12/12/2018/09:50CET
Markets are in uncharted territory as the great unwind of our time gathers speed. Everything seems to be holding by a thread. What comes next?
I am a crypto guy but cryptos do not exist in a vacuum. The larger financial world is where crytpo is trying to find a place, it must disrupt some part of the existing financial world in order to carve out its niche, get a foothold, a place in the market from where it can build presence and purpose.
It is with this backdrop that I also take a avid albeit schadendfreudlich interest in the utter panic in the greater global markets and in particular in the US as the month of december 2018 rolls to its conclusion.
DJI monthly chart
This is an ugly development. There is a lot in this chart to read. Look at the size of the flush following the 2000 dotcom bust. It took 2 years to bottom out and then 5 tp pump back up again. Notice the levels of the tops are virtually the same! Interesting TA observation.
DJI monthly, now with area showing the closing of the gold window (Anyone who has not idea what this means, it is when the latest version of the US dollar came into existence. No more gold backing at all!)
Because this is not a log chart, it looks like nothing much ever happened before the crash of '87. Here a quick sidestep is useful to see the US dollar currency supply. Gold is a commodity backing for a currency. Without the constraint of having to hold gold to print more currency, the supply of USD began to exponentially grow.
Important takeaway here: Gold is money! dollars, yen, yuan, rubles, shekels, euros, pounds, etc.... are currency. A derivative of money. So the notes we have in our pockets, and the numbers we see when we log into our online banking, are an unsecured derivative. In fact the only thing giving them value today is a social hallusication. The guys that are not tripping, not fooled, are those that print more for themselves every day.
Now lets circle the visible crises
Each crisis is fueled by debt. Because debt is the trick used by banks, including central banks to create more currency. Sound stupid? It's their little dirty secret. To pay off all debts is impossible because there is not enough currency. Remember the debts are incurring interest, but the currency to pay off that interest is not created without more debt, and so on and on it has gone.
Does this sound nuts? That's because it is!
But the system has an elegant poison to it. Those interest payments, they go to the banking system where they are used to control everything from the water we drink to the food we eat. A megalomaniacs dream come true.
But as with all flawed systems, eventually they fall apart. Something gives way. A pebble shifts on the mountain top, just the right one and the right time. It takes a few more with it as it tumbles down and suddenly the torrent of material in motion is unstoppable. There is no pushing it all back up and into place, the world is changed afterwards.
The sharp downward turn in the Dow Jones Industrial averages chart, is just a statistical reflection of sentiment in a fraction of the worlds economy. I choose it because it is a large fraction and it rest on top of a currency which has been used to underpin much of the rest of the global economy, so it is a useful proxy for my post.
If you have a detached feeling about this chart, let me wake you up!
You may not own any of the stocks of the DJI, but your pension fund does via ETF's! The bank where you currency resides does.
The insurance companies you rely upon in times of emergency do.
And the health of the company you work at relies on the health of a huge web of other companies, all of whose fates are intrinsically tied together in a dance called the global economy.
Never before has the world economy been so interwoven as today. Our leaders and their mouth pieces called it globalisation using the most altruistic and humanistic terms. The result of this was far from what was advertised. And a vulnerable side effect, was to tie up the world economy in such a way that if one country sneezed, everyone caught a pneumonia.
This time, there will be very few rocks to hide under indeed, and the pain will be bad.
Recessions and depressions ruin lives. Families long and hard earned savings vanish in a heartbeat. Home values plummet, interest rates gyrate madly, debts become far larger burdens than ever imagined. People get sick from worry, and they die. And banksters usually do OK out of it all (because at best they see it coming long before we do, and at worst, they help cause it with their greed).
"your problems are only this big. So stop bothering me"
Cryptos
I have ranted on and not discussed my favourite subject, cryptos.
Cryptos have been badly battered in the last few months. Many hodlers have moved out of their positions when their much beloved bottom of 6k crumbled below them. I capitulated with part of my holdings as well.
Here is a simple daily of BTC in USD - as good a proxy for the crypto world as you can find...
The famous 6k line is marked in red. As you can see, there has been a noticeable uptick in price. This is really only over the last 5 days. Does this portend the big reversal. Hope is not a good strategy in markets so we wait and see. At least with eyes on it, we are ahead of the bulk of the pack who are running away from disaster in the greater financial world.
I am a strong believer that Crypto solves some of the most fundamental structural issues we have in our skewed unfair global financial system. Cryptos are unlikely to usher in a utopia, but it has the real potential to blunt the most rapacious and corrupting effects of our current system.
As always guys, leave comments, have fun and trade safe.