The economy's bruises are showing.
![The economy's bruises are showing.](/content/images/size/w960/2024/06/Bruised-Uncle-Sam.jpeg)
IMHO
We've long held one of the forces that will drive Bitcoin upward will be the US government being forced to print massive amounts of money to keep itself from defaulting under untenable levels of debt.
In a nutshell, this means that instead government taking the hard medicine which could eventually —through a painful road— lead to a healthy economy, they'll pump the system full of morphine to treat the pain instead of the illness.
The reason they'll continue to choose this road is not complicated. The "hard medicine" would drive popular sentiment too close to the point where guillotines seem sensible, austerity will never win a popularity contest.
So they lie and to convince you everything is OK (in fact it's better this way) as they try to kick the can even further down the road. But with every kick the can gets heavier.
Higher inflation can lead to greater efficiency. It all has to do with the price dispersion that inflation generates, which might motivate some consumers to search for the lowest prices, increasing competition among sellers. https://t.co/KWPkL6mmFk #FEDSPaper
— FedResearch (@FedResearch) June 24, 2024
Because some of the voters can still read and do basic math they need to manipulate the numbers to support their narrative.
For example, they clap themselves in the back for GDP growth and fail to mention it's largely driven by massive government spending, fueled by fresh debt.
For more than 20 years the government has been spending far more than it makes. Their official projections already look scary before you learn the plan is to let the federal deficit go wild for the next 30 years and pray nothing goes tits-up.
What are the odds of that?
Good morning.
— James Lavish (@jameslavish) May 17, 2024
In a scathing report from 2019, the CBO warned that the US deficit to GDP ratio would reach 7% by 2040. It turns out the seemingly pessimistic projections were actually wildly optimistic, as we will likely hit 7% just a few years after that report instead.
Have a… pic.twitter.com/yVKZVgVfav
Over 80% of government expenses are on auto-pilot— driven by categories that wold be almost impossible (at least politically) to reduce.
The "most important chart" shows federal spending soaring to astronomical levels. Just three parts of the budget drive unsustainable deficits.
— David Ditch (@DavidADitch) May 28, 2024
Interest payments will soon top $1 trillion per year. The Fed was forced to end the era of super-low interest rates and investors are… https://t.co/UZvDn3Fx9C pic.twitter.com/GDy9oDnvoq
The fact one of the biggest expenses is the cost of servicing debt is ominous.
Ferguson’s Law states that any great power that spends more on debt service (interest payments on the national debt) than on defense will not stay great for very long. True of Hapsburg Spain, true of ancien régime France, true of the Ottoman Empire, true of the British Empire.… https://t.co/3jcblaGgqD
— Luke Gromen (@LukeGromen) June 18, 2024
Their pans are so optimistic, they couldn't last 6 months without requiring a 26% upward revision for the second semester of this year.
*CBO BOOSTS 2024 US BUDGET DEFICIT ESTIMATE TO $1.9T FROM $1.5T
— zerohedge (@zerohedge) June 18, 2024
Could this increase be related to the government's loan forgiveness program? It never ceases to amaze how generous they can be with your money.
Student Loan forgiveness isn't free.
— Wall Street Silver (@WallStreetSilv) June 21, 2024
Now it is shifted to the US national debt and we all pay for it ... pic.twitter.com/Fye9x7RJ6r
If you want a deeper dive into all this, the (long) tweet below does a good job breaking down some of the moving parts.
Why the US cannot afford a recession:
— infra 🏛️⌛️ (@infraa_) June 2, 2024
At the end of the day, a government is no different than a business. It has costs (expenditures) and it has revenue (tax receipts). Because of the bleak fiscal position of the United States, a recession will act as a margin call on the debt… pic.twitter.com/fReePItfwy
Not included in the analysis above though, is the fact foreign appetite for US debt is not keeping pace with debt growth.
RE: The Goldman report on foreign UST demand, a picture is worth 1,000 words:
— Luke Gromen (@LukeGromen) June 19, 2024
Total US Federal debt 1990-present in blue.
Total foreign holdings of USTs in green.
Foreign official (CB) holdings of USTs in red.
"Mind the Gap". pic.twitter.com/KrGZTueGtd
What are they buying instead?
OVER 80% of central banks expect global central bank gold holdings to INCREASE in the next year.
— Steve Hanke (@steve_hanke) June 21, 2024
US sanctions are FUELING A GOLD MARKET. pic.twitter.com/DOzS24VAAU
It seems a fairly obvious move to us to choose hard assets over negative yielding debt, it's amazing to see the broader market ignore this trend despite the fact Central Banks are visibly and actively engaged in this trade.
🎯
— Lawrence Lepard, "fix the money, fix the world" (@LawrenceLepard) June 23, 2024
"we think buying long term US treasuries at negative term premiums while global Central Banks buy record amounts of gold may come to be seen as buying AAA-rated subprime mortgage bonds in 2006, even as home prices were already falling nationally: Something that should have…
Don't get me wrong, the USD is still the best house in a bad neighborhood, and will probably remain so for a good while, but the fact some countries are looking for alternative, non US-dominated rails should not surprise anyone whose being paying attention after the sanctions to Russia's Central Bank.
