I jumped onto my old 17-inch Toshiba laptop, I wasn’t really sure if what I’d heard was actually true.
I’d only returned to the country about six months earlier. I had been gallivanting around Europe from April to November in 2008. And boy, what a time to be away, oblivious to the markets.
Call it divine intervention, but I’d made a snap decision to head off with mates and do that whole ‘backpacking thing’.
And for most of 2008 our time was spent hopping from train to train, city to city, hostel to hotel to hostel…and pub to pub. What a way to stay (somewhat) out of the loop when the one of the most devastating market crashes rolled out.
Of course, I couldn’t remain completely blind to it. Whether it was Barcelona, Amsterdam, Berlin or Bordeaux, the world was awash with unadulterated fear of economic collapse.
And I had a relatively small stock portfolio at the time that I’d dip into now and then to help fund the ongoing travels. The downside is that when I took off in April 2008, to when I started to need it most around September/October 2008…the value was, sadly, much lower.
But I didn’t really care. That trip was weirdly a foundation that helped to shape the person I am today (another story for another day).
I eventually made it back to Australia. And even with a bit of a tan. But with somewhat depleted funds. And I took up a job so that I could start to build my wealth back up again.
Navigating Australia’s financial landscape
The job was working in one of Melbourne’s most exciting, fast-growing financial advice firms. A great company with great people. Some will be friends for life.
I had worked as a financial advisor in the years before my trip too. And I’d studied finance, economics, financial advice, and half a law degree at University as well (again, another story for another day).
Therefore, my education and experience had been in markets, finance, and the financial system. To see it falter, crash, and dive into the pits of despair was an eye-opener. And seeing the responses from central banks and government because of it was equally as eye opening.
Being also somewhat of a free-market proponent, I was always curious as to the need to bail out those that had happily sailed themselves up ‘that creek’ without any paddles.
Nonetheless, that’s what happened. And then the government and central banks coordinated ‘attacks’ on the financial system. Now, you won’t hear these programs labelled as ‘attacks’ very often.
But that’s exactly what they were.
Money printing, slashing of rates, fluffing up economies with cheap money and flooding the market with it. This benefited those in power, those that sat atop of these failing companies. The rich got richer, the really rich got mega-rich.
Now by around March 2009 we’d hit the rough bottom of the crash. And a lot of companies did fail, they never received a bail out, they were just left to the administrators.
But the companies that were aligned to the operation of the flawed, broken financial system were kept alive. On life support, some of them, but still alive. And the broken strings of the system were restrung and retuned to play wonderful melodies for the next decade.
The government’s $42 billion ‘stimulus’ package
One of the most bizarre support mechanisms employed in this time, in mid-2009, came from the Aussie government.
They had decided to hand out cash payments to Aussies. The amounts were relative to how much you earned. Around 13 million Aussies would get these cash payments. It was part of the government’s $42 billion ‘stimulus’ package.
Remember, this was off the back of possibly the worst financial crisis ever seen outside the Great Depression.
Anyway, I couldn’t fathom how this would work out well. The idea was give everyone $950 (or less depending on what you earnt), and they would spend it in the economy and we’d be A-OK.
And that’s exactly what they did.
Again, I couldn’t quite believe it, until I saw it. I logged into my CommBank account, and there it was. $950 right there just for me, from the government, to do with what I wanted. They just gave me $950 for free!
Sweet. I was also now living with some mates. And I’d wanted to get a TV for my room, because, why not? And that’s what I used my $950 for. I was a good little citizen and I put that free $950 back into the economy, doing my part, buying a TV from JB Hi-Fi.
It was also in the throngs of the crashing market, the early parts of 2009, when an unknown ‘way-out’ of the financial system was emerging. It was still unknown by most in 2009, and I hadn’t even yet come across it or its potential.
It was during this time the Bitcoin blockchain started and the idea of bitcoin started to proliferate and permeate through the online world.
Now if I had my time again, I would have used my $950 of free money to buy bitcoin. Had I known about it well enough then and had I bought bitcoin in mid-2009…things might be a little different today.
Bitcoin back then was worth very little. But by the end of 2009 it was worth roughly 3.3 cents in Aussie money. Had I spent my free $950 on BTC back then I’d have got around 28,787 bitcoin for my money.
In today’s AUD prices that would have been worth just over $380 million.
That’s no typo. $950 of bitcoin in 2009 could have been worth over $380 million today.
And I bought a TV instead…
But like I say, I didn’t know about it then. No one really did. And there’s a good chance I wouldn’t have held onto the full value all the way for the next decade, watching my paltry $950 become worth $1 million, $10 million, $100 million and not taken some out.
Government is looking to take drastic measures
Today however, thanks to the coronavirus, the government is once again looking to take drastic measures.
They’re petrified about the impact this pandemic will have on the Aussie economy. And they’re preparing to release a new stimulus package. There’s even talk of there being direct cash injections. Which may even come in the form of this ‘free government money’.
We’ll see over the next few weeks as to how it plays out. But I tell you what, the government may just decide to kick the can down the road. They may decide they know what’s best for us all. They may just do what they’ve done before to try and ‘stimulate’ the economy.
I say none of it will work…again. But I can tell you exactly what I would be doing with free money if the government decided to hand it out.
If I had my time again, and I may well do, then I’d be taking that money and buying bitcoin with it — and I’d sit on it for another 10 years to see what came about.
I reckon that’s a fair thing to do. Don’t you?
Editor, Money Morning