HyperMonetization Cometh

The best way to win a nuclear war is by preemptively striking your opponent before they are prepared, hitting them so hard that they have no ability to respond with a counter-strike. This is a 0 to 100 total war event, where one day everything is “normal” and the next day your city is a smoldering ruin.

It’s an issue straight out of game theory. Give your opponent the ability to strike back and YOU will be the one who is completely demolished and unable to fight.

A less macabre arms race takes place when the piñata breaks at a child’s birthday party. A fervent hysteria is suddenly unleashed as every child who can crawl rushes forward to scoop up as much candy as possible. The stakes are high — every candy that’s passed over will go to some other snot-nosed punk. A kid who’s slow to the gun will come out behind and will be forced to watch some other kid eat the extra large Reese’s he’d been dreaming about all day.

In the piñata arms race a child’s unlimited appetite for sugar is met with a very limited supply of said sugar… and screaming, squabbling, and (most likely), crying ensues.

This is rational behavior in competitive markets.

Today the nuclear bomb being dropped on society is the global debasement of fiat currencies coupled with an ahistorical power grab taking place under the name of “public health”. Individuals and corporations are beginning to realize that their money, their businesses, and their wealth may not be as secure as they had once thought.

Holes are appearing in the piñata and corporations are beginning to realize where to swing the bat. Bitcoin stands to win.

The events taking place have been so well documented that I will keep it simple:

  1. A corporation is sitting on a pile of cash that is being inflated away by bad monetary policy. They need out. What can they do? They can buy bitcoin.
  2. Their purchase causes an increase in bitcoin’s price — which is then also reflected in the corporation’s stock price. As bitcoin’s price moves up, so does the company’s stock.
  3. The corporation then borrows money against its higher valuation, positive cash flows, and rising bitcoin portfolio. They use it to purchase more bitcoin.
  4. Rinse and repeat.

As more and more corporations wake up to this reality, bitcoin becomes the only finite resource that can cure their sweet tooth. The hysteria will be impossible to stop.

Why? Because GameStop.

I know, I did it. I’m sorry.

But it’s important to reiterate the fact that the regulators stepped in to stop the trading of GameStop stock back in February because the hedge-fund-bankrupting-short-squeeze was an existential risk to the stock market. If one guy goes down, his forced liquidations will cause every other guy to go down like well placed dominos.

As corporations leverage their balance sheet in order to scoop up as much bitcoin as possible, their stock prices will begin to reflect the price of bitcoin. Regulators will be unable to step into the market without causing a huge bitcoin sell-off that would have a negative impact on stock prices. Such a massive market deleveraging has the potential to destroy the stock market, as depressed stock prices force EVERYONE to get liquidated.

The U.S. will find itself in a position where letting corporations borrow money to buy bitcoin will entirely undermine the value of the U.S. Dollar, but preventing corporations from holding bitcoin will create a negative feedback loop that will be disastrous for the stock market. Adversely, a drop in the stock market would force the Federal Reserve to backstop it by printing money, which would only increase demand for bitcoin — further exacerbating the devaluing of the dollar.

Good game.

So if they can’t stop it, they’ll have to join it.

The U.S. Government will have no other option but to set off the nukes and initiate total war against its own currency. The Fed may find itself creating new US Dollars for the explicit purpose of purchasing bitcoin — all in an effort to front run the deliberate debasement of its own currency.

The end result is the hyper-monetization of bitcoin.

An indomitable melting up of bitcoin’s price.

A no bid scenario, wherein no amount of US Dollars is enough to purchase a single bitcoin.

An event like this can truly happen sooner and faster than any of us might believe. Just like in a nuclear war, the first entity that strikes with the intent of preventing any possibility of a counterstrike will hold a major competitive advantage. Normality today, ruin the next. Drop the nukes now and think about it later.

Or, if you like the candy metaphor: nobody wants to be the kid who’s crying because he got stuck with the Tootsie Roll.

I write my ideas