Thread by @BMBernstein

The USD is going to turn into monopoly money faster than people realize

People are starting to say 'deficits don't matter' just as they matter more than ever

Owning a non fiat store of value is more important than ever

In 2022 the govt officially turns into a ponzi

Here's why

Debt and deficits are rising faster than ever

Deficits just surpassed $1tn. They're not slowing down

The $20tn trillion Treasury market was the $10tn trillion Treasury market a decade ago

Real deficits are even worse. Boomers are retiring and entitlement spending is going through the roof

When you count all government liabilities, the real debt balance isn't $20tn

It's 10 TIMES higher: $200tn

By 2022 'real interest expense', will surpass all tax receipts

This is historically when fiat currencies collapse

We'll need more debt just to fund EXISTING DEBT. This is like rolling credit cards. The US will be running a ponzi

Who would loan us money?

From: @LukeGromen

You can't finance new debt with existing debt forever, bc at some point new buyers run out

Foreigners, historically the largest buyers, realize this

And theyve stopped buying our treasuries as a result

The trade war. Foreign sanctions.THIS is the cause

zerohedge.com/news/2019-02-2…

This means that private institutions are left to buy the debt

But this crowds out other investment. Specifically the equity markets, causing massive reflexivity

Stock prices will decline, driving up deficits even further because of the wealth effect

This is also coinciding with bipartisan support for the MMT nonsense and increased fiscal spending

2008 was a socialist policy for bankers

The rest of the country wants a similar socialist policy

And with the likes of / rhetoric of Bernie & AOC, they'll probably get it...

But by 2050, ALL of our tax receipts will already be going to Boomer's entitlements

The US government will be just one big machine made to finance the boomer's retirement

We don't have any room to add massive fiscal policy

Meanwhile, the impending social plans aren't going to be cheap

AOC's new deal would cost (just) $90tn....That's over 4x our GDP

...Because 'deficits don't matter' right?

We're not going to end up spending that...but you get the point

The only way to finance NEW spending will be the fed balance sheet

Despite purportedly selling off the balance sheet, it's going to go the other direction

The money printing machine is going to get revved up again

No institutions are going to finance the debt given the credit risk

The Fed will be forced to, and holders of the currency will take the hit

According to @RayDalio

“You easily could have a 30 percent depreciation in the dollar through that period of time.”

Remember, this is all LATE CYCLE too

The fed has already turned most of these dials

We've been on QE novocaine for 10 years already

Next crisis, when we really need the monetary ammunition the most, we'll be out of bullets

Can the Fed soften the blow of the next collapse?

Modern Monopoly Money Theory could work early cycle in a "closed system"

But if there’s a exit / neutral arbiter of value, the market wont finance a govt that can only bail itself out w. more debt

The scarce asset will offer better real returns

Think of a currency like equity in a nation

The debt holders are more senior. Equity holders will be diluted to pay them off

When people realize this, they will rush into scarce assets and "sell off the equity"

Assets like BTC and gold will skyrocket in value

But this won't be gradual. I think it happens in a massive step function value increase as confidence in fiat currencies vanishes

Meaning, if you're not in these assets *before* the move, you're riding the sinking ship lower

This is all happening right before our eyes:

Populism. MMT nonsense. Demographic shifts

The people running the presses aren't buying fiat currencies. They're buying a 'worthless rock'

cnbc.com/2019/01/31/wor…

Just wait until they realize there's an even more scarce, unconfiscatable, digital alternative that's better