Trump’s Most Dangerous Policy Idea

Trump’s administration could throw sand into the gears of the primary bull trend, but the economy is not going to grind to a halt in a matter of months, even if they manage to cut the deficit. Depending on how successful their fever-dreams are, I estimate it would take 2–4 years to cause a recession — note that the “land cycle” has a wavelength of 18–20 years which places the next downturn at 2027–2029, 2–4 years from now.

(We will continue to monitor what really matters: the deficit-spending (net-transfers), the level of private debt (bank credit), and the sentiment in the herd of investors.)

I think the most dangerous policy idea of the Trump administration is the deregulation of the “crypto-industry”. I believe this is as dangerous and potentially as consequential as the deregulation of the mortgage/banking industry in the 2000s which led to the GFC of 2008–9. Not realizing that the crypto “investing” schemes are nothing more than Ponzi pyramid schemes (value depends on there being a greater fool) places the entire financial industry in peril (again). The GFC was caused by the unravelling of the Ponzi scheme that was the (deregulated) MBS industry: create mortgage loans at 105% of the value of a real estate asset, collect the commission, then sell the book under false pretense to the banking/investing industry.

Bitcoin — and all blockchain-based “currencies” — has no intrinsic value. It is not backed by anything of value like profit potential or a government’s taxing and military powers like real currencies are, and is not very useful in the settlement of trade (other than for criminal trade). Bitcoin is simply a speculative asset based on the greater fool theory inherent in all Ponzi schemes. If bank credit-creation backed by Bitcoin becomes common, then we are at the start of a gigantic bubble that would end catastrophically for the financial system. When the servicing of the private debt becomes difficult, everyone would be selling Bitcoin (greater fools no longer available) and defaulting on their debt. Think “Tulips” and “Beanie Babies”.

There are different estimates, but it is reasonable to assume that 10% of Bitcoin holders own 90% of all Bitcoin. These ‘whales’ need to convert their Bitcoin holdings into something of value; notice how Bitcoin is quoted mostly in USD. Convincing the public to take on margin debt for the purchase of Bitcoin has already started, but there is also talk of the US Treasury buying a “Bitcoin Reserve” which amounts to giving the ‘whales’ their exit ramp. A Treasury “Bitcoin Reserve” makes as much sense as the Treasury investing in a ‘Tulip reserve’ or ‘Beanie Baby’ reserve at the height of their respective speculative bubbles! The result of this is that the public will end up as ‘bag-holders’. However, before we get there, Bitcoin could grow to silly heights and it might make sense to buy a Bitcoin ETF, not as an investment, but more like buying a lottery ticket.

Join us at www.angtraders.com with discount code: “20off”