Revolutions are coming:
If the market does crash and the banks are involved, bailouts are going to be discussed.
In the context of today’s environment when interest rates are at zero and the US government printed 6 trillion dollars in the last year since Covid, they have nowhere to go.
Sure they could bail the banks out, but then inflation becomes much more of a bigger issue. If it becomes a big issue, you could get hyperinflation, which would effectively ruin the US dollar.
No country would pay in US dollars if hyperinflation were to happen.
They could lose their status as the world reserve currency.
Then what happens?
Don’t think you can trust the Chinese dollar because even though they’re economy is set up to inherit the title of leading global superpower, too much of the West distrusts their government.
China for the last several decades has tried to build that trust with the rest of the world instead. By playing the game of risk, they’ve slowly taken over. Silk road in Africa. 5G for free for the world through Huawei. Now it’s the fight for territory, and we’re seeing it happen in front of our eyes.
First it’ll be Hong Kong. China knows how powerful it is and knows Hong Kong has nothing to stand on. Sure, we can get upset at what they’re doing by destroying democracy, but no one is going to do anything because they’re so powerful. What are you going to do, sanction China? They’re economy is too strong.
You also see it in the South China Sea. The battle for territory with Japan, Taiwan, and likely America. If they control that passageway, they control global shipping. Right now a lot of shipping goes through the Panama canal and the Suez Canal. If China gets control of the South China Sea, they control a major accessway for global shipping.
Next it’ll likely be Taiwan. There may be a huge battle with Taiwan upcoming in this decade. Why? Because of semi-conductors. Semi-conductors power the entire world. Think about the direction the world is going; digital. Everything digital is powered by semi-conductors. One of the most important companies in the world geo-politically is Taiwan Semi Conductor (TSMC). There will be a massive battle over that.
Do you trust the Euro? The EU is too unstable because there are so many members with different politics all trying to act together. Brexit was the first sign, it’s fractured. Rich countries like Germany and France are footing the bill for everyone else, and a populist leader is going to get into power and persuade their citizens the same thing that Britain did. So too unstable.
Does it go to Bitcoin? Hell no. Don’t believe all the hucksters online telling you Bitcoin is the future gold of the Internet. It’s the biggest ponzi scheme we have today. All of it’s run up is based on belief. All you have to do is get guys who bought to keep hyping belief, so more people buy in and the price keeps getting pushed up and up. It’s why Cathie Wood, Anthony Pompliano, Mike Novogratz and all the other crypto lovers keep telling stories about how Bitcoin could get to a million. They’re convincing everyone, including companies, banks and some of the biggest people in finance this is an investable asset. Banks now have to talk about it and set up funds because their rich clients are probably pissed they can’t get in on the action.
This is how the hucksters win. By bringing more and more people into the charade, the price keeps going up. But, eventually the bubble will break. Bitcoin is just the modern day tulips.
Long term 10, 20, or 30 years from now could Bitcoin be a store of value? Absolutely. But short term it’s going to get destroyed. The charade will fall.
So where does that leave us for global reserve currency? Maybe gold I think since countries and governments still trust its use. It’s had a track record for thousands of years and actually has some value.
But who knows.
I keep thinking though politically about where the US is going.
Just finished this documentary called Panic: the untold story of the 2008 financial crisis, and there are similarities to the results of what happens as a result of the financial crisis.
Trump happened as a result of the crisis. Even though the bill that they passed was actually worth it, since the government received billions in profit from the deal they made with the banks, politically it was a disaster because it looked like Obama was appealing to the elites. Meanwhile, a depression was upcoming if the integrity of the financial system was in crisis. All this is explained in the documentary.
Does that happen again now? If markets tank, are the banks in trouble and will they have to get bailed out again? It’s very possible. Why? Extreme risk taking.
When money is free, people get greedy. They take excessive risk. They invest in more risky things and borrow more money, especially because interest rates are so low. Hedge funds are at the heart of this. The one thing they didn’t account for was the Internet.
This movement with AMC and Gamestop is Occupy Wall Street 2.0.
When Occupy Wall Street happened, people didn’t have enough power. The cool thing with this time is that retail is on the other side of that trade. The largest redistribution of wealth in the stock market history is upon us. Rich people will be pissed and banks could be in question, but there are numerous other banks who are long on the trade, as well as hundreds of thousands, if not millions, of people on the other side.
My issue though is politically, it’s going to look like Biden and his government caused this crisis. They didn’t, Trump did. Corporate tax cuts put more money in the hands of corporations. They paid their CEOs well, they paid their executives well, but they took on more debt. The problem is a lot of the companies of the past are not earning money. They’re not producing output in the economy. They’re ‘zombie companies’.
All Trump did with Chairman Powell last year when Covid hit was give everyone tons of money. They didn't know how bad Covid would get so they threw the kitchen sink at it. Now Biden’s come in and printed even more money. Hopefully it goes to things that actually it like investment in infrastructure, education, housing, healthcare and climate change.
But because the banks could be in trouble if the stock market collapses, the blame will be placed on him.
In a few years from now, Trump or one of his kids or someone else who’s super far right on the Republican party will bring rise to the populist movement again. This is how revolutions happened in the 1930s in Germany, Japan, Italy and Spain that eventually led to the world war. (side note: if you want to get educated on more of this, please read Ray Dalio. He’s a legend)
How? It came on the back of economic crises through the great depression.
The other problem in today’s society is the rising inequality gap.
It hasn’t been this high in America since…? Guess? When do you think?
Rising power in China today. Rising power in Germany, Russia and Japan in the 30s.
On the back of all of this, you still have inflation. As much as the government is not going to let inflation get out of control according to the Fed, inflation is not easy to curb. And it’s brutal for a country.
Look at countries who went through hyperinflation in the 1900s in South America and Africa. Those places were not good places to be.
The US could be facing a similar path, but so could a lot of the world.
As much as I am positive on certain aspects of the world going forward, there are going to be a lot of consequences that come from this market collapse.
Populism is going to rise. Trump was a sign. Bolsinaro is a sign. Nationalism rising around the world is a sign. Economies are going to become more localized. The problem with the rise of populism is the leaders who usually challenge the ‘elite’ are part of the elite.
They’re just going to make sure the small group of people do well while most of the world suffers. Don’t believe me? Look at Trump and his family.
Trump was a sign.
Revolutions are coming.
We won’t know the results for years but don’t be surprised if the world gets a lot more fractured in the coming decade.
Update May.8.21
Just finished a movie talking about short selling on Wall Street made in 2013. This is going to happen again, except there will be millionaires all over the world because of this. Hedge funds are screwed.
End of the documentary though was an ominous warning - someone said 'It's going to take a revolution before this changes.' It could be coming.
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