Photo by Thought Catalog on UnsplashPhoto byPhoto by Thought Catalog on Unsplash

The Washington Post wrote a story this year titled, “Jerome Powell to the Rest of the World: Drop Dead.”

WaPo was a touch early here.

Today, however, that prediction became true: the era of globalization, peace, and free trade are over. This is different.

Japan surprised everyone Tuesday by raising a benchmark interest rate and acknowledging that the U.S. Federal Reserve’s monetary tightening is screwing their economy. Japan is known for its ultraloose monetary policy, they were the last pillar, the final domino, now they are hinting that the U.S. will indeed hold interest rates high indefinitely.

In plain simple non-nerdy financial talk: It’s the U.S. vs. Everybody — and we’re losing.

If the most dovish central bank is tightening then it’s almost certain that Europe/Uk central banks will go harder, which will tank the U.S. dollar (like Japan did today) and global stocks due to high-interest rates worldwide.

The dollar is no longer a safe haven for the world… so, ask yourself, where did all the money go?

Gold.

Gold and one other asset: the new world currency.

The World We Knew for 30 Years Is Gone

I know everyone says this — they said it when Jesus turned water into wine, when the Dutch discovered the East Indies, and when Apple released the iPhone.

But this time it’s true.

You are living in a truly special era.

The world’s financial powers are at war and the Fed is playing games by diminishing global liquidity (i.e. U.S. dollars), pressuring every banking system across the globe: essentially they’re telling every country to eat shit and die. Japan hiked interest rates to save the Yen from death; however, this only buys them a little time. Because, like every other nation, they still have a massive debt crunch they can’t pay while the Fed is psychopathically turning the screws on everyone’s nuts.

The U.S. vs. Everyone, daddio.

“It’s important not to underestimate the impact this could have, because tighter Bank of Japan policy would remove one of the last global anchors that’s helped to keep borrowing costs at low levels more broadly,” Deutsche Bank head of macro research Jim Reid wrote in a note to clients.

U.S. DOLLAR CURRENCY INDEX. 10:00 am is when the sell-off began from the Japan news.Photo byAuthor

And here’s where it gets worse: Russia.

Confiscating Russian assets made holding western assets much riskier. After all, China is not our ally, India and Saudi Arabia are barely our allies, and the rest of the world is starting to believe we don’t have their best interest at heart, financially speaking (i.e. Japan, UK).

We are living in a post-pandemic economy.

Countries are looking out for themselves and leaving the U.S. in its dust.

Offshoring is slowing down. Globalization is dead. Cheap goods and cheap labor? Dead and dead. And by all accounts this is the world until 2030:

• End of Cheap Labor: The U.S. is subsidizing American electric vehicles — and not subsidizing EVs from overseas. This is against the WTO rules and yet, this is the new world order. U.S. companies will be discouraged from building factories in other countries, and this will lead to new jobs in the U.S., but also a slowdown of global economic growth.
• End of Cheap Goods: What did you read on the back of every toy, shirt, hat, pillow, couch, and television for the past twenty years? “Made in China.” That is ending, too. We are in a cold war with Russia and China. In part, because China has become an unreliable supplier with their “zero-covid” policy, strict political laws, and the potential war in Taiwan.
• End of Cheap Energy: In what is becoming a new Soviet Union: Russia, China, and Saudi Arabia may use their energy to bully the West into submission. It’s the end of globalization and a move towards de-globalization. It’s why the price of natural gas in Europe is going up and why Europe will have to endure harsh winters over the next few years.

The Standout Trade

Basically, the trade that everyone has been talking about for over a year is finally happening. Gold and silver are going up while stocks and the DXY are down.

In a world of economic uncertainty, gold wins:

WSJ/ Gold (blue) is up 10% since Oct. while SPY (yellow) has remained constantPhoto byAuthor

That said, gold isn’t what I am betting the farm on. My actual stand-out trade is Bitcoin and Ethereum.

If Bitcoin and Ethereum maintain their promise of decentralization they will be assets to own for life. The U.S. doesn’t own them, and no single government (read: Russia, China or Saudi Arabia) can manipulate them for their own benefit.

It’s like a new world currency, but for the people.

Moreover, the gold trade is overcrowded causing many to flee to Bitcoin and Ethereum, which, due to crypto-related events (Luna, Ftx), most of the damage is already done and there isn’t much sell pressure left (nowhere near close as tradfi).

It’s already happening, by the way.

Crypto is losing its correlation with the stock market and rising on its own:

Cryptocurrency Correlation ToolPhoto byAuthor

Crypto is a gift.

It’s a gift to all Millennials and 20-somethings who were screwed by 2008; who were lured into predatory colleges that taught them nothing and saddled them with inhumane debt; who can’t afford a house; who will own nothing and rent everything; who won’t have social security, cheap healthcare, and real wages that outpace inflation.

Bitcoin and Ethereum are the only assets you can truly own.

I understand why the Wall Street Journal and its aging, dying audience don’t understand crypto.

They don’t have to.

They’re circle-jerking around the same talking points praying the Fed doesn’t screw up their retirement.

Everyone else, on the other hand — the working class, the middle class, the poor, disenfranchised; we must understand crypto.

It is a gift, for you.

Takeaway

America will come back from this.

We will have to build up our own strengths, not rely on offshoring or cheap labor. However, you can only have a tyrannical, autocratic, corrupt institution control global economies for so long.

It’s like playing a game of tag.

If one of your friends capriciously decides mid-game he doesn’t like the way you are playing, he can change the rules to his advantage. And why not — he has the power to do so.

The Fed won’t back down. They will raise interest rates as promised and hold till the economy breaks. This will have enormous consequences for the U.S. dollar and is incredibly bullish not only for commodities (i.e. gold, oil) but will be bullish for crypto assets, as well.

We must not squander this. Make sure you understand the basics of crypto and how to invest safely. Blink and you’ll miss it.