Everything is breaking.
Years of 0% interest rates encouraged everyone to take on cheap debt. Corporations, countries, individuals... Everyone.
Most of the debt wasn't used productively - meaning most of it will never be paid off.
And now that interest rates are rising...
Our current economic system REQUIRES more debt to survive.
Just take a look at this graph and you'll see that the amount of debt only goes one direction.
If we don't pile on more debt, the entire thing collapses - and that's what we're flirting with now: Systemic collapse.
The amount of new debt required to keep things propped up is at truly silly levels.
And the Fed is making one last attempt to deny reality by raising rates...
But the only way to stop our momentum is to slam into a brick wall of economic pain - which is exactly what's happening
We're seeing the chaos play out in all markets:
- Equities are tanking
- Bond yields are surging
- Currencies are plummeting vs. USD
- #Bitcoin selling off
- Shitcoins evaporating
There are very few places to hide. And cash is being eaten by inflation of 8%+
Here are some charts that illustrate how crazy things are getting:
1. German 10 year yields just broke through a 4 decade long trend line.
The German economy is being crushed by inflation, but the EU can't raise rates without bankrupting Italy and Greece. The EU is trapped.
2. The Japanese Yen, the 3rd largest currency in the world, is being destroyed by its central bank.
The Bank of Japan is buying UNLIMITED quantities of Japanese Government Bonds to prevent yields from going above .25%
Why? Above .25% and the Japanese banking system implodes.
Watching the Bank of Japan destroy the Yen offers a glimpse into the future of other major fiat currencies, including the USD.
When the debt becomes too large, yield curve control and destruction of the currency becomes one of the only ways out
3. Dollar weakness vs. the Russian Ruble.
Russia is done accepting cheap fiat for scarce goods. This severely limits the ability of Central Banks to kick the can by printing.
Russia is calling the fiat bluff - and the implications are massive.
4. Corporate bonds are falling off a cliff as investors realize that a lot of companies won't be able to pay off their debt at higher interest rates.
Companies that can't afford to refinance will need to layoff employees and liquidate assets which is bad news for everyone.
5. Let's take a quick peek at how mortgage backed securities are holding up through all of this... YIKES.
Fun Fact: The Fed says they're going to sell some of the MBS that they bought during QE. Good luck.
By now you get the point: The entire system is crumbling. Cracks are opening up and portfolios are tumbling to hell.
And yet... What can the Fed do? With inflation absolutely crushing people, can they really reverse course and fire up the money printers again?
Inflation in the real world (with pressure applied by Russia) means we're now facing an impossible policy choice: Mass default leading to systemic collapse, or continuing down the path towards hyperinflation.
And this finally brings me to #Bitcoin and why I'm calmly stacking through the chaos.
Let's be frank: The #Bitcoin price is melting down. It's testing the low $20K range as Celcius blows up and shitcoins head to zero.
But the value prop of Bitcoin remains exactly the same.
Everything that is playing out right now is why we've been stacking #Bitcoin to begin with.
The fiat system is falling apart. And we need a form of money that can be held safely outside of the system without counter-party risk.
https://twitter.com/stackhodler/status/1536283396053291008
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