I love your analogy of the hole in the dam getting wider. Obviously there is a lot propping up the stock market and everything else right now…but let’s say we have a “black swan” moment with, for example, Deutsche Bank going under and dragging down twenty times the hypothecation of the European economy. Does that just break the dam? What does that mean for the average person in North America and Europe?
That’s a really good question. First of all, I don’t think that’s a black swan moment. That’s a white swan moment.
We’ve seen it before, we know what it looks like, and we know it’s coming. I mean, there would be nothing surprising about Deutsche Bank going belly-up at this point. Once every newspaper you’ve ever read has predicted it, it’s no longer a “black swan.” It will probably come from somewhere we don’t expect, like the third largest Italian bank you never heard of.
I hope that doesn’t happen, and I hope it doesn’t happen anytime soon. I’m actually perplexed by people in this community who wish to see bitcoin as thriving in a moment of chaos and collapse in traditional currencies.
I lived in a country that has had a currency crisis, twice. I’ve visited many countries that have a currency crisis. It is ugly. A lot of really good people get very hurt. Generations lose their future overnight and don’t recover in thirty years; so we should not be wishing for that.
If we do have a global economic crisis at this point, bitcoin is not ready to absorb anything. Let’s be realistic. There is no exit valve. Even if everybody in Bitcoin actually gains an advantage from having some diversification, that’s not going to make much of a difference to anybody else.
All of the investment in Bitcoin, not just in companies but also individuals, entrepreneurs and start-ups dries up instantly overnight and we’re all set back, across the board by a decade. I don’t wish that on anyone. I hope that doesn’t happen.
Unfortunately the system is very fragile, so there’s a good chance it might happen. We’ll see how it plays out. I certainly don’t want people to think that just because bitcoin can act as a safe haven investment, as an exit valve… just because we see fiat money devaluation happen, and the bitcoin price spikes up…
There’s a big leap between that and saying: “I hope the world burns so I can make money on my bitcoins.”
Part two of that question is… The more likely scenario is which is, when it burns, the fire is put out by several trillion dollars of helicopter money. They talk about the IMF doing $100 trillion bailouts and things like that. Would that have a different effect, in terms of the size of the holes of the dam wall?
Not really. Again, I’m not an economist, which probably means I can speculate with complete immunity from criticism… but If you consider that the world economy is on the floor and flat-lined, and you’ve already delivered a hundred electro-shocks and three EpiPens in order to wake it up… Uhm… A larger dose of adrenaline is not going to help at this point.
Helicopter money – how many times does that work? More happens when it doesn’t. So I’m not very optimistic for that particular one.