0/This is USD’s FADE.
Fiat Assured Destruction Event.
The Fed has launched an all out assault on the economy & will do “whatever it takes.” Oil, trade and currency wars have deepened the crisis. This (long) thread explores secondary effects of the Fed’s rescue mission.
Fiat Assured Destruction Event.
The Fed has launched an all out assault on the economy & will do “whatever it takes.” Oil, trade and currency wars have deepened the crisis. This (long) thread explores secondary effects of the Fed’s rescue mission.
1/The Federal Reserve has taken the final steps to assure the complete decoupling of any semblance of value in the USD. A promise of “infinite cash” releases the cap on its balance sheet. Total Fed assets have gone vertical! 
2/The Fed’s support for overnight repo operations in Sep 2019 was the canary in the coal mine. A sign of brewing systemic failure. A spike in interbank rate lending pointed to overstretched collateral chains strained by markets seeking alpha.
3/The March 2020 rate cut was another critical signal. Just off ATH the Fed intervened to prop up an overheated debt driven economy in anticipation for a dramatic slowdown due to the coronavirus.
4/Expanding repos started with overnight, multi-day, weekly and then monthly terms. Last week the Fed offered $1.5T in liquidity but the market called the Fed’s bluff. Limit down followed limit down. The Fed doubled down and expanded repos to $1T per day.
5/As markets continue deleveraging the Fed has committed to unlimited QE - a telling sign it is already too far behind the curve.
From the Federal Reserve, March 23, 2020
From the Federal Reserve, March 23, 2020
6/Loss of confidence will trigger another wave of deleveraging. Corporate/commercial debt defaults followed by retail collapse. SMBs which power the American economy will contract and lead to a massive surge in unemployment. The coronavirus just pushed the accelerator.
7/The Fed and US govt have few tools left. And each of these chip away at the last vestiges of capitalism and herald a new era of socialist reforms and governance.
8/High probability the Fed will:
Alter its charter, purchase stocks directly.
Institute negative interest rates.
Launch a USD digital coin.
Fund UBI/MMT efforts.
Alter its charter, purchase stocks directly.
Institute negative interest rates.
Launch a USD digital coin.
Fund UBI/MMT efforts.
9/The Fed has recently floated the idea of purchasing stocks. Recall BOJ bought “approved” stocks from commercial banks in order to prop up the Nikkei.
From Federal Reserve Boston Pres. Rosengren, March 6, 2020.
From Federal Reserve Boston Pres. Rosengren, March 6, 2020.
10/Discussion of negative interest rates has been ongoing and given the rapid drop to 0 is now on the table.
11/USD digital dollar crisis payments pave the way for a Federal Reserve digital coin and eventual direct influence over public banking through deposit schemes such as negative savings rates and financial surveillance.
novoco.com/sites/default/…
novoco.com/sites/default/…
12/UBI proposals recently entered mainstream discussion and the Fed’s multi-trillion dollar bailout will be the catalyst for deeper engagement and entrenchment.
13/Proposed COVID crisis income-scaled financial assistance is equivalent to a short term version of a phaseout UBI policy. First a bailout - then perpetual in order to establish socioeconomic stability and control.
From Annual Rev. of Econ “UBI in the US,” 2019.
From Annual Rev. of Econ “UBI in the US,” 2019.
14/As the effective increase in money supply begins to trickle into the economy in the form of debt & UBI cash we may see pre-existing inflationary pressures in healthcare, education and housing grow and expand into other sectors.
15/Beyond the current deleveraging crisis as the economy moves into “recovery” the public may not immediately experience the effects of USD’s FADE. Yet costs will begin to accelerate powered by trillions more in debt. There’s no flattening this curve.
16/During currency collapse we should expect no less than the government attempt to hold onto power through more money GovCorp schemes and continue to drive citizens apart through partisan politics and social re-engineering.
17/Trade and energy wars will continue to roil financial markets. A great shift in the balance of global power is underway and no nation will be spared.
18/Yet this inexorable shift was pre-determined when the world left the gold standard. Central bank machinations and runaway inflation induced unnatural business cycles decimating economies over and over again.
19/Over 150 yrs the Roman Empire debased its money reducing the silver content of its coins (the Denarius) from 100% to 0.5%. The Empire suffered the ills of inflation, leading to excess taxation, breakdown in trade, and eventually failure of the state itself.
20/As long as money is in the hands of central authorities, and as long as they control its supply and distribution we will be subject to their whims as the Romans where to theirs.
21/Cumulative USD inflation since 1913 is 2,513%. The USD has lost 96% of its value.
22/And let’s not forget the stimulus package represents a fraction of its potential and real downstream impact on the USD.
23/If USD’s FADE has begun where do we turn? What haven remains outside of the current system and out of the State’s hands?
24/Bitcoin presents itself not as a hedge against recessions but one against fiat follies. Bitcoin rewards savers and mutes fiat’s endless debasement and inflationary tendencies that punish the very workers who power the economy.
25/Though Bitcoin is nascent money in time it will form the backbone of the economy. We temporarily denominate it in fiat and want Number Go Up. But we already have the only number that matters during a FADE: 21M hard capped supply.
#bitcoin
#bitcoin
