By Darren Parkin
CPI is one of the most distorted figures reported by governments. In the US, CPI came in at 8.3% but Americans are experiencing inflation at much higher rates than the already steep 8-something percent.
For example:
Gas: +25.6%
Fuel Oil: +68.8%
Electricity: +15.8%
Groceries: +13.5%
Meat, Poultry, & Fish: +8.8%
Milk: +17%
Eggs: +39.8%
Baby Food: +12.6%
Airline Fares: +33.4%
By contrast, the cost of digital goods in the metaverse are witnessing a depression as risk-on assets nosedive. We have seen this so far this year in stocks, bonds, and cryptocurrencies. The macro environment of central bank tightening across most countries is the worst observed so far in this long-term debt cycle, a cycle typically lasting between 75-100 years. But despite the huge drops across these assets, how much lower can they go? Read on.
2% inflation a pipedream
The median CPI recorded a 9.2% annual rate in August, the single highest monthly print in their dataset which starts in 1983 (second highest was in June).
The Fed can return to 2% inflation if it crashes all markets by creating the mother of all recessions by continuing to hike rates. This could create a worse financial crisis than 2008. Big banks would have to be allowed to fail which could include customers losing out on their deposits.
Interest rate hikes take time to impact inflation. The Fed is always behind the curve. CME Fed Futures now show two 75 bps hikes then a 50 bps hike in December, bringing the target FFR to 425-450. While higher rates curtail demand, the real issue is the supply side of the equation to which the Fed is ill-equipped to combat. Supply chain shocks due to COVID have largely contributed to inflation as have uneconomic global warming policies.
Everything is downstream from culture. Governments know this so use the mainstream media as a weapon to create FUD which, in turn, pushes politicians who want to be reelected to do what the misinformed, misguided, brainwashed public wants. The degree of disinformation on global warming, COVID, and nutrition, let alone drugs and sex is staggering.
How did we get here?
So how did we get to where key important economic indicators are grossly misleading, to where central banks control fiat, and to where nation-states control and collapse freedom of movement and freedom of value transfer? The formula has been practiced by every dictator and corrupt government over the millennia. Focus on obvious issues that are emotional triggers such as terrorism, child trafficking, nuclear energy, kidnapping, or money laundering. Anchor the law to the protection of innocent victims even though the percentage of actual victims is at least an order of magnitude below common threats that get underreported. Then because the lawmakers now have the public on their side, they can easily enact laws that further remove our personal and economic rights.
Common threats that are not mainstream media fodder are vast and numerous yet get underreported. Such threats include record levels of teenage depression and suicide from overparenting #jonathanhaidt, domestic violence, kids getting sick on new viruses from degraded mask-induced immune systems, and kids malsocialized from nearly 2 years of lockdowns among numerous other issues. More than 1 in 5 teens is now obese due to the pandemic lockdowns.
In the world of trading, as one of many examples, eighths went to tinies which were then decimalized. This created more slippage for retail investors due to fewer market makers. In the world of economics, the printing of money debases fiat while assets rise in value, thus the rich get richer and the poor get poorer.
Such could never exist in the metaverse which is decentralized. There are no central banks to debase your fiat. There are no governing bodies to freeze your fiat. There are no authoritarian political bodies that can lockdown the metaverse. Mainstream media is far less likely to brainwash the public as reporting the truth becomes economic as I wrote HERE.
The witch hunts
There is a pandemic of disinformation on drugs, sex, politics, COVID, voting, investing, taxes, religion, & education. If you go against the cultural narrative, you may be labelled a conspiracy theorist.
On #metoo, you can’t apply modern standards to yesterday’s actions. Standards change. Cultures change. This does not excuse any form of abuse but many innocents have been thrown under the bus. We should therefore have #sextoo #drugstoo #justicesystemsurvivor for the millions of victims imprisoned or ruined for victimless crimes.
You also cant apply modern standards cross-culturally. What is legal in one culture is a crime in another, ie, use of marjiuana in California vs Hong Kong and China. Jackie Chan’s family has been disgraced because his son was smoking weed recreationally with a couple friends on a Friday night. Likewise, what is sexually celebrated or embraced in one culture may be demonised in another.
