Good Morning Everyone,
Back at it after a week of paragliding! Lets get straight into it.
As bitcoin heads toward $47,000 (relative to melting USD shitcoins) i found this video of Russian supreme leader Vladimir Putin of particular interest. The video shows Putin calling a spade a spade, and rightly calling out the end of the USD as a first class reserve asset following the sanctions by the G7 seizing Russian central bank reserves.
If you have been paying attention and following along - this is not news to you - but the significance of a pivotal world leader and one of the major energy producing nations calling it out certainly is. The US and others are hiding behind propaganda and Russian smear campaigns to distract the populous from this reality and the potential implications of this. Like him or loath him - What supreme leader Putin is saying here hits straight in the middle of the bullseye.
He says (which is subtitled):
“Let me reiterate, the whole global economy and trade have suffered a major blow, as did the trust in the US dollar as the main reserve currency. The Illegitimate freezing of some of the currency reserves of the Bank of Russia marks the end of so-called first-class assets. In fact, the US and the EU have defaulted on their obligations to Russia. Now everybody knows that financial reserves can simply be stolen and many countries in the immediate future may begin - I am sure this is what will happen - to convert their paper and digital assets into real reserves of raw materials, land, food, gold and other real assets.”
As i said, if you have been following along none of this is news and has been discussed and explored multiple times including here in a previous article titled - “A Clinic On Counter-Party Risk Ensues”
What is significant, is confirmation from Putin that he/Russia has received the US memo about counter-party risk, albeit a little late, but will now acknowledge reality and accept that we are entering a new monetary paradigm in which the US dollars reserve status doesn’t count for anything and is not worth the paper it is printed on.
I do agree in the short term that it is likely to see most nations pivot to protecting their wealth in quote-un-quote “real assets” as he mentions, however as i discussed last week, this is historically a suboptimal strategy. Hoarding of perishables like raw materials and foodstuff and monetising of suboptimal monetary goods is a knee-jerk reaction to a much more systemic problem. But it is a problem which now has a solution thanks to bitcoin. It is certainly the case that the monetisation process of bitcoin requires more time to deepen liquidity to be able to truly serve as the global monetary reserve asset. In the short term these “real assets” will likely be increasingly used, but over time this will also act as an educational tool for the wider populous what an unsatisfactory monetary good these items actually are.
As i said last week:
“The problem with this is the same as why it’s problematic to have monetised real estate. By monetising real estate as a store of value, it pushes prices up. This directly and negatively impacts local people because obviously people need somewhere to live. The only reason we have monetised real estate, and may be moving toward a world of commodity backed money, is because we had not previously discovered or invented a superior system. A pristine monetary good. We need a neutral money for the world, that does not need us to trust each other in order to trust the money, or the monetary protocol. With such a monetary good, this ensures we’re not incentivzed to hoard other things people may need, like commodities, in order to store and protect value. We do not want to adopt a money with utility. Quite the opposite. The most superior form of monetary good, is something that purely full-fills the purpose of an optimum money and absolutely nothing else.”
Short term it seems likely that naive interventionists will monetize so-called real assets at the expense of many humans on the planet being able to nourish themselves. Long term, the transition to the most pristine monetary good in human history has never been more obvious, and it is this transition that will usher in a new paradigm of energy abundance.
Hope you all have a great start to your week. I’ll chat to you tomorrow.
AK
