Thread by @LukeMikic21

Lots of talk surrounding hyperinflation lately so here's a thread and article on how #Bitcoin plays into..

- The 75-100 year Long term debt cycle
- Hyperinflation
- Repo market madness
-''Transitory inflation''

Is hyperinflation the catalyst to trigger Hyperbitcoinization?

1/

Hyperinflation; like technological adoptions, is a gradually then suddenly process.

Both have acceleration points.

For hyperinflation, that acceleration point tends to be above 10% per year inflation levels.

2/

Currently today in the west and US, CPI inflation is fast approaching that magic 10% level EVEN in the heavily manipulated CPI basket

Shadow Stats shows REAL inflation is already at 15%

So why do central banks globally CONTINUE to print money and pour more fuel on the fire?

3/

The 2020s Global debt crisis.

Debt levels have NEVER been this high and it simply cannot be repaid

Hirschmin Capital released a great report showing that since 1800, 51 out of 52 countries that reached sovereign debt levels of 130% of GDP ended up defaulting within 15 years

4/

How did we let debt get this large and out of control though ??

Enter The 75-100 year Long Term Debt Cycle(LTDC)

The LTDC helps to explain how we got here and also gives us a blueprint of how central banks may attempt to deal with the debt at these unsustainable levels.

5/

On the chart below the 50 leveraging phase of TLTDC is made up of lots of repeating 5-8 year short term debt cycles.

We've all lived through the conclusion of one of those, also known as a recession.

Think of the 2008 GFC for example ??

6/

Central banks will lower interest rates in response to every recession to further stimulate the economy and encourage more debt and 'growth'

But what happens when the debt levels become too large and interest rates hit the 0 bound?

Will the governments default on their debt
7/

Enter QE infinity

This chart by @LynAldenContact shows that in the previous LTDC in the 1940s the US ran deficits and pegged interest rates low (YCC)

Put simply, governments will print money, devalue the currency and pay back the debt with devalued dollars
8/

In the 1930s and 40s conclusion to TLDC the US was able to deleverage the financial system but at a great cost

Gold was outlawed in 1933 and the citizens were forced to hold cash and bonds which lost over half their value through inflation to allow the system to deleverage

9/

Governments can either admit their spending was wasteful, let the unproductive debt collapse and cause an economic depression or ''default'' on the debt secretly.

That's where the implicit default comes into play by simply devaluing the currency.

With interest rates at 0

9/

Central banks have no other option today in 2021 but to print money, it's only maths.

Here's some ''simple grade 11 maths'' from @FossGregfoss that shows the issue with these unsustainably high debt levels.

10/

For governments to begin paying back the $300T debt bomb, global GDP would have to grow at more than 12% yearly

Global GDP hasn't grown faster than 8% over the past 150 years, so outgrowing the debt is impossible.

11/

It's MATHEMATICALLY impossible to pay back the debt and that's WHY governments are printing their currencies into oblivion

When a country reaches the deadly 130% debt to GDP level, the ''default'' usually comes through significant inflation and currency devaluation.

12/

Now hyperinflation

As much as MMT proponents say ''debt doesn't matter'' and ''this time is different''- its not.

HUNDREDS of currencies have failed throughout history when governments and CBs acted as if ''debt doesn't matter' and devalued their currency.

Here's a list

14/

Now is inflation transitory ?

Will the Central banks around the world be able to nominally decrease their debt levels like they did in the 1930s and 40's long term debt cycle ?

Policy makers need to be careful today in the 2020s as there’s many differences present today

15/

In the 40s the world was still moving away from a partial gold peg

In 1971 this partial peg was destroyed further, leaving every currency globally completed untethered from reality

Bretton Woods,1933 FDR gold confiscation and 1971 all acted as implicit soft defaults

16/

Today we have no plan Bs left.

The system is totally reliant on faith in the currency...

Which is rapidly disappearing

@drew_macmartin points out all the striking comparisons of todays economic climate to the 1923 German hyperinflation event

Is the ''transitory inflation'', repo market madness and supply chain interruptions all red flags that hyperinflation is closer than many believe.. ??

Check out my recent article to find out where I covered this in faaarrr more detail

medium.com/@luke.mikic88/…

Massive thanks to those that helped shaped my thinking for this piece- @FossGregfoss for his great paper on credit markets and debt, @LynAldenContact for her numerous papers on this topic and @DylanLeClair_ for his great article on the long term debt cycle- Links in the article

More thank yous to the following for their thoughts on this topic, highly recommend you follow them all @PrestonPysh @LawrenceLepard @GhostofSvetski @LaserHodl @1MarkMoss @JeffBooth @BitcoinMagazine @Bquittem @mrcoolbp @heavilyarmedc

Nearly forgot, if you liked this thread, you’ll love this weekly rip @BitcoinSimply and I recorded yesterday about all things hyperinflation and the #bitcoin supercylcle

Nearly forgot, if you liked this thread, you’ll love this weekly rip @BitcoinSimply and I recorded yesterday where we talked about all things hyperinflation and the coming #bitcoin supercylcle