It’s a crazy world we’re living in, it was always crazy, but we tend to keep most of it under the rug. Still, as shelter in place orders have rekt the entire world economy, we see already strained systems take an absolute beating. What would have played out over 10/20 even 30 years is now being congested into a smaller window, and we have very little time to prepare when compared to a post corona credit crunch world.
The whiplash is going to be a real pain in the neck, and many are only going to wake up to it when it hits them like a ton of bricks.
Each country is pretty much in the shitter right now and the further away you are from the US and their dollar supremacy the worse off you are at the moment. If we look at the countries that have US dollar/Swift sanctions, Venezuela, Iran and Zimbabwe, not doing too well right now.
Countries folding under the pressure
But this isn’t going to stop; countries are feeling the pressure of job losses and drying the slowing down of the M2 money supply as more people save and fewer people spend. In a debt run, fiat money Ponzi scheme economy Keynesians live and die by getting people to continue to spend as much and as fast as possible, so heading in reserve is only killing the economic system faster.
As countries continue to borrow and lever up their debts in US dollars, they put more pressure on the US, which strengthens the dollar as there is such a demand for dollars to fund countries recoveries.
What worked before is seen to will work again, but this time I’m not so sure, with no more interest rate cuts to go and negative rates on the horizon for more countries there isn’t room to do anything else but flood more fiat money into the system and hope it self corrects somehow.
The weight of the dollar
As countries will eventually have to pay back their debts, they will find that to service the interest along with the principle they will need to either tax their citizens to death or print up more of their fiat currency devalue it to buy dollars and then pay back their debt.
This is a sure way to hyperinflation as the US Dollar gobbles up more of the worlds purchasing power and kills currencies in the process. Countries are going to eventually have to hyperinflate their debt away or default on their debt which would see a currency collapse, so the result in both will be chaos.
The Bitcoin counterweight
Smaller countries that will shit the bed have a choice, take the shit head-on or start to accumulate positions in other asset classes, for some this will be gold, and for others, it could be Bitcoin. For those who chose Bitcoin, it will make for interesting game theory as one country adopts sound money principles they will see their economy strengthen over time.
Allowing your citizens to earn, spend and save in a deflationary currency while also holding some of your own will see them break away from the traditional constraints and see them leapfrog those that do.
The smaller nations have less to lose, and a shorter distance to fall which is why they can switch over should their currencies collapse. Larger economies, however, will fight it out to the end.
The preditor becomes the prey
The more the dollar kills other fiat currencies, the more we would see one by one country look to adopt Bitcoin, the first one to do so will surely not be the last and once they do it will be a game of how long can you go against the sound and dependable policies of BTC.
Only time will tell, but I have a feeling once one country makes the first move, it going to be quite the whiplash as Bitcoin begins to slap aside other currencies as it moves its away to a possible reserve currency status.