How to protect yourself from the government stimulus

These here are crazy times

BostonCoin Update – April-May 2020

Crazy times give crazy outcomes

With all the shenanigans going on amidst COVID19 and the lockdowns, it is hard to tell where the truth lies. Judging by Facebook posts and the almost-reliable Washington Post, one in five people have taken to coping mechanisms such as excess alcohol or adopting wild conspiracy theories.

So far, there have been no concrete links between 5G, chemtrails, Bill Gates, vaccines and the novel cornonavirus. A lack of facts hasn’t stopped some people from blaming the virus on their favourite bogeyman.

Despite being slow to adopt the advice of medical professionals, and occasionally promising the virus would disappear “like magic”, the non-presidential Trump has blamed the Chinese, and the World Health Organisation (WHO) instead of his own bad decisions. The Don’s cult-like followers have been quick to shift blame as well. Those who have been long against their chosen bugbear have been quick to provide sketchy ‘evidence’ that the thing which they always hated, now causes COVID19.

It has become so hard to tell the truth from the falsehoods that many social media platforms have had to ban the worst offenders. Facebook, Twitter and YouTube have taken down, blocked or “fact-checked” countless articles and thousands of questionable videos from unverified or unqualified self-proclaimed “experts”. Unsurprisingly, the pandemic has been suddenly linked to the very thing which the propagandist has been speaking out against for years (although the ‘experts’ significantly never claimed that the evil bogeyman caused viruses until after the event occurred).

It is quite notable that amongst all the pandemic propaganda of April 2020, the US Pentagon released officially verified footage of UFO’s, and nobody really paid any attention. It is as if our species has become numb to all forms of news, from any source, however formerly reliable they were.

Meanwhile (quarantine-while), news from cryptopia

Back in late 2019, long before there was even a scent of a virus, cryptopians were looking forward to news of the “halvening”. In May 2020, the bitcoin mining reward will be cut in half, an event which occurs around every four years. Legendary bitcoin creator, Satoshi Nakamoto, knew many things, among them Mohr’s Law and the value of real money.

Technically, computing power doubles every couple of years, which is why a $299 smartphone has more computational power than the first PC, which in turn had more computing power than the NASA scientists who planned the moon landing. To remain relevant as a source of value, bitcoin had to have regular inbuilt doubling of effort or halving of rewards.

We have heard anecdotal stories of an 1850’s farmer who kicked a rock and found a nugget of gold large enough to retire on. Over time, gold nearest the surface was taken, and miners needed to dig deeper and deeper holes. This meant larger investments of capital, greater scarcity and a corresponding increase in the value of gold.

If scarcity adds value to collectors and utilisers alike, then one would expect the value of bitcoin to double after each halvening event. Gold has a 5000-year history of scarcity driving price. As cryptocurrencies are barely a decade old, we have only seen two prior halvenings. After each one, the price of bitcoin did indeed double; although, it took from six to eleven months for this to occur.

During 2020, it cost around $3000 just in electricity to mine a single bitcoin; not counting the cost of hardware or web access. This may explain why, in its classic 2017-2018 plunge from $20 000, the price did not go under $3000, as miners were unwilling to sell for a loss. From May 2020’s halvening, each bitcoin will cost over $6000 to mine. This does not necessarily guarantee that bitcoin will approach a double of its current value, but it does indicate that a new floor price will be established.

What about the broader economy?

Global lockdowns have impacted millions of industries, with massive unemployment, and faltering world economies. Australia will likely have its first recession in thirty years, China’s GDP has dropped to its lowest level since 1990, and Europe continues to bleed value.

The USA, who lead the world into the first Global Financial Crisis (GFC1), has tried to counter GFC2 the same way it dealt with the previous debt-fuelled issue: by printing truckloads of paper currency. Currently borrowing up to 100% of GDP, and printing a Trillion dollars a day for the repo market alone, it seems that the USA is spiralling out of control, with many other countries echoing the disastrous ‘recovery’ plan.

Any householder will know that “you can’t borrow your way out of debt”, and most will know that printing vast quantities of money will lead to hyperinflation. It seems that the highly-educated economists of the US Federal Reserve have not heard of, or learned nothing from, similar fiscal frenzies in Germany, Zimbabwe and Venezuela.

As central banks print what they themselves have called an “infinite supply” of paper currency, it is hardly surprising to see that scarce commodities such as gold and bitcoin have climbed in value. When we see a gold price lift up over 30% in one year, we start to question whether the gold itself has become more valuable, or whether the USD it is measured in, has shrunk.

A man who was 67 inches last week and becomes 175 centimetres this week has not actually increased in height; it is just that the unit of measurement has become smaller. Bear that in mind as we see “price increases” in other assets, as well as the fact that the Fed is using its increasingly worthless monopoly money to buy up local stocks and bonds. The charts may look impressive, and new record highs may seem to be emerging, until a wise or honest economist produces a chart which is ‘adjusted for inflation’.

It is arguable that, without the advent of COVID19, national lockdowns and stimulus printing of paper currency, that the price of bitcoin and gold would still have increased. This would merely be a function of scarcity; now it is scarcity and panic.

What is interesting to note, is that, back before December 2019, in the absence of a COVID19 outbreak, there were still cracks starting to appear in the global economy. Hundreds of retailers were closing their stores, blaming Amazon, eBay or other online sources for their losses. Debt levels in the USA were already at levels which the IMF called “unsustainable” long before the pandemic.

Government policies which bailed out huge corporations during GFC1 possibly did more harm than good: instead of allowing faulty conglomerates to go bankrupt, the burden was shifted to the taxpayer, and the debt has never been repaid. It is interesting to note that when GFC1 almost took out the global banking system, USA had junk housing bonds worth around $600 billion and debt to the Fed was at 5%. A decade after the GFC, the junk bonds now include a staggering 300% growth (thanks mostly to unpayable student loans) and the debt to the Fed has increased by 400%. This does not include debts to foreign powers (currently over $1.6 Trillion to China alone).