The Confidence Game
With so much going on it's been difficult to keep up with everything. Even Janet and Jerome can't keep their stories straight.
Before we get into the plethora of charts and hot takes I have planned for this update, apologies to my paid peeps for two weeks without a portfolio update - you’ll find this week’s update behind the paywall of this post. Now, the hot takes…
Confidence vs Ponzi
They know, as sure as the treasurer of Enron knew, that they are engaged in, at best, a confidence game and, at worst, a Ponzi scheme.
—Thomas Kaplan on Central Banks
All I can say is the last two weeks have been a long year and it has been wild trying to keep up with everything. I obviously shared my general thoughts on the Coinbase COIN 0.00%↑ Wells notice yesterday and the paper wealth scam last week. While it’s incredibly frustrating that the SEC is behaving this way with crypto businesses, it’s not a surprise.
What we’re witnessing is a coordinated attack on the industry and if there are any companies that have a shot in hell of successfully defending the domestic survival of crypto businesses, it’s probably Coinbase and Grayscale - and they’re both in the ring. That’s the good news. Now the bad news; it’s abundantly clear to anyone paying attention what is happening here. If you think the crime in crypto is bad, just wait until you see the corruption in Washington!
But I get it. Crypto is scary. The powers that be say things like Bitcoin “are dangerous, harmful, volatile,” and any number of other things that are true and untrue to various degrees. What is also true is fractional reserve banking has a major flaw; when people want their money back the system collapses.
Like physical self-held gold and silver; self-custodied Bitcoin, Ethereum, Zcash, and countless other digital currencies are not IOUs. They’re not liabilities. They are fundamentally different from dollars and they are far closer to gold than they are to fiat even though they live in a digital setting as opposed to a physical one. Even if one takes the view that they’re closer to fiat because they aren’t physical, fine. They’re still not controlled by the state - that means they’re more censorship resistant by default.
Yesterday I said to pick up a paddle. Today what I’ll say is this;
First they came for the socialists, and I did not speak out—because I was not a socialist. Then they came for the trade unionists, and I did not speak out—because I was not a trade unionist. Then they came for the Jews, and I did not speak out—because I was not a Jew. Then they came for me—and there was no one left to speak for me.
—Martin Niemölle
What do I mean by that?
There is no doubt the banking sector is going through a dramatic shift and that shift is almost certainly going to lead to the full-on financial surveillance state. We’re already so close to it anyway because so few people still use physical cash. But now where getting really close to the end game scenario. Inflation is still high. Banks are collapsing. And the printer will be turned back on. Dollars are going to continue losing value, potentially even faster than we can comprehend. The dollar system is on the brink and the new system will be ready and waiting for the forced pivot.
If you’ve been legitimately paying attention to what I’ve been saying for well over a year, this should not be a surprise. I joke about tinfoil hats but they’re not needed. This has always been a simple math problem and the math no longer works. First they come for crypto. Then they come for gold. Then they come for cash. Then you’re either a criminal or completely trapped. Don’t let them win the first battle and we’ll all be fine. Pick up a paddle. Self-custody everything you can.
The system is rotten. The Chairman of the Federal Reserve told the world the central bank wasn’t “thinking about thinking about” raising interest rates in June 2020. At that time, he told the financial markets that rates would stay at zero through 2022. Then he raised rates at the fastest pace on record by year over year change percentage beginning the first quarter of 2022. Now all of the banks that bought treasuries on his June 2020 rate guidance are underwater and need bailouts.
Then this week we get Powell and Janet Yellen literally contradicting themselves in the same day regarding whether bank deposits are backstopped or not. Fun times. Dumb or on purpose? Does it really matter when the consequences will be the same?
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