Oh Great, Global Hyperinflation

Oh Great, Global Hyperinflation

The best investment and thing to own right now in this crazy market is yourself and your business. We have no idea where this is going. However most can guarantee that if you aggressively work on yourself and your business, your going to be worth a lot more when times get easier and money starts flowing again.

I'm currently living in Thailand as I write this. Having my morning coffee and I'm utterly shocked at the price of Baht to USD. Currently it's peaked at 36 Baht to 1 USD. I've grown richer (as I get paid in USD) simply by holding cash.

Weird times we live in and personally something is going to break. Perhaps we will live through global hyper inflation due to most commodities and international trade being in US dollars?  I don't know but this time feels different.

Recession or depression or Bitcoin?

I don't think this is the recession that puts the nail in the coffin for the US. I hope it's not the next one either because we don't have an alternative system setup yet. This is the Bitcoin use case but it's still in it's infancy. Imagine it is 1999 and we had a global pandemic then?

Amazon, it's global supply chain and complicated delivery systems was not established like it is today where you can shut things down and people can order stuff online. Amazon needed time to develop and alternative system and as far as I see it, that's where we are at today with our financial system. We need an alternative and that alternative is nowhere near being ready yet.

A great video on what happens when the financial system collapses. It's happened before, it's happening now.

Bitcoin becomes money (maybe)

Bitcoin makes a lot of sense to me as we live in an ever growing digital world. Bitcoin is created through time and energy. Miner rigs are that physical connection to the digital. They solve complicated algorithms that take literal time and energy - the most scare things in the world as you can't create more energy (thermodynamics) or print more time.

Money is a vehicle to trade your labor, your time and energy that was required to earn that money in the first place. Shouldn't our money be based on a scarce commodity created out of the same scarce things (time and energy) instead of yellow rocks dug out of the ground?

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Global hyperinflation is when the wheels come off

I think inflation goes to about 9% and we get another run before the wheels come off. Every dude bro who's watched a YouTube videos tells me the same thing: "lol bro, if you just hold the entire time it always comes back and you actually make more long term."

Perhaps, but often times the price of an asset crashes, it can take a decade to retrace back to where it was before. But over the course of years of holding an asset, the value of the underlying denomination (US dollars) has inflated. So sure, your gold in 1929 was worth 350 USD. It then crashed for 10 years and around 1940 gold was still 350.

In short you lost purchasing power.

Enjoy the decline

It's incredibly important to realize that the the US is in the final stages of any 100 year empire where the currency goes to zero due to mass printing to pay debts. If I owe you $1000 USD, it's easier to just create it out of nothing and give it to you instead of having to tax and take it from productive people who may support me later as a politician.

Almost every great empire since time infinitum took out way to much money and would pay it back by devaluing the currency. Rome's currency was silver coins. As that empire got further into debt they diluted the silver in coins more and more to the point that the coins only were less than 5% silver. But because it was the reserve currency people accepted it and Rome paid its debt easily with.

Eventually debts in the Roman currency became worthless because the money was worthless. Thus it lost reserve currency status and no one would accept/give credit in the currency. Suddenly Rome had massive debts it could not repay and could not take on anymore debt. It went poof.

This will certainly happen to the US dollar in the next 10-20 years as we lose the reserve currency status (though of all the currencies the dollar is best). Without the dollar being the reserve currency the US will be in absolute financial ruins. As inflation sky rockets our debts will be called in, money will be printed to pay them. Inflation will skyrocket more and people will rush to convert their dollars to gold/hard assets.

The dollar will then go all Venuezuela on us and will not be usable to pay debts. It's critical you are not 100% invested in and or holding only stocks because they have been inflated to unrealistic values due to money printing, just like the Weimar Republic. People who held assets thought they were getting rich until their society collapsed.

The current value of equities is far above actual value and they will return to this value as the dollar implodes causing a double financial whammy you cannot "hold" through. Unlike 2008 where we didn't have a "money" problem, this crash will be 100% related to money imploding.

Even if stocks return to all time highs their purchasing value will be 50% of what it was. We have already seen this to some extent with this crash. If you bought Bitcoin for 17k in 2017 (the previous all time high) and held to now you are down in purchasing power nearly 50%. Weathering the storm & holding is not an option for crashes like this.

You need to own assets that pay you to own them as well as have a skill that others need in order to continue earning an income.

Ray Dalio and the rise of China (he's wrong)

Countless people I talk to about this always mention that YouTube video by Ray Dalio and his book on changing world orders any time I mention the collapse of the dollar.

While it's an informative video, its brutally apparent Ray is trying to get you into Chinese stocks/companies which he owns a ton of. His fund also failed to beat the S&P 500 during the easiest time to make money ever (the last 5 years).

I've been to China. If they had a more open and democratic government like Taiwan instead of the CCP then yes, China would be the global super power like they were previously for thousands of years. But anyone who's actually visited that society and culture sees the corruption and knows they are no rising power.

Their government is all about control and staying in power. They flushed out all the Bitcoin mining (which is a huge boon for the US and the world as it now makes an attack on this decentralized network ever more difficult) and banned online teaching. An industry where Chinese based companies were the global leaders in.

Dalio didn't capitalize on any world shifts the last 5 years.

He has no record of predicting anything that has happened. Plenty of other funds did and greatly beat the S&P. Buffet wiped the floor with Bridgewater compared to Ray's fund. In fact with inflation factored in, Bridgewater only slightly beat inflation over 5 years.

You personally could of done infinitely better just funneling your money into an ETF like VTI which is a total market fund. Ray Dalio is a legend and an expert but the correct answer to a dollar and world order collapse is not Chinese stocks and companies.

The Chinese stock market reported data is untrustworthy and manipulated. Hell, they even have ghost cities as a way to keep the real estate market going as Chinese citizens don't trust their own stock market and instead hold the majority of their wealth in real estate (which is why that market needs to be propped up).

Conclusion

Financial cold war is almost guaranteed as far as I see it with the way things are right now. This will be a disaster for all countries involved. I think China will sky rocket afterwards just as the US did after the cold war because they actually make stuff where the US has gone too far down the financialization route. However, if we move to a Bitcoin standard who the heck knows what happens then.

Dalio is right that the US is declining, but it's not China that is rising. Perhaps we will live in a world where the competent, sovereign individual reins instead of the traditional nation state we've come to know.

What does that even look like? I don't know.

Further reading

Ray Dalio is a legendary investor. But for content on concepts like the collapse and booms of money and the rise and fall of world orders, I'm a personal fan of Saifedean Ammous who wrote both the Bitcoin Standard and the Fiat Standard (see my best books for men). Check them out and thanks for reading.