If Bitcoin really is a safe-haven asset,
is it behaving like one?

The title of today’s post is not intended to be a serious question as much as it is “gallows humour”, as they say.

Since the Russian invasion of the Ukraine in early 2022, it’s been speculated that future historians may look back on that event as the beginning of WWIII. I have privately wondered (and meant to write it up in the last monthly letter, but it slipped off the radar), whether the cascading military coups throughout the CFA (Central African Franc) nations were the slow opening of a second front in what was becoming a global conflict.

As the ruling, CFA-aligned governments are being deposed, in Niger, Ghana, Central African Republic and Burkina Faso (eight coups in the past two years, so far), Russian military advisors are appearing on scene, coaching the generals. Meanwhile China is ready with infrastructure incentives and loans. That front isn’t hot – yet – but it’s – “War By Other Means”, to quote the Robert Blackwell & Jennifer Harris book by that title…

“Today, nations increasingly carry out geopolitical combat through economic means. Policies governing everything from trade and investment to energy and exchange rates are wielded as tools to win diplomatic allies, punish adversaries, and coerce those in between.”

Except for the United States, the authors lament, both of whom belong to the Council on Foreign Relations. The USA is still somewhat retrograde in that it reflexively seeks to use its military stature to either threaten or force issues – an increasingly obsolete strategy.

I’ve mentioned 5th Generation Warfare before (5GW), which is all about “war by other means” – so much so that at least one of the combatants may not even realize that they’re embroiled in a war:

“In 5GW, violence is so dispersed that the losing side may never realize that it has been conquered. The very secrecy of 5GW makes it the hardest generation of war to study. Because 5GW attacks occur below the threshold of observation, COIN in 5GW is the preemptive, system-wide, automatic degeneration of 5GW forces into more primitive gradients of warfare. The 5GW warfighter hides in the static, and the most successful 5GWs are those that are never identified.”

Abbott, Daniel H.. The Handbook of 5GW: A Fifth Generation of War? (pp. 16-17). Nimble Books LLC. Kindle Edition.

I think this has been the case in the West for decades, with the rise of far-left ideologies and bat-shit wokery permeating (infiltrating?) our core institutions (basically, Fabianism writ large).

Yet as I type this, it is still early days in a new hot war in the Middle East, which is possibly – if you listen to Patrick Byrne’s theory on how it occurred – the side-effect of a geo-economic battle between the US and Israel of all things.

What REALLY Caused Israel’s Foggy Intel? Read it Here 1st.

The MSM has the what and the why, but not the how. Let me tell you what really caused this catastrophic failure in Israeli intelligence last Saturday.

As my regulars are aware, I have spent some time this year in… pic.twitter.com/8uR0QzSupB

— Patrick Byrne (@PatrickByrne) October 12, 2023

In any case, it’s another 9/11 moment and at some point I’ll explain why I use that comparison specifically, instead of the “Pearl Harbor” references we’ve seen a lot of since the Hamas surprise attack on Israel (possibly in the monthly macro Bitcoin Capitalist if I don’t get to it here).

The mid-month portfolio review issue is intended to be a more tactical focus on Bitcoin, cryptos and the companies we own, within the backdrop of whatever is going on that affects these spaces directly.

But the dial for geopolitical tension just got ratcheted up to 11, so we have to acknowledge here that something very bad has occurred, and like it or not, it stands to become a core driver of what unfolds from here on.

Hedge fund billionaire Paul Tudor Jones appeared on CNBC October 10th, saying that it was hard to own stocks amid such geopolitical uncertainty, and citing three flashpoints: Ukraine, the Middle-East, and sooner or later: Taiwan.

In a widely circulated quote, PTJ said he liked gold and Bitcoin although he said so within the context of the two performing well in recessions, which he predicted would occur by Q1 of 2024.

I don’t necessarily know if that’s true. Bitcoin has never been in an official recession, although when we were in a “technical” one earlier this year, it was coming off the lows of a bear market nadir with a good head of steam on it, so I don’t know how much we can infer from that.

Recall, Paul Tudor Jones was arguably one of the catalysts behind “the institutions are coming” mantra of the 2020 cycle when he disclosed holding a position in it within his hedge fund.

As I’ve observed since, that wave, which included Michael Saylor, Stanley Druckenmiller and (for a while) Elon Musk, wasn’t really an institutional wave, per se – more like a vanguard of maverick billionaires. But it was a start.

It’s the inevitable, perhaps even imminent arrival of spot Bitcoin ETFs in the USA (they’ve been around here in Canada for years) that will truly lay out a carpet for institutional investors.

But the geopolitical and macroeconomic environment today is very different from anything experienced since Bitcoin emerged as an asset class.

The great bond supercycle is over, as is The Everything Bubble and likewise is the (so-called) “unipolar world”.

We’re neck deep in The Jackpot now , or what Strauss and Howe called a “Fourth Turning”.

The End of The Unipolar World (as we know it).

