We’ll take a quick pause from the Gradually, Then Suddenly articles to hit you with another great piece on the macroeconomic conundrum the world finds itself in written by a Bitcoin Wizard, James O’Beirne.
The thesis of this article is not new, but the message bears repeating. In fact, I highlighted a piece by Ray Dalio that touched on many of the same ideas.
The over-levered world financial system is in an extremely precarious situation that cannot easily nor painlessly be resolved. The only paths forward are a major contraction of the credit system to purge unsustainable debt which would cause a global economic crash or continuous money creation by world central banks to support bad debt and continue to expand the credit system which the economy depends on for continued growth. The latter is the most likely scenario even though it will end with hyperinflation and destruction of the global monetary system. In either case, it behooves you to opt out of the current, legacy financial system and protect your finances by holding equity-based, hard assets, namely Bitcoin.
” This doesn’t mean that Bitcoin will actualize on its potential in whatever next crisis lies ahead of us, but it would seem foolish not to have a small amount of your portfolio betting that it will, whether you’re a pension desperate for yield or a millennial like me, disenchanted with almost every other option. “
One thing worth noting, as James highlights the dire system pensions find themselves in, is that most pensions funds (and many other types of investment portfolios, such as insurance companies, foundations, endowments, some hedge funds, etc) have investment mandates that legally constrain their portfolios. Many pensions are legally restricted from holding large cash balances and are required to be 98% invested at all times. I’m not sure about the the legalities and compliance issues of holding Bitcoin for these types of investors, but we may need to see pensions rewrite their investment mandates in order to be able to allocate to Bitcoin. If so, they’ll be facing some hurdles to be able to save their ships from sinking.