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To investors,
The global pandemic caused incredible uncertainty and chaos in financial markets last March. Every day felt like a month. Each asset class seemed to bleed more and more every time the market opened. At one point, circuit breakers were tripping almost daily, the Federal Reserve was announcing multiple emergency interest rate cuts, and most “capitalists” on Wall Street proved to be socialists as they begged the government for bailouts.
Simply, it was an utter disaster and no one knew how much worse it would get. This is when the Federal Reserve and the US government decided to intervene. As you would expect from the Keynesian economic viewpoint, the market intervention was seen as a badge of honor. In fact, a noble act. The cavalry was here to save the day. And save investors’ wallets.
There were the two emergency interest rate cuts to a 0% environment. There was incredible support and attention measured in hundreds of billions of dollars directed at the repo markets. The politicians couldn’t stop passing monetary stimulus bills that led to trillions of dollars being injected into the economy as if it was a drug addict reliant on another hit before a painful withdrawal.
The crazy part was that the intervention from central banks and politicians was met with applause and admiration by the leaders of the legacy financial system. They claimed that the little people….the every day citizens….needed help immediately. If not, people would die, people would be put out in the street, and the entire system could potentially collapse. Seriously. You saw them tweeting this nonsense. You saw them talking about it on television. And you saw them applauding every intervention, along with asking the government for their own bailouts and stimulus money.
There were airlines that received billions of dollars in free loans that never had to be paid back. There were Wall Street asset management firms who took PPP loans. The encouragement for market intervention from the wealthiest in society was rather odd, right?
Not at all. They knew exactly what was going to happen. These individuals are intelligent. They have been in markets for a long time. The secret escaped into the public during the global financial crisis. If you can convince the government and central bank to intervene in the market, they will not only remove all risk from that market, but they will also drastically enrich anyone holding assets.
Guess what? That is exactly what happened.
This past week we saw the S&P 500 hit an all-time high on the very same day that the Federal Reserve’s balance sheet hit an all-time high of over $8 trillion. THE EXACT SAME DAY! Coincidence? I think not.
The US government, Federal Reserve, and US Treasury department have been manipulating the market for more than a decade now, but they really turned up the intensity in the last 12-15 months. With COVID-19 as an excuse, the market interventionists did what they did best — they brought the cost of capital down to 0% and they pumped trillions of dollars into the economy.
We are now living in an economy that has the worst wealth inequality gap in history. Small business owners can’t find enough labor to run their businesses because most people are making more money from government support than they would in the labor market. There are more open jobs in the US economy than ever before, including pre-pandemic. People literally refuse to go back to work.
On top of this, inflation hit 5% in the month of May. For most of last year, economists and the mainstream media told us that inflation wouldn’t be a problem. They said we lived in a deflationary period and the market could soak up all the extra monetary stimulus. But now that inflation is here, we are told that the inflation is only transitory. It will go away in the short to medium term. Nothing to worry about!
Wrong. There is not a single business that is raising the prices of their goods or services that has intentions to lower the prices in the future. There is no such thing as transitory inflation. Prices move up over time as a currency is devalued. You can’t increase the value of a currency that can, and will be, printed infinitely at will. You may be able to slow the pace of inflation, but you can’t reverse it. The prices of goods and services don’t come back down because of any monetary policy decisions.
But the lack of labor force participation and accelerating cost of goods is not the only story here. The Federal Reserve and various political administrations have made a complete mockery of markets. They have manipulated them so badly at this point that a generation of kids is growing up with the belief that all risk has been removed from the market. The leaders of our monetary system have outlawed bear markets. They have banned market corrections.
The first sight of any regression to the mean is met with an incredible amount of market intervention and manipulation. The bigger the force of correction, the more intense the market manipulation effort. The Federal Reserve and government officials have become so arrogant that they were literally on 60 Minutes bragging about their access to unlimited money. You can’t make this stuff up.
So where do we go from here?
The short answer is that there is no turning back. The market has been manipulated to the point of no return. It would be nearly impossible for the government or central bank to allow free market forces to rectify the mess that has been made. The pain would be too great. Every politician would be replaced. There would be social unrest. It would get very ugly, very fast.
The only option that the market manipulators have left is to continue manipulating. The charade has become a necessity. Every time the market wants to correct, the interventionists must be at the ready with more interest rate cuts and more monetary stimulus bombs. Why stop at $5 trillion? Why can’t we go to $10 trillion? $20 trillion?
The crazy part is that we are going to see it all. Regardless of whether people recognize we are sprinting off a cliff or not, the manipulation that we have seen over the last 18 months will pale in comparison to what we are going to see in the future. The Fed’s balance sheet will keep growing over the long-term. Asset prices will continue to be pumped to the moon. You literally can be an idiot and get rich in dollar terms.
Just get out of cash. Buy any asset that is denominated in dollars, sit back, and relax. The market manipulators will continue to devalue the dollar and push your asset values to the moon. They will make you richer than your wildest dreams.
Sounds amazing, right? Unfortunately, the bottom 45% of Americans hold no investable assets. They live paycheck-to-paycheck. 100% of their wealth is stored in dollars. So at the same time that the market manipulators are making asset holders wealthy, they are also punishing the individuals who are most vulnerable in our society. The rich get richer and the poor get poorer.
Very few wealthy people want to talk about this dirty secret. They don’t want to advocate for the closing of the wealth inequality gap by shutting off the money printer. They will talk about the virtue signaling efforts of paying slightly higher wages, etc. But they know those things won’t actually have the systemic impact that is needed to actually close the gap and empower the bottom 45% of citizens.
