Jerome Powell took the stage at Jackson Hole and told the world that rate cuts are coming to the US.
Bad news – rate cuts aren’t going to solve this one!
Here is a theory – after a few decades of intervention (central planning) via central banks – the system is out of control. No matter what the banking cartel does, the value of money is going down in a big way.
The themes that made Bitcoin valuable to begin with are stronger than ever. Nothing has been fixed since 2008 – and now the financial system is in dire straits.
Given how delusional central planners are – we can assume that asset prices are going way up – and major central bank intervention is coming soon.
We aren’t talking about rate cuts – but the central banks will try cutting rates on the way to socioeconomic oblivion.
Inflation?
Powell claimed that inflation is heading back to 2% in his propaganda piece at Jackson Hole. This is a lie of the highest order. Price inflation in USD terms will never be at 2% for any amount of time ever again.
The only speck of truth in Powell’s view on inflation is that the rate of rising prices has fallen. The actual level of prices has not. We are sure that Powell is sincere when he says that rates are coming down – it’s easy to see the system is broken – lower rates may help patch over the cracks.
Sadly for the lower 99% of society, asset and commodity prices are near all-time-highs at the start of a rate cutting cycle. Stocks, food, and housing are all near record high prices. With lower rates incoming in H2 2024/H1 2025, we can be sure that these price levels will rise.
For crypto investors – rising asset prices are a mixed blessing.
Deeper Problems
The social planners don’t deal with 2nd and 3rd order consequences. Combine that lack of vision with an ultra short-term planning paradigm – and you have a prescription for disaster.
Instead of diving into the potential problems that runaway inflation in the G7 will cause, let’s look at a BTC to the moon scenario (they are likely one and the same).
Credible economic ideas posit that the velocity of money is a root cause of strong inflation. It is a technical argument, but it has merit. When money is moving quickly, inflation can easily rise. In an economy with fast monetary velocity, there is also ample liquidity.
Bitcoin and crypto prices LOVE liquidity!
It’s easy to imagine a situation where central banks flood the markets with even more money, and prices rise. We are talking about all prices – from Bitcoin to bagels.
In a globalized world – there is nowhere to run. Every major nation sees big price jumps – with some incredible FOREX volatility added to the punchbowl for extra fun and excitement.
With prices rising and the markets swimming in a fast moving torrent of money – crypto prices explode higher. Gold and silver would also likely look pretty good to the global investor class. On the social side – things are pretty bleak.
Profit margins collapse, and unemployment blasts higher. With no way to make money – the masses become enraged, and a nasty cycle takes hold.
People rely on both income and savings to maintain their ability to live – and feed their families. With no stable assets left in the legacy financial system – people all around the world are put into a very difficult situation.
We all have to live in this world – so “BTC to the moon” could be bittersweet.
The Social Club
Anyone remember the “transitory inflation” narrative?
The banking cartel is a pack of scoundrels. Laughing like hyenas when the term comes up.
Seriously – watch the video of Powell speaking at Jackson Hole.
To the cartel – the global economy is an academic endeavor. Much like the global political class – the central bankers feel like they are living above the clouds with the gods of old.
Everyone lives on the same planet. Social breakdown would impact everyone – at least as time grinds on. Looking at a place like Argentina could shed some light on how the G7 breaks down at a financial level.
After more than three decades of inflation and terrible politics, Argentina is once again dealing with hyperinflation. The Argentinian Peso is effectively worthless on the FOREX market, and no one prints prices on the menu anymore.
There is one good thing about Argentina – they already endured hyperinflation a few times in the 20th century. Argentine society has inflation coping skills. In the US, UK and EU, this simply isn’t the case.
Think Smaller
Despite high inflation and some of the highest price levels in human history, the FED will be cutting rates soon. Markets are celebrating fresh rate cuts – but the wider social implications aren’t especially positive.
We live in an era when people assume the money they possess will have value.
More money is seen as a good thing. The idea that money can lose meaningful amounts of value isn’t widely appreciated. Despite numerous examples of fiat currency systems entering hyperinflation – everyone seems to think that “this time is different.”
The political class and central bankers aren’t thinking about the wider population when setting rates or drafting public policy. Open borders and massive deficit spending will have long term consequences whether or not you agree with the short-term policy implications.
You have to live in the same world where all this is happening – so you should be aware of what may be coming next. And what is possible based on our shared human history.
You Have To Do This One Yourself
Going forward – it would be wise to assume that the socioeconomic structures we have relied on in the post-WW2 era will fail. The banking cartel has its own agenda – and it isn’t likely to benefit you.
Crypto will rise substantially as measured by fiat currency – but all the other stuff you need like food and energy will too. The politics of collapse are nasty. You can see that in the US the entrenched power system is more than happy to use idiotic ideas like price controls to maintain power.
Ask anyone in Venezuela how nationalization and price controls work over the medium and long-term. The short take is – price controls create shortages. We have met more than a few Venezuelans on their way north from Colombia – and they were happy to sell us their currency as a souvenir.
Bolivares no longer have any value as money (a means of exchange) outside of Venezuela.
To reiterate – the banking cartel and governments do not care about the 99%. The common person isn’t a policy consideration. Drunk with identity politics, and sick with worthless money, the masses are moving into an unenviable position.
If you know why cryptos have value, you should understand that going forward, you must have a holistic plan to care for your needs. The closer you live to your sources of food and water – the better.
You never know – a can of smoked oysters might keep up with Bitcoin in the next bull run – if you are using fiat currency to measure its value.
The post Op-Ed: Central Bank Delusions: Why Rate Cuts Won’t Save Us This Time appeared first on Blockonomi.