Don’t forget that witches were once burned at the stake, many careers were ruined during Senator Joseph McCarthy’s Red Scare in the 1950s and 1960s, millions were and in some countries continue to get sent to prison for smoking weed, and countless were and are sent to prison for victimless sex crimes.
We should thank the whistle Blowers dating all the way back to Galileo and Copernicus up to contemporary times such as Snowden, Assange, Swartz, and Guccione who asked the courts, “Why do kids’ cartoons depict violence #roadrunnershow yet sex which is the act from which we are made is demonised?” #religion
Indeed, contradictions run rampant. Legendary musician Frank Zappa said, “There is more stupidity around than hydrogen and it has a longer shelf life.” I would add that hypocrisy often follows. Freedom is the use case of crypto that solves censorship and control via decentralization. Crypto breaks apart big pharma, big oil, big business, big philanthropy, and big <fill in the blank>.
Web3 metaverse
Crypto has spawned the Web3 metaverse which will provide far greater freedoms to individuals than any other social system of governance. Hyper structures are being formed that exist as entirely on-chain crypto protocols that run for free and forever. They are unstoppable, running for as long as the underlying blockchain exists. They are permissionless and censorship resistant. They create a positive-sum ecosystem for its users.
Countless DAOs (decentralized autonomous organizations) are being created. Ones that are truly decentralized may also become hyper structures. They come with their own rules and live and die by their utility. Those DAOs that provide useful functionality will also be economic thus their token and NFT values will rise. Those that don’t will founder. Uniswap is one such hyper structure. If the team and website were to disappear, the protocol would still run in perpetuity. Others include LexDAO which creates smart contracts that carry out legal services and BitDAO which allows anyone to participate in Web3 start-up funding.
Outrageous inflation = FFR 425-450 bps = $10k BTC = -50% stock market averages
The metaverse is growing exponentially regardless of where the price of bitcoin or valuations of the cryptospace go. Many continue to build out the metaverse. We most likely have yet to see the worst of the bear market. My calls for Bitcoin heading to $10k and major averages falling by at least 50% still stand until the Fed at the very least pivots to a dovish stance.
That said, there is no guarantee that stocks and crypto will find major lows once the Fed halts rate hikes. A halt to hikes probably comes by the end of the year once the FFR hits 400 bps or more.
High inflation will be far from resolved, far from the Fed’s target 2%, but near record levels of debt, personal insolvencies, crashing earnings, soaring unemployment, and broken supply chains will create the mother of all recessions unless the Fed finds a reason to halt rate hikes. The targeted 2% is a pipe dream. Instead, 4.5-5% is the “new norm” the Fed will set. Ray Dalio of Bridgewater had an informative view on this target range.
Even once they start to print money once again, this is no guarantee stock nor crypto markets will find major lows. In each of these bear markets, the discount rate was quickly reduced but the major averages continued to make new lows.
If they print massive sums as they did post-2008 after the great financial collapse or post Mar-2020 due to Covid-19, then roaring bull markets are possible. But printing such large sums seems less likely given the twin flame conflagrations of high inflation and near record debt.
Interest rates are also still well below historical norms. In other words, the Fed does not have inflation, debt, nor interest rates on its side to launch QE5. Such would likely end up pushing rates negative since interest rates are still relatively close to 0%. They may instead take a slower approach to at least prevent markets from rupturing further. Stagflation may be the standard for years to come, but the exponential growth of web3 metaverse technologies will press onwards and upwards.
(͡:B ͜ʖ ͡:B)
Dr Chris Kacher, PhD nuclear physics UC Berkeley/record breaking KPMG audited accts in stocks & crypto/bestselling author/top 40 charted musician/blockchain fintech specialist. Co-founder of Virtue of Selfish Investing, TriQuantum Technologies, and Hanse Digital Access*\. Dr Kacher bought his first Bitcoin at just over $10 in January\-2013 and contributed to early Ethereum dev meetings in London hosted by Vitalik Buterin\. His metrics have called every major top & bottom in Bitcoin since 2011 to within a few weeks\. He was up in 2018 vs the avg performing crypto hedge fund \(\-54%\) \[PwC\] and is up well ahead of Bitcoin & alt coins over the cycles as capital is force fed into the top performing alt coins while weaker ones are sold\.*
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