“One possibility now that Saudi Arabia has joined mBridge is that the platform will be increasingly used for commodity settlement that bypasses the U.S. dollar.”https://t.co/MgOEixus08
— Jan Nieuwenhuijs (@JanGold_) June 24, 2024
Wall Street
Most of the above was at a government / nation-state level, but how is all of this reflected in the market, outside government?
Affluent asset holders are dong great, thank you very much. But are they well positioned for a turn of the tides?
I'm not one to fade AI, with all of its plentiful warts, the speed at which its improving is nothing short of breath-taking.
While I don't necessarily agree with the timeline suggested by the recent "Situational Awareness" paper that dropped like a bomb a couple of weeks ago, I do think AI will get much better, much faster than most people can imagine.
My god, this paper by that open ai engineer is terrifying.
— Zach Vorhies / Google Whistleblower (@Perpetualmaniac) June 14, 2024
Everything is about to change.
AI super intelligence by 2027.
Will it become smarter than us? I'd bet yes. Self-aware, not so sure.
In any case, Nvidia is certainly been the most successful rider of both the hype and reality of this massive wave but does that mean they get infinite valuation?
As someone who invested through the dot.com bubble I wouldn't short Nvidia, but they're current valuation simply seems well, disproportionate.
Nvidia, $NVDA, is now larger than:
— The Kobeissi Letter (@KobeissiLetter) June 19, 2024
1. GDP of every country in the world except 7
2. The entire #crypto market COMBINED
3. 5x the market cap of Tesla
4. 6x the market cap of Walmart
5. The market cap of the entire French stock market
6. Canada's GDP plus $1.2 trillion in cash
7.…
Having said this —unless something bad happens first— the stock market will probably melt-up if the government turns on the money printer.
How about banks, how are they doing?
The corporation that insures your deposits (FDIC) forces banks to have "living wills" pre-made plans in place in case they find themselves under financial distress.
After a recent review, the FDIC determined the plans for Bank of America, Citigroup, Goldman Sachs, and JPMorgan Chase, were lacking.
Full article: Financial Banks 🚨
— The Coastal Journal (@1CoastalJournal) June 21, 2024
4 Major U.S. Banks Face Scrutiny
In an alarming development, the U.S. Federal Deposit Insurance Corp. (FDIC) and the Federal Reserve Board have flagged serious "shortcomings" in the "living wills" of four of the eight largest U.S. banks,… https://t.co/jMNcvecP6A
I have to agree with Ben, banks feel to me like they're on pins and needles.
The banking sector really is a scary place to leave your life savings. Largely because it's uninsured to a large degree, it's overvalued, it's under capitalized & it's over leveraged. Leaving your money in the bank right now is as risky as it gets.
— Ben Rickert (@Ben__Rickert) June 21, 2024
The government will do everything they can to contain a domestic banking crisis (at least untill after elections), but will they also be able to contain bank failures outside the US?
Eurodollar mega banks starting to crack like the US regionals.
— George Gammon (@GeorgeGammon) June 19, 2024
Norinchukin announces $10b loss, triple what was expected. Now having to fire sell treasuries.
Difference is Norinchukin has a $800b+ balance sheet and is a massive player in the derivatives market (CLOs) pic.twitter.com/pD8iNmmEwA
The problem with Norinchukin selling tons of USTs is it'd make it harder for new debt to find a market without raising rates (which would make the servicing of already existing debt even moar expensive).
In the (long) article below Arthur Hayes goes in depth explaining how the most likely outcome of the Norinchukin situation is them offloading their USTs to Bank of Japan and BOJ tapping the Fed for liquidity —all of this in order to not blow out interest rates.
“Shikata Ga Nai” is an essay exploring a theory on how Bad Gurl Yellen can stop Japanese banks from dumping treasury bonds.
— Arthur Hayes (@CryptoHayes) June 21, 2024
As always, money printer go brrrrr.
I hope ur stacking sats.
😘😘😘😘😘
https://t.co/xCVZHuR4OI
Long story short, the US will have to print astronomically. It's a matter of when.
The current lack of appetite for gold by corporations and retail suggests most remain unaware of the current risks of debasement or default. The chart below is from last year but I'll bet it remains similar.
What an important chart to highlight.
— Otavio (Tavi) Costa (@TaviCosta) October 30, 2023
Despite the recent push toward new highs, gold remains severely under-allocated.
In fact:
71% of advisors have little to no exposure to the metal.
Similar to how central banks continue to aggressively accumulate the metal, conventional… pic.twitter.com/NfO2D9bhcv
Main Street
As all the above unfolds, how's the US citizen doing?
In previous issues we've shown plenty of examples suggesting Commercial Real Estate is doing horribly. Seems housing is going through a rough patch as well
BEWARE: Housing defaults have just hit the highest levels since 2011
— Game of Trades (@GameofTrades_) June 19, 2024
This is not looking good pic.twitter.com/lFqQMxpVNt
This is not that hard to understand when you consider the cost of food has been rising considerably.
