Welcome to the regular Friday mailbag edition of The Daily Cut.
Coming up, a reader wonders how it’s possible for bitcoin to remain outside the mainstream money system… and still thrive.
And your fellow readers weigh in on a new stimulus proposal – a $1,000 bank balance top-up every two weeks, courtesy of Uncle Sam.
But first, Legacy cofounder Bill Bonner weighs in on a question he and Dan Denning have been asking at our Bonner-Denning Letter advisory…
Will the result of the presidential election affect all the digital money “printing” that’s going on?
Bill’s answer: No, not at all. It won’t make any difference that I can tell.
The difference between Biden and Trump is mostly a cultural difference. There are people who think it’s important which Supreme Court justice gets appointed and which one doesn’t.
I’ve never seen any evidence of that. You know, we’ve had liberal justices and conservative justices. It hasn’t made any difference. The court tends to follow the passions of the time, whatever they are. Mostly, they just go along with whatever the government wants to do.
So to me, the election we’re facing is an election between two people who represent, fundamentally, the same thing.
They’re very different people, with very different backgrounds, very different styles, and very different cultural signals they send off.
But they’re both baby boomers in their 70s. They have the same interest in keeping this money-printing thing going.
Neither has the solution. Neither understands it. Neither seems to care about what’s really going on.
America’s not facing any real threat from China. It’s not facing any threat from Russia. It’s not Black Lives Matter that’s going to undo the government or the nation.
What’s going to kill the nation is the financial system. It’s the system of spending more money than you have… and doing it over and over again… and then trying to cover it up by printing money.
This is classic. There’s no mystery to it. It shouldn’t even be any surprise. Lots of nations have done this. In fact, they all have done it, or something similar, at one time or another.
So that’s what’s really going to upend the nation. Because when you spend more than you can afford to, and you keep printing money, it destabilizes everything.
Regular readers will know we’re bullish on bitcoin as a way to escape the kind of monetary calamity Bill sees coming. Like gold, it’s honest money that governments and central banks can’t fiddle with.
As the Fed tries to inflate the dollar with digital money-printing, bitcoin is more important than ever.
But one of your fellow readers wonders how bitcoin can stay independent of the feds. On hand with an answer is Nick Giambruno, who heads up our Casey Report advisory.
In June 2018, Nick recommended bitcoin as a way to sidestep inflating fiat currencies. Since then, his readers have had the chance to make a 73% gain on the crypto.
And as Nick explained over at our Casey Daily Dispatch e-letter, the really big gains for bitcoin still lie ahead…
Reader question: It seems to me like bitcoin is like the fastest car on the road. It can’t run out of fuel and it will never need repairs. Sounds wonderful… except who owns and controls the highways?
I’m concerned about how bitcoin payments can work in everyday life and not just in a “Mad Max” escape to some hideaway place. At some point, it has to interface with the very system that makes some of us want to puke.
– Michael H.
Nick’s answer: I would suggest looking into the Lightning Network. It’s is a peer-to-peer network built on top of Bitcoin.
It could allow bitcoin to eventually handle every transaction in the world – many millions every second.
The Lightning Network has near instantaneous speed. It also has zero counterparty risk and almost zero fees.
It’s still under development. But it’s likely to get a big boost soon. I covered this in great detail in a recent issue of The Casey Report. [Nick’s paid-up readers can catch up in full here.]
I wouldn’t worry about bitcoin being able to adapt to the old legacy financial system. It’s a mile-high house of cards that looks wobblier every day. I’d say that’s backwards. I’d be far more worried for the legacy financial system.
Bitcoin is the hardest money man has ever known – meaning it’s the most resistant to having its supply corrupted by inflation. It’s decentralized over 10,000 computers around the world. It’s accessible to everyone and controlled by no one. It’s also secured by unbreakable cryptography and a mind-bending amount of computing power.
Bitcoin is far more robust and resilient than highly leveraged government paper-shufflers such as Citigroup and JPMorgan Chase.
Finally, we turn back to a suggestion from dot-com billionaire Mark Cuban.
He reckons the government should drop $1,000 in newly digitized cash into every American’s bank account every two weeks for as long as the pandemic lasts. If someone didn’t spend the money, the government might take it away.
And Bill penned a withering response in his daily e-letter, Bill Bonner’s Diary. As he wrote…
Fifty years ago, would anyone – other than an unhinged fantasist – have dared to suggest such a thing? Would the newspapers have bothered to report it?
Probably not.
But today, we have more billionaires and lower standards.
In the boom years, people spent money they didn’t have buying things they didn’t need. Now, Cuban proposes to make it a matter of government policy.
You can’t argue with Bill’s logic – as far as it goes. Bill again…
If it makes sense to give people fake money to stimulate the economy, why not give them more of it?
Then, if people really get richer by buying things they don’t need with money they don’t have… why not force them to do it?
But what will happen when the feds stop giving people money? What will happen to the “demand” that Cuban thinks he is stimulating? It will come to a stop, of course… resulting in an even worse calamity.
We asked readers what they’d do with the free-money handouts. And we got some interesting responses…
I’d spend the money on bitcoin and gold because, over a period of time, the proposal would surely ruin the dollar. If you spend it on industry, at least you’d have the hope of increasing investment and productivity, expanding markets that might otherwise permanently fail or move offshore.
Though perhaps you’ve presented a false dichotomy. And the real answer is not to print more money at all. Let the dark science of economics have its day.
If the markets were to adjust naturally, we might enjoy more efficiencies and a greater incentive to innovate. Ah, but that comes at great human and political cost!
– Pete C.
I would buy my regular groceries, pay bills, etc., with it just to ensure it got spent. I would not increase my spending. I could then use money I already have to save or invest. So there’s no net gain from me in spending. I would expect that many people who have incomes would do the same.
– Neil G.
If the government handed me $1,000 every two weeks, I’d spend it on guns, ammo, and a security system. I’d need these things to protect myself from anarchists right after the idiots in Congress and the Federal Reserve bankrupt our government with their stupid fiscal policies.
– Bernie M.
Is it a good idea for the government to hand out free money in a recession? What would you do with your first $1,000?
Write us with your ideas… plus any questions you have for our analysts… at feedback@legacyresearch.com.
Have a great weekend.
Regards,
Chris Lowe
October 9, 2020
Bray, Ireland