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Friday March 31, 2023 - Issue # 41
(Any views expressed below are the personal views of the author and should not form the basis for making investment decisions, nor be construed as a recommendation or advice to engage in investment transactions.)
The other week, I wrote about the biggest bank run in U.S. history which subsequently led to the second-largest bank failure in U.S. history. How that was only 14 days ago is beyond me. Since then, I’ve become more bullish on bitcoin than ever. Before I go on, let me preface that when I get super bullish, prices typically move in the opposite direction…so take my bullishness with a grain of salt.
I’m not sure that people (including me) fully understand how fast the world has sped up over the past month or so. The changes seem so profound and exponential it isn’t easy to conceptualize them fully. I think it’s both good and bad that people can adjust to new norms very quickly — one day Covid was just some virus on the other side of the world, the next day we were all rushing to stock up on toilet paper and the world changed forever. The vast majority of people were able to shake off the loss of fundamental human rights and freedoms (lockdowns, curfews, etc.) for an extraordinarily long time. We look back at this very recent period in our lives and can barely recall how apocalyptic it truly was. Life goes on…
Thankfully, there were no zombies running around during the covid crisis (yes, I’m currently watching The Last of Us). However, I believe that we are currently in the midst of a new crisis, and unfortunately, this one does involve zombies. Regional banks across the U.S. and other banks globally, are the living dead. Yeh, spooky.
If you are following this space closely, it would have been hard to miss legendary entrepreneur and thought leader, Balaji Srinivasan putting up the “BitSignal” a couple of weeks back.
He followed this up by accepting a ludacris bet — $2 million that BTC would touch $1 million within 90 days:
While I give him a 0% chance of winning this bet, I do think he’s directionally right. When I saw this all go down…I was kind of taken aback. I’ve been following Balaji for many years and I’ve always held him in the highest regard as one of my generation's greatest thinkers. So much so, that I had to support his bet.
Balaji on Covid, before we took it seriously:
Take a look at the date on that tweet. Nailed it. Yikes.
When I saw the coronavirus tweet, I called my parents who were about to get out of Canada for the winter. They were happy that I cared enough to express my concerns, but they weren’t worried at all. Unfortunately, Balaji was right and their travel plans were cut short. I made a similar call this time — “maybe you should buy some BTC just in case.” Similar response and a “Michael, take off your tin foil hat!”
See, I’d like to think that we are what, like, 5, 10 years away from some crazy stuff happening but ah…things move fast these days.
It appears the brilliant minds at central banks are using a sledgehammer to bring down the price of milk by a few cents. How innovative! Instead of embracing the deflationary effects of technological advancement, they seem to prefer stifling growth and progress. Who needs innovation when you can just tax the rich, go to war against crypto, and ignore the potential of AI to transform entire industries in no time? And let's not forget their brilliant strategy of strangling credit to achieve all of this. Truly, they are the epitome of forward-thinking.
So, how has this played out and where might we go from here?
The current liquidity crisis, with bank runs becoming more frequent, has exposed the fact that money market funds can offer returns of around 4%, compared to the paltry interest rates offered by banks, which are also subject to deposit risk. This has led to a credit crunch, as banks struggle to lend without a steady stream of deposits and customers moving funds en masse to bigger banks (to mitigate risk) and higher yielding products. The next stage, a solvency crisis, would be disastrous. To avoid this, history suggests that we will witness a massive easing of monetary policy, which essentially amounts to a temporary solution to postpone the inevitable decline of global dominance.
Here’s a pretty good thread to check out:
One of the many lessons to take away from Silicon Valley Bank and the current banking crisis is how fast and how much the world changes, and how little our expert leaders and regulators understand it. The speed with which the bank run happened because of Twitter, because of mobile banking apps, was so different than the 2008 collapse when we didn’t have this technology. I don’t think the people in power realize how much the field has shifted.
Until we get a complete overhaul We need to get these folks out of power right away and make way for a peaceful revolution spearheaded by a fresh set of leaders who are in tune with technology.
Things — happen — fast.
I’m a Dalio guy. Here’s a 43 minute summary of his most recent book Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail which I highly recommend. Don’t let the cartoons fool you…