In our previous article, we introduced the idea of Bitcoin becoming a safe haven. Yet, its value went down. So is Bitcoin a safe haven or not?

Here’s the light at the end of that tunnel. But it will get very ugly first.

In short: We might see two collapses. One is an asset collapse (happening now). Then a currency collapse. Then a rise of a new monetary system.

Bubbles always burst!

Bubbles tend to burst from “ Black Swan events”. A Black Swan event is the trigger that causes an economic collapse. It is something that pops the bubble that was overlooked before but the bubble becomes very apparent only after it has popped.

The trigger for the asset bubble was the Coronavirus. But the asset bubble collapse was inevitable anyway because of inflated prices from ETFs and pension funds. Coronavirus simply made it happen sooner.

But there is another bubble on the horizon…

World debt is overdue

World debt standup routine from 2011

Robert Kiyosaki, Mike Maloney, Chris Martensen, George Gammon, and countless other millionaires have been warning us of The Everything Bubble for decades already.

All governments, banks companies, and individuals have more debt than ever before in history. And it is only accelerating.

The world debt has been accumulating since the 1970s after the US dollar was lifted off of the gold standard. And everyone knows this. For some reason, we have shrugged it off thus far.

The debt is overdue.

Inflating Asset Prices

All you need to understand about inflating asset prices is this:

After we got off the gold standard, central banks have been able to create as much currency as they want. But all currency that is created is created in the form of debt.

The problem with debt is that debt has to be paid back with interest.

For 50 years, central banks have issued exponential amounts of debt to keep asset prices rising.

In order to do this, central banks have had to lower the interest rate so governments, companies, and individuals wouldn’t go bankrupt from the monthly payments.

Now we are at 0% interest.

So what? We can have negative interest rates and keep issuing more debt, right?

What will the negative interest rates cause?

Negative interest means that instead of you paying the bank for your loan, the bank pays interest to you for your loan.

Hell yeah! That sounds even better than free money! In fact, let’s all get the ‘helicopter money’ so we can all start buying more!

Exactly the problem!

What if the trend of the interest rates would start going higher? Who could even pay their monthly debt payments?

Even if we are able to keep interest rates at 0% or negative, there would be an increasing amount of currency chasing after the limited amount of goods and services.

Now we are seeing shortages of toilet paper, pasta, canned food etc. If we add more currency, the only thing that would happen is that prices would rise quickly causing inflation or even hyperinflation.

A supply shock is bad, demand shock is worse!

Both at the same time is the worst!

Because of the virus and the quarantine measures, people’s buying habits have dramatically changed. Instead of going out, investing, traveling and buying convenience, people have rushed to buy necessities.

We have an overabundance of convenience but a lack of necessity.

Currency circulation has halted.

A double shock is like throwing a metal stick between a bicycle going full-speed. It falls over and the cyclist may have to spend months in recovery.

Why are all the asset prices falling then?

Investors know that the supply and demand shock will cause companies to make less money and many companies might even go bankrupt. This is why investors are taking their currency out of the stock market.

Also, companies that are not getting their usual income from customers are having to sell their soft and hard assets for currency to pay for their expenses. Companies do not have enough ‘liquidity’ aka cash or assets that are easily transmuted to cash.

The prices are falling because companies have to sell their assets for liquidity. But that will not be enough. Most companies are over-leveraged with debt and big companies know that the governments always come to the rescue.

And as we know, governments will not allow a mass bankruptcy! They will once again ‘save’ big companies. So the banks and governments are now issuing currency like there is no tomorrow.

Once the sell-off is finished and the asset price decline bottoms out, companies are still alive, and we take a deep breath to relax…

We should prepare for what’s coming next…

A currency crash

Once people start seeing that the currency doesn’t have as much purchasing power and they are losing value day by day, they will start to look for alternatives.

History tells us that people fly towards ‘safe havens’ like physical necessities and gold and silver.

But in reality, they run towards any asset that is easy to buy, has limited quantity and can be used in the future effortlessly to buy other things.

100 trillion Zimbabwe dollar note

Today that asset is toilet paper, canned food, and other necessities. But you cannot hoard 14,000 hand sanitizers or 1,000 rolls of toilet paper or the government will confiscate it from you.

Even gold can be confiscated, which is exactly what happened during the Great Depression. It was illegal to own gold in the USA.

This is what Bitcoin was created for

There are only 21 million Bitcoin and that’s it. You can hold hundreds, thousands or millions of dollars worth of Bitcoin without having to worry about inventory. Transactions are private. Governments cannot confiscate it, and it is easy to use anywhere in the world.

Will this future happen? I don’t know.

Is it likely? Governments will do everything in their power to prevent losing power and control. We may see governments getting together and somehow making a monetary system that prevents the mass adoption of crypto or gold as a new monetary standard. So no, it is not likely.

Is Bitcoin better than gold? Yes and no. It might be wise to hold some Bitcoin and gold and silver just to hedge yourself against the world debt and the influx of currency stimulus.

Will the world ever be like it was before? No. Just like the black swan events of the collapse of CCCP, 9/11 or 2008, the world will not be the same again. Things usually become darker before they are better again.

Will we survive and will life continue? Yes. If you do nothing, you might lose your purchasing power temporarily but there is always work for people who are willing. But wealth will be transferred from the people who react to the people who prepare.

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