let time do it’s thing you will benefit. That’s the Buffet strategy, 99% of the time resist the urge to sell. Make good value investments then sit back and let time it’s thing.
Here’s my abbreviate case for Bitcoin…
- If you understand what happened in Silicon Valley with the invention of the Internet, then you know it democratized communication worldwide. Everyone now has access to platforms to voice their opinions. Information spread across the earth like wildfire.
Bitcoin is the Internet of Money. This means a future where the currency people trade will be based on a finite savings based money supply. If you are a saver that should sound much more attractive than continuing to pay the price within an infinite debt based engine. Keep in mind both can exist. For those who are avid consumers and not savers a debt based system is perfect. But if you have a mind towards a stable future where you know your worth from decade to decade, it is incredible to now be given choice.
It’s very similar to the transition from gas to electric cars. We all know electric cars are better for the earth, more efficient, and the future. It’s simply a matter of time. So if time is on your side, use it to your advantage. - When you log into your bank account it’s numbers on a screen. Bitcoin is also numbers on a screen only much more cumbersome to access. But look under the hood and you’ll discover the way the number is generated could not be more different.
Here’s how Ben Bernanke, the former US Chairman of the Federal Reserve, explain how dollars are generated: “we simply use the computer to mark up the size of the account…”
Bitcoin is generated like this. It is the world’s biggest trust machine. And yes it is expensive to run but absolute trust cannot be cheap. Buying into a tamper proof system of trust is worth it’s weight in Bitcoin. Over time more people will get burned by fiat based systems and across decades more will turn towards a different option. Bitcoin is a hell of a choice for the weary debt based traveler. - On a deeper technical level there are many ingenious aspects of what make Bitcoin hands down the most masterful piece of codebase ever written. The one for the layman that’s most important to recognize is that a Bitcoin cannot be copied.
You can copy and paste the entirety of the Internet as we know it. Think about how difficult it is to put something out on the internet and be the sole person who has provable ownership over it?
It is the only digital asset class on earth which cannot be forged, duplicated, or copied. And it carries all the same base characteristics of gold plus one magic trick: you can transfer it to the international space station for next to nothing. The combination of these characteristics should set off triggers in an investor’s head to peg value towards Bitcoin even if it’s currently in a nascent state of development.
I hope this is a good starter on the subject matter for any savers out there under Stay at Home quarantine thinking about how we got ourselves into this situation and how we can make a better tomorrow.
Stay safe and please feel free to comment or ask me any questions you might have.
