Comte de Sats Germain on Nostr: Thought 🤔 : If global foreign exchange swaps are $14 trillion USD, and bitcoin has ...

Thought 🤔 :

If global foreign exchange swaps are $14 trillion USD, and bitcoin has a higher return than any other asset, then all carry trades will get sucked into bitcoin.

That means the real present value of bitcoin - the entire supply - is $14 trillion USD. Right now.

What I'm talking about is what just happened in Japan. A 15 basis point rate hike crashed markets. Don't be fooled by the financial propaganda - it was not a decision by the central bank or government. Yield and price move inversely. When investors have less confidence in the usefulness of a bond, the want less of that debt, so the demand goes down and the price of the debt also goes down. The yield is just the difference between what you pay and what you get. So investors lost confidence in the Japanese economy, for whatever reason, at a magnitude worth 15 basis points, before the seller of the debt (the central bank) could do something about it - and the only thing they could do is sell less debt, or reduce supply enough to match the reduction in demand. Your econ teacher was telling the truth : everything really is supply and demand.

Built atop this price/yield mechanic is the carry trade. Basically, rich people print free money by borrowing the "weak" currency (yen) and depositing in a bank with "strong" currency for fat yields, then pay back what they borrowed and keep the free cash. Of course there's all sorts of things you can buy, with varying ROIs. This is why banksters obsess over sharp curves and stuff like that - they want to see the whole field of risk vs return, so they can maximize their mansions with the free money that comes from borrowing in one currency and lending in another.

You can probably detect my opinion of this - I hate it. This is the world built on debt, and the beginning of the growing fiat induced insanity. An asset being a store of value has a new meaning when you get to print free money, and you get to print free money because you're already rich. And when you can do this, then you have a strong incentive to lobby for new regulations that either increase government debt or decrease the supply of things like houses.

Now... Bitcoin. We know it here. I'll say it anyways - the price does not reflect the true value. Just given the way the carry trade works, never mind the million other reasons, bitcoin *must* absorb all of the value in the carry trade. $14 trillion of foreign exchange swaps *that we know of. Because it costs nothing to keep, returns higher than anything, so borrowing in anything to buy bitcoin is a better play than any foreign exchange swap.

So what happens to the national currencies? As demand shifts from buying bonds to holding bitcoin, the shift away accelerates, and yields have to rise to entice investors again. And this *should* be a huge benefit to savers, as banks will be able to offer yield on savings again. At this point, any decent economist will have to start doing "on one hand x, on the other hand y" thing. Savings ~= investment, so increasing yields could cause an economic boom, which some governments could leverage to get out of debt. The countries that do this will be the superpowers of the future. But there's a point where the debt is so large, that any boom causes deflation, which causes the real value of debt to explode faster than increased taxes can pay. Plus there's the problem of habituated indebtedness. I don't think they understand the meaning of balancing a budget... When we say it, they probably hear "wonk wonk wahhhnk wonk."

Okay, I didn't intend to write all this and I'm kinda mad that I did. But....

Who wants to bet that it will stop at $14 trillion?

#walloftext #masterclass #economics #finance #bitcoin #godcandle #holdontoyourbutts #yourenotbullishenough #ipromiseimstupid