Thread by @RaoulGMI

Re-watching Inside Job on Netflix. It reminds me of March 2020 and the potential insolvency phase of The Unfolding hypothesis I had, especially around BBB bonds. 1/

The Fed realised it couldn’t happen at all costs or the system would go down ( much like the ECB in 2012).

That led to buying on high yield corporate bonds via QE. The rubicon had been crossed.

The next part of that rubicon crossing was the implicit financing of fiscal stimulus.

The worst part of the story? It worked. The biggest recession since 1929 lasted 2 months (by NBER definition).

Now we all know that the recession is still affecting millions of people but it was all papered over by the debasement of fiat by all the central banks.

Asset prices could not be allowed to fall or the massively over-leveraged financial global economy would collapse…

You see, in a world overloaded with debt (over 400% of world GDP), collateral is precious and must NOT see a sustained fall in value, or it’s all over. If house price falls caused 2008, what would happened if collateral on corporate debt, household debt, financial debt, student

debt, car loans and pension obligations failed? It doesn’t bare thinking about.

So, buying any failing collateral, mortgage and rent forbearance, PPP loans and cash payments were essential to avoid The End Game…

But debasing the currency is very insidious.

Yes, I think it’s is better than to allow total collapse because that destroys EVERYONE but debasement is something most people don’t see until it’s too late.

Asset prices rise so everyone who can own assets thinks they are a winner

But most are just keeping up with debasement, if indeed they can afford investment assets.

And we know that the CB’s now know that they can avoid the worst of any business cycle by doing more of the same..

That means that the marginal propensity to do more QE, more fiscal and buy assets to avoid collateral falling is much higher. They have an itchy trigger finger..and see no downside.

To be fair, I don’t see they had another answer. It was too late for the Austrian cycle.

So, the world went, one step at a time, from demographic driven debt bubble to rate cuts to QE to asset protection and into debasement.

The investing game has changed. You either understand it or you lose.

This is the world of crypto, tech network stocks and buying every dip. You now follow the Govs and CB’s and don’t fade them. Stay one step ahead.

This is the new macro investment game….

And the dirty truth? It’s easier than the old macro game of fading the crowd, the govs and the CB…

There will be sell off’s, blow ups, etc but the game has changed.

The easiest game for the long haul is owning a stake in the future system…

This is why the digital asset system has such dramatic adoption. It is the life raft and everyone is jumping on it, migrating and building out the new world.

This is why it is exciting.

Adapt or slowly die.