Let me tell a story. Inspired by the @RaoulGMI and @Breedlove22. It all started at the height of the British Empire and the assassination of Franz Ferdinand. The start of World War One.
Germany was the rising power in Europe. Thanks to technological advances, the world saw its biggest war to date. 20 million people died. Then came the Treaty of Versailles...
Germany had to pay 132 Billion Gold Marks in reparations, rougly (by my flawed research methods) 3.5x their GDP at the time. The Germans used a nifty government trick : currency debasement - to help them pay their debt.
Germany was poor and struggling as a result. 80 countries, starting with the UK and including the USA got of the gold standard. Out of these conditions, Hitler came to rise and Nazi Germany started World War Two.
Technology advanced. The Atom Bomb. Etc. Etc. 70 Million people died in a the war. When the war ended, people, especially those in the US, in euphoria, started having lots of sex... Lots of babies... The Baby Boomers...
Post-war fiscal stimulus and the consumerization of war-tech led to the golden era of the 1950's. The global population saw growth of 30% - 40%.
The world economy globalised. Bretton Woods happend. Pegged currencies to USD. Counties increased reliance on each other that prevented World War Three. (Pax Americana) The US is unofficially appointed as the super power to protect the free world.
Then in the 1960's the first Baby Boomers - the biggest generation ever until then - entered the workforce for the first time. Demand exploded. Prices exploded. The biggest demand shock the world has ever seen. 75 Million Boomers becoming economically active.
As a result the US struggle to keep up with deficits, losing a lot of gold supplies and completely depegs from the gold. The world is now on a fiat currency system.
We then get the great inflation of the 1970's. This is not necessarily a monetary phenomenon, but a demographic one. More and more Baby Boomers demanding more and more goods and services. A demand shock.
Here comes the big problem... Since the 1970's real wage growth is flat - for the next 50-ish years. Too many people competing in the workforce. Supply outstrips the demand. No need to raise wages. Money decouples from productivity growth.
The problem is that as fiat money gradually debase, asset prices start to rise, but wages don't. That is why we sit with a fucking angry far right and far left. They have been left behind, economically. Politics are downstream of economics.
Then it gets really ugly. Margaret Thatcher, in an attempt to convert Labour Party supporters to conservative votes, gives low income earners the chance to buy their previously free housing at a low price. As a result a new generation of low earning debt slaves was born.
Ronald Reagan used the same playbook in the US - making credit abundant. The rise of Wall Street and the 1980's. Stock and property prices rise, but people can't buy proportionally, because their wages don't go up.
In an attempt to catch up, people start borrowing money, buy assets and hope they go up. The Snowball starts. The more people borrow to invest, putting their pensions in stocks, the more the prices rise. In search of the American Dream.
People often confuse being rich with being in debt. But that's the way of the fiat system, it incentivizes debt to buy assets in the hope of getting ahead.
Then the crash of 1987 happens. Alan Greenspan cut interest rates outside a recession - a new trick in the Central Banker's playbook. Showing first signs that the Fed will bail out Wall Street.
Then we move on to the fall of the Berlin Wall and Communism. China also starts opening up. The World Trade Organisation sees the light. Workers in developed countries now all of the sudden competes with workers in developing countries.
Although consumer prices dropped, wages stayed the same, ruining the American (and developed world) workers class. We then see a big boom in the Asian markets, backed by Dollar leverage, without Dollar earnings. It all came crashing down. Not long before the crash of LTCM.
Greenspan cuts rates again. "Bailing" out Wall Street for a second time. This was probably the last time in history that we could the free market do its thing without the whole financial system crashing down.
So, with the Fed having everyone's back, it was a free-for-all. Everyone levered up, goes all in on the US stock market because no one wants to touch emerging markets. We see one of the biggest stock market booms, followed by die dot-com bust and then the property boom...
The Boomers start retiring. The labourforce participation rate goes down, and so does the velocity of money. We all know what happens next. Global. Financial. Crisis. Hits. To no surprise the Fed steps in again and cuts rates. Again.
But this time it is not enough. What do you do then? Print money? No, that sounds wrong, we all know that if you print money, the value goes down. So we start "quantitative easing" instead. Printer goes BRRRRRR. We didn't have any other choice.