Americans spent a massive ~$17 trillion on food in 2023, the most ever recorded in a single year.
— The Kobeissi Letter (@KobeissiLetter) June 19, 2024
Since 2020, food at home and away-from-home expenditures have soared $5 trillion, or ~35% as high inflation hit the country.
At the same time, fast food prices have increased by… pic.twitter.com/2XHQp8e2mt
The majority of americans are feeling the pain.
The Hill: "Almost half of Americans say they are having a hard time staying where they are financially."
— TFTC (@TFTC21) June 19, 2024
45% of Americans said they are "basically stable" in their financial situation, while only 9% said their financial situation is improving. pic.twitter.com/iSE5yoKipP
The War Continues
Despite hopeful signs of the US "war on crypto" coming to an end, it seems not everyone has gotten the memo yet.
Stripe seems to be hostile towards crypto-adjacent companies
@blockstream has the same issue with https://t.co/TZA67waHOr which just sells hardware wallets, swag etc for lightning, so even lower argument for "risk". and @stripe cut us off also recently, and we'd been using them since 2017. can you re-enable us also @stripesupport.
— Adam Back (@adam3us) June 24, 2024
And the Biden administration keeps wanting to exert control over the industry.
The Biden admin just hired the same spook who testified to congress that bitcoin miners should enforce OFAC sanctions at the network level https://t.co/B7WCocdvQR pic.twitter.com/Tkuhkd4n4M
— Pledditor (@Pledditor) June 24, 2024
Fortunately some bright spots keep appearing, not all states kowtow to the Federal Government.
JUST IN: Louisiana PASSES House Bill 488 protecting #Bitcoin rights, self-custody, transactional freedom & mining, while banning CBDCs@SatoshiActFund
— Simply Bitcoin (@SimplyBitcoinTV) June 24, 2024
Forbes Article by: @DecentraSuze https://t.co/pznEtkc4qj pic.twitter.com/JyXbEneSwJ
And more politicians around the world are recognizing Bitcoin as a positive component in their platform.
TIL Maya Parbhoe is running for president of Suriname on a platform to put her country onto a Bitcoin Standard
— Alex Gladstein 🌋 ⚡ (@gladstein) June 24, 2024
Also loves Nostr 🇸🇷 @MayaPar25 pic.twitter.com/ZyVSuvr9kn
The vast majority of people and corporations have still not woken up to Bitcoin as a lifeboat. I don't think they will before $150k, but a few billionaires might…
The 10th richest man in the world just reposted this comment by Michael Saylor. 🤯
— The ₿itcoin Therapist (@TheBTCTherapist) June 21, 2024
Michael Dell is worth a whopping $120 billion.
The billionaires are coming. #Bitcoin pic.twitter.com/ID4sRpdcuv
Nobody can say when price will take off again, but take off epically it will.
PS. This week's Mt. Gox FUD (see below) tanked price to the $60k levels. I'd suggest you stack hard here.
![](https://newsletter.thebitcoincoach.com/content/images/2023/10/Charting-basics.png)
Price News
Mt Gox
Apparently, the long awaited distribution from Mt. Gox creditors is finally coming next month.
JUST IN: MT. Gox says they'll start $BTC, and Bitcoin Cash repayments in July. pic.twitter.com/L13CssEolV
— Watcher.Guru (@WatcherGuru) June 24, 2024
This will be more than enough reason to fearmonger price as low as they can before the actual event takes place, but I don't think the reality of the distribution will be all that apocalyptic.
Mount GOX Math.
— Fred Krueger (@dotkrueger) June 24, 2024
Roughly 100K Bitcoin will be distributed starting in July.
Of this @intangiblecoins estimates, 65K will go to individual holders, and a minimum of 6500 BTC will be liquidated.
Let's say that the number is 2x that -- so 13K BTC.
That number is roughly the amount…
Bitcoin Surfing
The Mt. Gox news almost drove BTC to the Water line ($58.5k) where it would probably find strong support.
![](https://newsletter.thebitcoincoach.com/content/images/2024/06/2024-25-BTC_Surfing-Chart.jpg)
Dip Fishing
Last week I said "We may dip all the way to $60k if something nasty happens, but I'd be surprised if we went lower." Here we are.
I'm not saying we couldn't go to $56k on further bad news, but I am saying: This is the dip. If you've been waiting to buy, do it now. Yes, you may miss an even lower bottom, but honestly I wouldn't bet on it.
![](https://newsletter.thebitcoincoach.com/content/images/2024/06/2024-25-Dip_Fishing-Chart.jpg)
Calm Chart
June now seems almost certain to close in Red. I take it as a good sign, coils the spring tighter for the bounce up.
![](https://newsletter.thebitcoincoach.com/content/images/2024/06/2024-25-Calm-Chart.png)
![](https://newsletter.thebitcoincoach.com/content/images/2023/10/BTCC-2023-LOGO-CLEANline-Blackback-1280x374.jpeg)