Magic
Daily Ramble
Did things just get more expensive while you weren’t looking? Yes…but no…but yes.
Magic trick time. Let’s take that bread you bought yesterday. It was 2.50 last week and today it’s 3.00 (no $ or € here, to stay neutral). You take it to the clerk to check out, along with the rest of the items in your basket, wondering why the price increased. At the register, you hand over the extra .50, taking the bread in exchange. Muttering to yourself, you leave the store knowing you’ve got .50 less now.
Ok, you’ve focused, as directed, on the bread and prices, but did you miss the magic trick? The money itself changed. Sure, the price of the bread went up, but its actual value as a loaf of bread did not change in the last week. What happened in the last week is that the central bank where you lived pumped trillions of units of money into your local economy. More monetary units mean the value of each one is worth less. Not worthless (though that may be in the coming years), but worth less.
Historically, you’d be in excellent hands missing the magic trick. The citizens of most societies experiencing rapidly rising prices miss what is actually happening. Afterward, the historians come along and say, “by gosh, you guys printed too much money, devalued your currency, and created hyper-inflation which led to economical and societal collapse.” It happened in Roman times, pre-WWII Germany, and there’s a great case to be made that it’s happening in the good ol’ US of A as we speak. What happens instead? Everyone runs around enthralled with making more money as their investments increase without noticing their purchasing power is reducing just as fast.
What I wrestle with is the ‘why?’ Why does an entire society, which has the world’s knowledge and history at it’s fingertips, allow itself to make the same core mistake for more than 2000 years? All I can come up with is that we love the lie in the illusion so much that the people telling the lie no longer realize it is. What illusion? The illusion of making money out of nothing. And the lie? The lie being that someone is in control. There’s not a single time in human history where the people running the money printer haven’t turned into magicians, making more money appear out of thin air at the expensive of everyone. We all love a good magic trick…until it hurts.
Witness: the magic revealed
Favorite Thing on the Interwebs Today
Here’s looking at you looking at me, Mr. Rover!
Bitcoin Price Prediction
Yesterday: $43.6k - $53.2k
Today: $45k - $55k
Tomorrow: $45k - $58k
Despite Yellen yelling about the inefficiencies of Bitcoin, there continue to be more buyers than sellers. The price continues to rally back, currently trading at $51.5k. I anticipate the bull to continue here, but with volume declining, I continue to remain on guard for another pullback down to the range lows at $45k and possibly clear into the $38k region before the bull market continues. This isn’t a time to sell off a position you plan to hold through the cycle’s end, but it’s a good time to be patient and recognize that consolidation is healthy and necessary to continue to climb higher. Price is climbing a mountain with an unknowable time. Like any mountain climber, it needs to pause and go down to reacclimate, before continuing up the mountain.
Bitcoin Ed Bite
Q: What are CBDCs and how do they relate to Bitcoin?
A: CBDCs are Central Bank Digital Currencies and are cryptocurrencies with a monetary policy of Central Banks, i.e. print at will instead of being limited by design.
Bitcoin’s network has validated to the world that a blockchain can reliably transfer value around the planet more efficiently than the current banking system. Central Bankers are rushing to be the first to get their fiat currencies represented on blockchains to ensure that they don’t lose control of the value of their currency. Why? Because individuals’ money is currently geographically isolated and controlled by a central bank. Blockchains remove the geographic isolation and allow individuals to choose which currency they’d like to use. This is seen as a systemic risk.
Thanks for reading,
Kent
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