This is why I am such a big proponent of bitcoin. It is the only currency that can’t be devalued. It is outside the control of any government or central bank. The monetary policy not only has certainty, but it has finality as well. There will be no devaluation on a macro basis. You don’t need to be a professional investor or a wealthy, sophisticated person to keep the wealth you have earned. You can simply save in the digital currency and continue to have your purchasing power increase over time.
This is the beauty of a programmatic, transparent, fixed monetary policy. Bitcoin is literally the wealth protection that billions of people around the world need. While the market manipulators are pretending to save the world, they are actually running trillion dollar marketing campaigns for the true wealth inequality solution.
I wish the market interventionists would knock it off. I wish they would let the free markets do what they do best. I wish they would stop inflating asset prices artificially and punishing the bottom 45% of Americans who hold cash. But they won’t. So this is why we bitcoin. This is why I spend all day trying to educate billions of people around the world on how they can protect themselves from this madness.
Slowly, but surely, the world is waking up. People are beginning to see the problems. They don’t understand why markets are up when the economy is down. They know it doesn’t make sense that the wealthy got much, much wealthier when tens of millions of Americans were out of work and the US economy was essentially shut down. They realize something is wrong and they have been looking for a solution.
That is why bitcoin is gaining adoption so quickly. People around the world now understand its importance. Let the market manipulators continue to play their game. They are only accelerating the inevitable end state. I wish them the best of luck. In the meantime, get yourself educated and share your knowledge with those around you.
Don’t get caught flat-footed. Don’t sit around holding an asset that is being devalued at a historic pace. Make sure you have the protection you need to ensure that your purchasing power isn’t eroded away. You worked for your money. Don’t let it wither away at the hands of the rich and powerful.
Hope you have a great start to your week. I’ll talk to everyone tomorrow.
BONUS: We are running our 4th cohort for the Bitcoin and Crypto Training Course starting tomorrow, Tuesday June 15th. Graduates have already been hired at Coinbase, BlockFi, Gemini, Kraken, and many other great companies. Want to increase chances of being hired? Apply here: https://pompscryptocourse.com
-Pomp
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THE RUNDOWN:
Federal Reserve Balance Sheet Tops $8T for First Time: The Federal Reserve’s balance sheet has exceeded $8 trillion for the first time, following extensive measures the U.S. central bank took last year to contain the economic damage from the coronavirus. The Fed’s balance sheet has nearly doubled since March 2020, when the pandemic erupted in the U.S, based on weekly statistics released Thursday by the U.S. central bank. Read more.
Wall Street Asks If Bitcoin Can Ever Replace Fiat Currencies: El Salvador’s bold move to accept Bitcoin as legal tender has Wall Street once again wondering whether a cryptocurrency could really ever replace the old-school dollar. It’s a question that appeared, at least to some, to already be nearly answered after a handful of trailblazing companies -- including Tesla Inc., MicroStrategy Inc. and Square Inc. -- incorporated Bitcoin into their balance sheets without igniting a broader corporate revolution. Now, the focus is turning to governments.Read more.
Bitcoin Jumps After Musk Says Tesla Will Use When Mining Cleaner: Bitcoin jumped above $39,000 after Elon Musk said Tesla Inc. would resume transactions with the cryptocurrency when mining is done with more clean energy. The electric-car maker will allow Bitcoin transactions again “when there’s confirmation of reasonable (~50%) clean energy usage by miners with positive future trend,” Musk, Tesla’s chief executive officer, said in a tweet. Read more.
South Koreans Can Pay With Bitcoin in Stacks, Paycoin Integration: Stacks is partnering with South Korean e-commerce protocol Paycoin to support transactions with its currency STX. This integration means that merchants who accommodate Paycoin will soon accept STX and Bitcoin as methods of payment, the Stacks Foundation, which builds apps on top of the Bitcoin blockchain, announced. Businesses that accept Paycoin, such as Domino’s Pizza, KFC and 7-Eleven, will allow for customers to transact in these cryptocurrencies. There are 1 million users of the Paycoin application and 70,000 businesses that accept this cryptocurrency. Read more.
Next-Gen Game Developer Mythical Raises $75M for Playable NFTs: Mythical Games is opening its non-fungible token platform to external game developers following a $75 million funding round. The primary game in development, Blankos Block Party, includes animated NFT game characters as well as customizable aesthetics players earn through gameplay. Players in the beta version already hold more than 100,000 NFTs, and as the audience continues to grow, Mythical expects these rare assets will accrue value in the secondary markets. Read more.
LISTEN TO THIS EPISODE OF THE POMP PODCAST HERE
Shaan Puri is the Senior Director of Product, Mobile Gaming & Emerging Markets at Twitch. He previously built Bebo, before ultimately selling the business to Twitch. Shaan is also the host of My First Million, one of the fastest growing business podcasts.
In this conversation, Shaan and I discuss:
Solo-capitalists
Copypreneurs
Pros/cons of social reach
Podcasts
Newsletters
Rolling funds
Howard Stern
Kanye West
Joe Rogan
Kardashians
Mr Beast
I really enjoyed this conversation with Shaan. Hopefully you enjoy it too.
LISTEN TO THIS EPISODE OF THE POMP PODCAST HERE
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The Market Manipulators Are Laughing As They Ruin The World