The United States Is Facing The Ultimate Decision


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To investors,

The economic situation has deteriorated at an even faster pace than most expected. On March 18th, I wrote that “the unemployment numbers in the United States have the potential to quickly match the numbers from the Great Depression. I understand that the statement may seem ridiculous at first glance, but let me walk you through some math.

The claim only a month ago that we could hit unemployment numbers equal to the Great Depression was so absurd to many that I had to explicitly acknowledge that they would disagree with what I was saying. Unfortunately, the situation has transpired even faster than I anticipated, which means that we are seeing much bigger numbers than I thought possible.

In that March 18th letter, I explained that the Great Depression unemployment numbers are usually misunderstood. The letter stated:

There was a relatively slow ramp up in unemployment in the beginning of the Depression. Here are the year by year unemployment statistics in the US:

  • 1929 — 3.1%

  • 1930 — 8.7%

  • 1931 — 15.9%

  • 1932 — 23.6%

  • 1933 — 24.9%

  • 1934 — 21.7%

  • 1935 — 20.1%

So as you can see from the data, it took until the third year of the Depression before we hit double-digit unemployment numbers. People always focus on the peak number of 24.9%, but they forget that 3 of the 5 years of the Depression (1929-1933) had unemployment levels under 20%. This doesn’t mean that 8 - 20% unemployment levels are good. It just means that the peak number isn’t a great representation of the entire period.

Finally, I stated that it was possible that we could start to see Great Depression unemployment numbers by the end of Q3 2020. That thought was summarized by saying “the second year of the Great Depression saw 8.7% unemployment, which would 2.4x increase from our February unemployment numbers. It makes me incredibly sad to say this, but I think we could see those types of numbers by the end of Q3 2020. Year 3 of the Great Depression saw 15.9% unemployment, which would be 4.5x from our February numbers. Again, this type of increase over a long period of time would be crazy, but the early data we are seeing would suggest that many states have seen larger increases on a percentage basis just in the last few days.

The unemployment claims that were reported today totaled more than 5.2 million Americans for the last week. This is on top of the 16+ million Americans that filed for unemployment in the three weeks before that, which means that almost 22 million people have filed for unemployment in the last month. 22,000,000 people in a month. This brings the total unemployed in the United States to nearly 28 million people when you include the 5.8 million people who were already unemployed before COVID-19 took over.

There are about 165 million people in the US labor force, so this puts the current unemployment level over 16%. That means that in less than 6 weeks, we went from historic lows in unemployment to levels greater than the second year of the Great Depression. While this is scary, the more concerning thing is the rate at which this is happening. If we continue on this trend, we could see 20-25% unemployment by the end of Q3 2020. This would be more than double what I originally thought was possible.

Now that we understand what the problem is, we have to ask ourselves how can we solve it? The easy answer is that we have to get people back to work. We have to turn the American (and global) economy back on. Obviously there is a health crisis transpiring though, so we must do it in an intelligent and safe way. There are experts who are much smarter and more experienced that I am who will determine the exact details of that economic re-start, but that is the simplest answer.

The more complex answer includes numerous aspects of government aid or relief. We have already seen the recent stimulus package that (a) beefed up the amount of money available via unemployment insurance and (b) promised to give most Americans a one-time check of up to $1,200. These stimulus efforts will definitely help, but they are unlikely to be the complete answer if this crisis lasts into May (highly likely).

The average rental payment for an apartment in the United States is about $800, so if an individual receives the full $1,200 than they would have enough money to pay their rent and buy groceries for a month basically. They would be out of luck for anything past that one month of coverage. This leads to a new proposal that has been floated by two lawmakers — the Emergency Money to the People Act.

This proposal states that every American that makes under $130,000 and is over the age of 16 years old will receive $2,000 a month until the economy fully recovers and unemployment levels drop back to pre-COVID levels. This is an interesting proposal for a number of reasons. First, it acknowledges that the one-time $1,200 check is not enough money to be helpful in a sustainable way. Second, it pushes the conversation of universal basic income (UBI) to the national stage. And third, it would focus the goal on getting the economy back to pre-COVID levels.

Sounds great, right? There is only one problem though. Once this program is started, there will be no turning back in my opinion. If this proposal is accepted and implemented (still far away from that happening), the United States would be engaging in universal basic income. We will have completed the transition from a capitalistic society to a socialistic society. The incentive structures change. The relationship that people have with money changes. And the role of government changes in a drastic way as well.

The reason that I say that we will never stop the universal basic income is for two reasons — (1) the pre-COVID unemployment of 3.5% was a historic low so it will take almost a decade to return to those levels and (2) it will be nearly impossible for politicians to give money to people for long periods of time and then try to take it away from them. That would be a suicide mission for a politician.