In a debt crisis, we can't allow the collateral to go to zero. Otherwise the whole system goes down with it. Like Argentina. Everyone is Austrian, until it happens to them.
As the Fed continues its quantitative easing, CPI doesn't rise. It looks like it is actually working. But... And a big BUT... We get to where we are now. The "Everything Bubble".
Everything can't be in a bubble. Bubbles are measured by looking at the price of one asset class relative to another asset class. So you can't have an everything bubble. Asset prices rise, not because there value is going up relative to other assets, but...
Because the value of the denominator is going down. This is what we call debasement. Since 2008, the only assets beating the debasement are Bitcoin and the Nasdaq.
What we are witnessing now is the transition from one generation to another. 75 Million Boomers retiring. 85 Million Millenials at what is supposed to be their economic peak, but not much to show for it.
Free capital is funding innovation. Innovation that will probably put the 85 Million Millenials out of work in the not too distant future. And the Central banks can't stop printing, because then it all comes crashing down. The Fed can't unfuck us.
So can do we as Millenials do? Can we unfuck ourselves? Yes, we can. How? #Bitcoin It is a call option on the future and protection against currency debasement.
But we still have a few rough years ahead of us. The right is saying cut taxes. The left wants to super tax the rich. Fiscal stimulus will lead to more debasement. We can't go Austrian and let it all burn. Too late for that.
The Exponential Age is about to happen. All jobs are at risk. How will people get money? We don't know. Yet.
But, to some extent, lucky for us: The price of everything digital, including energy, is going to zero in the longer run. Energy is everything. Everything is energy. Will the future be dystopian or utopian? Humans have a way of ending up somewhere in the middle.
In summary: 1. War led to sex. 2. Sex led to babies. 3. Babies led to demand. 4. Demand led to debasement. 5. Debasement led to Bitcoin. The gradual migration to a decentralized financial system is what will save us. Let's unfuck the system.
Link to the podcast. All credit goes to @RaoulGMI and @Breedlove22. Best 2 hours you can spend today. https://youtu.be/i9TXVjYBM3U
@JamesRothmann This is all great but step 4 is still a bit fuzzy. What are the steps that cause demand to lead to debasement?
@mjdrink There should have been a few extra steps. I agree. Demand led to Gold depeg. Demographics to price inflation. This led to debt. Debt led to asset boom. Asset boom to debt crisis.
@JamesRothmann @inversebrah But sir Bitcoin leads to not making sex. So extinction is incoming
@JamesRothmann There’s a great meme here!
@JamesRothmann Good read, thanks for sharing your thoughts
@JamesRothmann Outstanding!
@JamesRothmann @readwiseio save thread
@JamesRothmann Reminds of the book "Layered Money", it starts the story earlier than WWI, when shells were a form of money. Big tech for all it's flaws, is one of the weapons used to expand the kink in the armour of the legacy financial systems. #Bitcoin , is the spear-head to drive it home.
@JamesRothmann Great summary and yet I still have no idea why the YouTube video was labelled The metaverse is the new solar system https://youtu.be/O1_LrREYQ8c
@JamesRothmann Technology led to War
@JamesRothmann @inversebrah War lead to sex??
@JamesRothmann Beautiful. Let’s unfuck the world.
@JamesRothmann @readwiseio save thread
@JamesRothmann Really good stuff 👍🏾👍🏾👍🏾🔥🔥
@JamesRothmann Brilliant!
@JamesRothmann great thread 👏
@JamesRothmann @threadreaderapp unroll
@JamesRothmann @threadreaderapp unroll
@JamesRothmann Unfuck the system? Then Bitcoin should lead to sex.
@JamesRothmann One way to look at it @kiwi_12_
@JamesRothmann Hit the nail on the head sir
@JamesRothmann great thread!
@JamesRothmann Somewhere I’ve gathered the demand for $ underpins everything. Giant current account deficits (massive consumption) leaves the $ at the center of the universe. When the consumption stops or even slows, the house of cards fractures. #Bitcoin
@JamesRothmann If you have sex use condom or your money will be debase
@JamesRothmann Yeah, right, Mr Rothmann. Nothing at all to do with the Banksters.
@JamesRothmann bitcoin leads to sex? ummm...