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Wednesday, October 20, 2021

Bitcoin (BTC) feeds on high inflationary pressures

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Inflation reaches 3% per year in the Euro Zone

Christine Lagarde, the President of the ECB, repeated last Thursday her banking mantra: inflation will be “temporary”.

This is a lie. In France, you have to go back 68 years to find a year of decline in prices. Inflation is currently 3% per year in the euro zone and should become even more violent in the fall dixit Lagarde.

Inflation exceeds 5% per year in the United States. It’s as if Americans saw their wages decrease by 5% per year… Bitcoin can only appreciate if inflation never stops. And that is not likely to happen. For two reasons.

The first is that we have passed peak oil. In other words, growth will now decrescendo, whatever we do. Less growth means that the pie to be shared shrinks, inevitably causing prices to rise.

Globally, the average annual growth of GDP per capita has been declining since the 1960s, falling from 3.5% per year (on average) from 1960 to 1970 to 0% (on average) between 1990 and 2000. For the year 2020, we went to -4.5%:

These figures are corrected for official inflation, i.e. inflation in the prices of current goods (consumer prices). The prices of real estate assets and shares are not recorded. However, these assets are particularly inflationary. They “artificially” fuel the increase in GDP.

We say “artificially” because they are bubbles. To put it another way, speculative bubbles in real estate and the stock market drive up GDP, as long as they last …

Inflation will never stop

Since the second oil shock (1979), France has never seen per capita GDP growth exceeding 2% per year. We are even in decline since the peak of conventional oil of 2008:

Graph GDP per capita
(Current dollar = corrected for inflation / We use the so-called “real” GDP) / Source:

The lack of energy makes it not so easy to transform our environment (to produce things) and therefore to generate the economic activity necessary to repay the debt.

So we come to the second reason: the money creation system is designed to operate in a context of eternal growth. Creating money from debt means that debt can only go up. It is a well established fact.

The more the debt increases, the more growth is needed, which is no longer possible for lack of sufficient energy. It follows that bankers must reduce their fees by charging less interest. Less energy available = lower rates.

In 2018, Jerome powell had announced that it wanted to raise the key rate to 3.5%. The FED helmsman finally backed down barely a week later. Why ? Because Wall Street had fallen by 20% in the meantime (a prolonged fall in the stock market means that US pension funds can no longer pay pensions).

It is therefore better to pay pensions with dollars that are worth less and less. We have no choice but to increase the debt to compensate for the energy scarcity, which in turn causes inflation.

Price per barrel, Michael Saylor, Cathie Wood and the $ 500,000

The price of a barrel has climbed back above $ 74 as of this writing. This ascent is linked to the last OPEC report in which it is written that the global demand for black gold will increase from 96.7 million barrels per day in 2021, to almost 100 million barrels next year.

And while the International Energy Agency (IEA) advocates the stopping of any new fossil fuel project to preserve the climate, the Sultanate of Oman has warned that an abrupt halt in investments will cause famines and a barrel price between $ 100 and $ 200. In other words, the outlook for inflation is going well.

The price of raw materials and food is directly linked to the price of a barrel.

  • Natural gas: + 126%
  • Essence: + 95%
  • WTI petroleum: + 89%
  • Brent oil + 86%
  • Aluminum: + 61%
  • Sugar: + 61%
  • Coffee: + 52%
  • Copper: + 42%
  • Corn: + 39%
  • Cotton: + 39%
  • Soybeans: + 29%
  • Wheat: + 26%
  • Construction timber: -2%
  • Gold: -9%
  • Silver: -13%

All of this bodes well for bitcoin.

On the NewYork side, Cathie Wood, founder of the investment firm ofArk Invest, bet that the value of a Bitcoin will drop from $ 45,000 to $ 500,000 within 5 years. More indigestible, wood said their portfolio will grow towards 40% ETH and 60% BTC. Bold when you know that it is written in advance that the Proof of Stake will end very, very badly …

During this time, Michael saylor continued shopping by purchasing an additional $ 242 million in BTC. 5050 BTC in the bag, more than 75,000 BTC in all. CEO of Microstrategy also revealed to hold 17,732 BTC in a personal capacity… Find his last two ITW translated into French here and here.

A publicly traded company is purchasing and HODLING as much #bitcoin as they can possibly can, 𝗮𝘁 𝗮𝗻𝘆 𝗽𝗿𝗶𝗰𝗲 𝘁𝗵𝗲𝘆 𝗰𝗮𝗻.

The signal in the noise.

– Documenting Bitcoin 📄 (@DocumentingBTC) September 13, 2021

After El Salvador, Panama and Ukraine?

Bitcoin has officially become commonplace in El Salvador. Some expected the markets to greet this historic day, but that was ignoring the old stock market adage that you buy the rumor and sell the news …

Admittedly, El Salvador has started buying BTC to water the fund that allows Salvadorans to make dollar conversions at no cost. But to date, only 550 BTC have been purchased, representing just over half of the amount of BTC created each day through mining.

Not enough to upset the structure of the overall supply and demand for BTC. The fact that Panama proposed a law to follow in El Salvador’s footsteps has also not raised prices.

Ukraine’s announcements also had the effect of a sword in the water. Kiev legalized bitcoin without legalizing payments in BTC… It is rumored that the country will take the plunge by 2023 but, as they say: “one yours is better than two you will have”.

Let’s finish with Brazil. Bitcoin Magazine reports that 48% of Brazilians think their country should embrace bitcoin. In any case, this is what a survey conducted by Sherlock Communications and published in Valor Investe. “56% of Brazilians support El Salvador’s decision to make BTC a currency in its own right.”

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