The situation we are currently facing is a complex one with no single answer. There is a health crisis that is causing an economic crisis. There are tens of millions of Americans out of work and there are tens of thousands of American businesses that are shut down by government mandate. The longer that people suffer financially, the higher probability there will be for social unrest. As politicians and government organizations look to solve the problem and avoid any potential unrest, they will naturally consider universal basic income.

Once we start though, we aren’t going to stop. And the cost of doing this will be unfathomable.

Imagine a world where the government ramped up spending by an additional $400 billion PER MONTH. That would be adding more than 5% to the Fed’s balance sheet on a monthly basis and with no plan to slow down. The United States has finally reached the ultimate decision — do you ensure your world dominance by continuing to lean into the capitalist and democratic ethos that built the country into what it is today or do you address the short term problems of your people by abandoning those ideals and pursuing the socialist safety net?

There will be one controversial debate after another on this topic in the coming weeks and months. The short answer is that we will never get everyone to agree. There are leaders that have been elected to lead our country and they will ultimately make the decisions. It will be imperative that people pay attention and are fully aware of the pros and cons of each decision. The United States is conducting a tight rope walk across a metaphorical Grand Canyon right now. One misstep and we have a long, long way to fall.

I remain optimistic that we can avoid those missteps and emerge stronger than ever from this crisis. It won’t be possible without a lot of hard conversations and tough decisions though. Stay safe. Stay alert. And please continue to be kind to each other during these trying times 🙏🏽


This installment of Off The Chain is free for everyone. I send this email to our investors daily. If you would also like to receive it every morning, join the 45,000 other investors today.


Grayscale Says It Raised a Record $500M in First Quarter: In a record first quarter, Grayscale reports many institutional investors took advantage of market turbulence to increase their exposure to cryptocurrencies. The crypto-focused investment firm raised a total of $503.7 million in Q1 2020, nearly double the previous quarterly high of $254.8 million reached in Q3 2019. While bitcoin-weighted trusts continue to be the company's most popular product, the report noted that ether trusts also received record inflows in the same quarter as investors added multiple Grayscale products to their portfolios. Read more.

Swiss Crypto Firm Closes $14.5M Series B to Help Secure Brokerage License: Swiss holding company Crypto Finance AG has closed a $14.5 million Series B funding round co-led by Swiss investor Rainer-Marc Frey, Beijing-based private equity firm Lingfeng Capital and joined by Hong Kong’s QBN Capital. Read more.

Weekly Jobless Claims Hit 5.245 Million: Protection measures against the coronavirus continued to tear through the employment ranks, with 5.245 million more Americans filing first-time claims for unemployment insurance last week, the Labor Department reported Thursday. That brings the crisis total to just over 22 million, nearly wiping out all the job gains since the Great Recession. Read more.

Andrew Yang Says Current Stimulus Payments to Americans Aren’t Enough: Andrew Yang isn’t satisfied with the one-time $1,200 stimulus checks going to 80 million Americans today. He wants the federal government to continue paying out $2,000 monthly checks until the crisis is well and truly over. The ex-presidential contender, basic income advocate and crypto community favorite thinks the pandemic is too bleak to be worrying overly about the national debt. “When the house is on fire, you don't worry that much about the water you're using to put it out,” he said as part of a web chat with Axios. “We have the equivalent of a $21 trillion fire on our hands, and we have to do everything we can to help people get through this.” Read more.

Verizon Will Buy Video Conferencing Company BlueJeans: Verizon is buying the video conferencing platform BlueJeans as workers increasingly rely on web tools to connect during the coronavirus pandemic, the company announced Thursday. Verizon will pay about $400 million in the deal, CNBC’s David Faber reported. BlueJeans has more than 15,000 customers, Verizon CEO Hans Vestberg said in an interview with Faber shortly after the deal was announced.Read more.


Cathie Wood is the Founder, CEO and CIO at ARK Invest. Prior to this, she spent twelve years at AllianceBernstein as Chief Investment Officer of Global Thematic Strategies where she managed over $5 billion. Cathie is one of my favorite investors on Wall Street thanks to her data-driven approach to investing in innovation and technology. She didn’t disappoint in this conversation and spent more than an hour dropping knowledge bomb after knowledge bomb!

In this conversation, Cathie and I discuss:

  • COVID-19

  • The economic implications of monetary policy decisions

  • How innovation gains market share during times of crisis

  • Her thoughts on Square and Tesla

  • Her latest views on Bitcoin

I really enjoyed this conversation with Cathie. Hopefully you enjoy it too.


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Nothing in this email is intended to serve as financial advice. Do your own research.