Good Morning Everyone,
The world order is changing fast right in front of our eyes. The implications of the war that has begun are far reaching and constantly evolving.
The following quote from Vladimir Lenin captures my sense of the situation:
“There are decades where nothing happens and there are weeks where decades happen.”
- Vladimir Lenin
The amount of bad information online has honestly never been higher. I’ve seen videos shared apparently from Ukraine, that was actually from a starwars movie (with storm-troopers in the video!) and that have been shared by mainstream media outlets, as well as propaganda relating to the Ukrainian PM with images of him in full-camo as if he were going into battle that are actually from a year ago. I could go on, but the point is it’s easy to get lead astray right now, and very difficult to separate the signal from the noise.
For this reason, i believe it’s more valuable to focus on the larger themes at play as these, just like higher time frames on a chart, imply a higher signal:noise ratio.
The big theme as we have discussed is that the world order is in flux. It’s incredible to me to witness the way the attention of the masses is as if it were attached to a string. One day it’s COVID and a fixation toward masks and vaccination status - next it’s war.
Now with military conflict breaking out, and all eyes on Ukraine, I’m most curious to see if the situation will escalate, and if it does, how China will respond.
Ray Dalio has written a recent piece that i’d like to point you to, which is insanely valuable. I’m constantly amazed at what the internet has enabled, and to be able to access content like this at zero cost is drastically under appreciated.
Focussing On External Conflict - The Russia-Ukraine-Nato Situation
Ray basically outlines his 2 major concerns. That being 1) NATO being drawn into this war triggering an escalation 2) How supportive will China be to Russia.
The article captures the broader view with clarity and a laser sharp historical context you’re unlikely to get elsewhere and I urge you take the time to read it.
What I wanted to highlight was from the very end of the article where he laid out his Power Principle which is as follows:
“Have power, respect power, and use power wisely.
Having power is good because power will win out over agreements, rules, and laws all the time. When push comes to shove, those who have the power either to enforce their interpretation of the rules and laws or to overturn them will get what they want.
It is important to respect power because it’s not smart to fight a war that will produce more pain than reward; it is preferable to negotiate the best settlement possible (that is unless one wants to be a martyr, which is usually for stupid ego reasons rather than for sensible strategic reasons).
It is also important to use power wisely. Using power wisely doesn’t necessarily mean forcing others to give you what you want—i.e., bullying them. It includes the recognition that generosity and compromise are powerful forces for producing win-win relationships, which are fabulously more rewarding than lose-lose relationships. In other words, it is often the case that using one’s “hard powers” is not the best path and that using one’s “soft powers” is preferable.”
This lead me to thinking about bitcoin - and money as a system of control more broadly. This system is relevant from the perspective of the individual as well as on a larger scale between nation states as we are seeing play out with this current conflict.
It’s important to understand the historical context of economic wars, to appreciate how significant they infact are, and how close it indicates we are from a wild escalation in Kinetic warfare. Ray outlines these in the article, and i’ve touched on these recently but the central point is this:
“Shortly before there is a military war there is an economic war that typically includes:
* Asset freezes/seizures
* Blocking capital markets access
* Embargoes/blockades. “
We are seeing these first two measures being taken in response to Russia invading Ukraine. So a tit-for-tat escalation is a very real possibility and could ensue much faster than what most may realise. Given this possibility it’s timely to consider how best to insulate oneself, that is to protect what power we do have, even in our own small ways. It is historically difficult to protect ones wealth in times of war as Ray points out in the article, and as i’ve stated many times, that i believe bitcoin is the most transformational tool to empower the individual to protect their’s - which is to protect your economic power in the face of uncertainty relating to the impacts these events may have on individual currencies, different assets and markets as well as how individual governments and/or central banks may change the rules of the game to suit their own means, as we have seen in Ukraine.
As Ray states in the article:
“Protecting one’s wealth in times of war is difficult because normal economic activities are curtailed, traditionally safe investments are not safe, capital mobility is limited, and high taxes are imposed when people and countries are fighting for their survival.
Protecting the wealth of those who have it is not a priority relative to the need to redistribute wealth to get it to where it is needed most. When hot wars happen, classically it pays to sell out of debt and buy gold because wars are financed by borrowing and printing money, which devalues debt and money, and because there is a justifiable reluctance to accept credit.”
There is a much larger idea in amongst all this that I’ll get into another time, which is that the monetisation of bitcoin has the potential to dis-incentivise kinetic warfare.
Leaving that aside for now - I think Ray’s perspective ‘that it’s most important to redistribute the wealth from those that have it rather than protect it, is an interesting one. But i also think there are arguments to made against it, given the level of wealth inequality. Remember, the top 1% in the US own more than the entire bottom 50%.
But who is disproportionately harmed by these kinds of conflicts out of the two parties? One can still afford shelter and food, and in many cases the other cannot. I think it’s self evident that the majority of every-day working class people that do not own assets as a means of protecting their wealth, because they live week-to-week to survive as it is, are most harmed as the cost of basic goods or services increases in an extreme way.
I would make the case that an open system that empowers the individual and does not allow one node in the network power over another, or the ability to distribute their value without consent, aligns the true incentives much more appropriately. I also believe we have already seen examples of this be demonstrated in the bitcoin community. We saw over 22 bitcoin raised and donated for the Canadian truckers. We have also seen significant donations to individuals effected by this recent conflict as well as the opportunity to donate in other ways as well.
However, this action should be a choice, and if ones survival does genuinely depend on it, then it would likely be an easy one. The current system incentives those closest to the center of the system to take value from those that can least afford it rather than funding these conflicts themselves, as ray suggests is most important. Instead we have seen US politicians and central bankers literally day trading and focussed toward benefitting from the recent pandemic and global events. This would seem to me like an obvious contradiction and while what Ray says is very likely true, that the current system and the incentives of it, do not line up and incentivise the behaviour he suggests.
For now I think the most critical thing for people to understand is that bitcoin is the most pure and pristine abstraction of money that human civilization has created or discovered, depending on how you think about it. In every previous war, gold has historically been the go-to as a means for the wealthy to insulate themselves from the actions of government/central banks indicating what Ray infers to be ideal, is not actually what happens.
It also meant that everyone that did not have gold or other alternatives and was confined to a local currency was disproportionately harmed economically, and in some respects, funds the war (through the devaluation of the currency) regardless of whether or not they were implicated directly.
Now for the first time, anyone on the planet with a smart phone and an internet connection has the power to protect themselves and opt-out from supporting a system that incentivises war.
This is a major shift, and one I don’t believe most have grasped yet, and the societal ripple effects of such a transformation are difficult to imagine.
As the title of todays letter suggests, I believe we’re in the eye of one of those points within history where decades could happen in days.
Stay alert. Get educated. If you have assets on an exchange now is the time to custody your keys.
Hope you have a great day. I’ll talk to everyone tomorrow.
AK
