Shhh… the Fiat Emperor is naked.

Last week, Ben Hunt published a brilliant piece called The Common Knowledge Game, I encourage you to read it:

Ostensibly, it's about the presidential debate, (which I discussed here last week) but Ben provided a key insight I was missing.

It has to do with the dynamics of the Common Knowledge Game:

Even if everyone in the world believes a certain piece of private information, no one will alter their behavior. Behavior changes ONLY when we believe that everyone else believes the information.

In other words: it's not enough for everyone to believe the emperor is naked. No one will acknowledge his nakedness until everyone believes that everyone else believes the emperor is naked.

It occurs to me that this, my friend, is a great framework for understanding your opportunity with Bitcoin:

1. The superior monetary properties of Bitcoin are understood by many, but are not common knowledge.
2. The ongoing (and at this point, inevitable) decay of fiat is understood by many, but not common knowledge.
3. The fact Bitcoin is a hedge against the decay of fiat is understood by many, but not common knowledge.

It could easily take decades for the above to become common knowledge, but as we just witnessed, the actual moment something moves from private belief to common knowledge happens quickly.

If I had to summarize the reason I believe in the 3 points above goes something like this:

The amount of money in existence is nowhere near enough to cover the amount of debt in existence —globally. Governments will "print" new money (as they have always done) to service the debt, decimating the purchasing power of fiat.

As more currency units chase a given number of goods, the nominal value of desirable assets will blow up. Within the universe of desirable assets, Bitcoin is uniquely positioned to outperform.

Now, let's have a look at what happened last week see if we find facts to support the thesis.

Major European countries need 3x to 5x their GDP to cover the unfunded pensions of their aging population (ie, they'll need that money sooner rather than later).

The US deficit (as a % of GDP) is negative at levels comparable to the World Wars.

Fed chair Powell publicly acknowledges the US debt is unsustainable.

Yet, the Treasury is accelerating debt growth.

The debt acceleration in context:

Is the US in a recession?

Most of the it, not all of it.

We've commented on consumer loan defaults being high and housing defaults spiking

Which isn't hard to understand when you look at just how unaffordable housing is becoming (regardless of whether you're buying or renting).

The housing affordability problem is driving many to eat into their savings.

However, asset-rich boomers , are having a good ole' time.

Their stocks are going up so much even analysts are throwing up their hands.

Money Games

Like in all games, some will bend the rules, others will break them.

China, for example knows their currency can't compete with the USD, indeed the Dollar has gained against the Yuan, but they also know money isn't everything.

Desirable assets —like tungsten— can be preferable to currency units your rival can print at no cost.

Similarly, Michael Saylor has learned to bend the money game rules masterfully to convert as much fiat as he can for Bitcoin.

What would happen if the sitting president of the USA got wise to the idea of playing the money game to accumulate Bitcoin?

I don't know how soon the implications of that would become common knowledge.

I do know I'm stacking as hard as I can before everyone knows that everyone knows the Fiat Emperor is naked.

Price News

Bitcoin has been crashing to levels not seen since… 4 months ago.

Among rumors of imminent Mt. Gox distributions and the German government selling a ton of coin —consistent with their flawless record of horrible decisions in the past few years—are creating a massive dip. Will it be enough to shake out some of the ETF holders?

Bitcoin Surfing

Last week BTC took a plunge into the Water ($59.5k) and has not come up for air yet.

Dip Fishing

I was wrong. Last week I said I didn't foresee BTC diving under $56k and it has now dipped below that twice. I won't make any predictions this week, but there's more Mt. Fox coming and the next strong support I see is all the way down at $50k. I've been stacking as best as I've been able to.

Calm Chart

July is solidly in the red and I expect it'll remain that way, at the moment any catalysts I can see (like Mt Gox) would represent further pressure to the downside.