In today’s Money Morning… make no mistake, there will be consequences… two different ways to exit fiat… new fiat, old fiat, it’s still fiat… and more…
Yesterday, Ryan Dinse wrote to you with some killer charts showing just how wild monetary policy in the US is getting right now.
In a nutshell, the velocity of money fell off a cliff over the last year, while the total amount in circulation went through the roof.
And make no mistake, there will be consequences.
I think the key to investing success is being able to spot the consequences of consequences.
This is how you stay a step ahead.
Which is why you should consider picking up a copy of this book that’s about to launch in Australia.
It’s called The New Great Depression: Winners and Losers in a Post-Pandemic World by Jim Rickards.
Jim knows a lot more about markets and money than I do.
I’ve got my views sure, but I’m a small-cap analyst at the end of the day, while Jim’s been around the traps far longer than any of us.
In the book, Jim draws on:
‘Historical case studies, monetary theory, and behind-the-scenes access to the halls of power, Rickards shines a clarifying light on the events taking place, so investors understand what’s really happening and what they can do about it.’
It’s essential reading if you want to preserve and potentially grow your wealth in a time of extreme turbulence.
You see, Jim is a gold bull and a macroeconomic bear.
Nobody is an ‘everything bull’ or an ‘everything bear’.
Which is why today I’m going to lay out the case for being both a gold bull and a crypto bull.
First stop, China.
Coincidence? I think not — Ant Financial IPO and digital yuan
Back in October, I wrote to you about the Ant Financial IPO.
Since then, Jack Ma, the charismatic leader of Alibaba Group went off the radar, the mega-IPO got called off, and China took the first step towards launching its central bank backed digital currency (CBDC).
This is no coincidence.
Fintechs like Ant Financial are aggressively remodelling the concept of money and central banks are as fearful as their second tier, big bank counterparts.
So, it makes sense that Chinese regulators put the kibosh on the IPO.
In its place, they’ve introduced a CBDC.
As, Tanvi Ratna, CEO of a fintech think tank called Policy 4.0 said via coindesk.com:
‘The bank [PBOC] can make it more costly for digital payment platforms to use the digital yuan to lend money, and this might be something the government might want to force… China is very conscious about its debt problem. A lot of businesses do not have cash flows, especially after the coronavirus pandemic…Ant is pushing out personal loans, a lot of which could go bad.’
And how is the People’s Bank of China going about launching the digital yuan?
Lotteries or giveaways.
The easiest way to sucker people in the business — free money.
Again via coindesk.com (back in November):
‘The latest attempt to encourage mass adoption of the digital yuan was a $1.5 million giveaway by PBOC in October for Shenzhen citizens, Wong said.
‘Each of the 50,000 participants, who downloaded the digital wallet, would be selected in a lottery to receive about $30 during the week-long campaign. Stores in Shenzhen posted the QR code for the wallet users to scan and pay for their purchases.
‘The digital yuan’s benefits for China’s commercial banks go beyond increasing cash deposits. With a larger user base, the banks will have more transaction data to profile consumers, analyze their online behavior and experiment with different ways to monetize the data.’
‘Monetize the data,’ great.
You can see where all this is going…
Two different ways to exit fiat currency
New fiat, old fiat, it’s still fiat.
Centrally distributed, centrally controlled, and quickly turning to rubbish.
I’ve said before that gold is the old-fashioned way to exit fiat, while crypto is the new-school way.
So, at a big picture level you can be bullish on both.
Long gold and long crypto positions are fundamentally based on the same reasoning.
And China’s tinkering with its CBDC is an omen for what Western countries are pondering at this very moment.
I’ve got a lot of sympathy for the macroeconomic bear position too — and I won’t rule it out as a possibility.
But what happens when someone yells fire in the economic theatre though?
Jim Rickards’ new book lays out a road map for investors about how to survive when this happens.
Keep your eyes peeled for an opportunity to pick up his latest tome.
You can catch a more in-depth look at central bank monetary policy and its effects on the BTC price chart and gold prices below:
For Money Morning
Lachlann is also the Editorial Analyst at Exponential Stock Investor, a stock tipping newsletter that hunts for promising small-cap stocks. For information on how to subscribe and see what Lachy’s telling subscribers right now, please click here.