All bets are off, and nobody really knows what happens next. When people use the phrase “the end of the unipolar world”, they are typically thinking in terms of nation states jockeying for primacy in a presumably multi-polar world. Russia, China, Brasil, India, Turkey, Saudi Arabia, Israel… Iran – I think this is a one-dimensional view and doesn’t fully capture the shift we are undergoing.

But for my own meaning of “multi-polar world”, the potpourri of nation states vying for geopolitical “Lebensraum” is only one layer of it. Add to that non-aligned, non-national, autonomous organizations …think supra-national Borgs like the WEF, and their polar opposite: Network States and crypto-anarchist enclaves.

Some countries may coagulate into the former (like the entire G-20) while others splinter out and morph into the latter (El Salvador).

Then factor in cartels, consortiums and corporations. Terrorist cells, organized crime, hacker networks, not to mention completely artificial entities with no human agency – like smart contracts, DAO’s, autonomous 3-D printers, weaponized drones or computer viruses.

Now imagine decentralized, anonymous (and autonomous) networks of 3-D printers cranking out kamikaze drones that take them out. pic.twitter.com/kaWClCBLQx

— Mark Jeftovic, The ₿itcoin Capitalist (@StuntPope) October 7, 2023

That’s the multi-polar world we are headed into, and we’re naive if we think we’re just dealing with a bunch of nationalist upstarts. In such a world, Bitcoin “the money of enemies” becomes necessity.

Where does it leave Bitcoin?

Until now it has only really had one long macro-economic cycle, with relative geopolitical stability, during which it was always theorized that Bitcoin was a safe haven asset, just like gold.

Couple problems.

One is that over the past fifteen years or so, not even gold traded like gold. It was supposed to be safe when everything else went to hell, but in the Global Financial Crisis and every other mini-crisis that tanked the stock market, gold usually tanked too.

Yes, gold took off like a rocket after the GFC bottomed, and did so a good six months before everything else. But for the most part, everything took off and highly correlated markets became the norm for the next ten or fifteen years, because “money printer go brrrr”.

That gave rise to the mantra, “it’s all one trade”. During that same cycle, Bitcoin tracked the Nasdaq for long chunks of it, and even traded like a meme stock – the right hand chart above showing correlations between BTC and Gold (top), the Nasdaq (middle) and AMC (bottom). The closer the line tracks along the top, the closer the correlation.

Now we’re in what seems like a global crisis for reals.

Bonds have had a somewhat under the radar implosion, owing to the fastest rate hike cycle in history. Stocks have done something barely recognizable, and gone down for a few months; debt is exploding at an accelerating pace, as if that was even possible; and that’s on top of: rolling energy crises, a hot war in Europe, escalating tensions between China and Taiwan and now, the Middle East erupting into war.

Gold has reacted vigorously to the Hamas attacks on Israel, and the anticipated reprisals and repercussions (a more than $60/oz move on Friday the 13th alone).

Bitcoin looked asleep, when a new hot war broke out in the Middle East. If it’s been reacting to anything since that happened it seems to be the ongoing breakdown of the bond markets. It may truly “be different this time” if the markets wake up to the reality that debt is well and truly out of control.

Granted, gold took a major dump in the weeks leading up to the Hamas attacks, and Bitcoin is still the best performing asset class of the year, so if we can infer anything, it feels like the “all one trade” correlation is starting to break down a bit.

Absent rampant money printing (on pause for the moment, to be sure), assets seem to be zig-zagging toward their own fundamental drivers and at the moment, it looks like this: fears of World War III are acting as a tailwind for gold while fears of the global financial system imploding (and possibly the inevitable arrival of CBDC’s) are what’s lifting Bitcoin.

My base case is that the latter is pretty well baked in. I’d like to hope that the former isn’t, but, as I noted earlier, we may already be past that.

My forthcoming ebook The CBDC Survival Guide will give you the tools and the knowledge to navigate coming era of Monetary Apartheid. Bombthrower subscribers will get free when it drops, sign up today.

Today’s post was an excerpt from The Bitcoin Capitalist Mid-Month Portfolio Review. TBC provides actionable intelligence on the macro forces shaping Late Stage Globalism and a tactical toolkit for growing your wealth as it plays out. Try it today here.

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Heretical Judge Rules that Uber Can’t Externalize its Labour Costs

As I briefly covered in my AxisOfEasy tech digest this week, Uber and Lyft were bracing themselves for a ruling by a California judge that threatened to force them into treating their wage slaves drivers as employees. Lyft said if the ruling went against them it would cause “irreparable damage”. Uber CEO Dara Khosrowshahi penned an op-ed in the New York Times that just so happened to run Monday, pining for a fair shake for gig economy serfs workers.

Khosrowshahi, whose compensation package last year clocked in at $45,000,000 USD, waxed pensively, ‘There has to be a “third way” for gig workers.’ . Ideally one in which Uber wouldn’t be on the hook for their benefits and would be able to continue apace as a Silicon Valley unicorn: posting billions of dollars a quarter in losses and jockeying for Federal bailouts. Meanwhile the early stage backers, the VC’s and the private equity funds, would continue to live large off of financialization, not having to worry about the consequences of being the driving force in a race to the bottom for everybody else (even Uber’s lümpenvestors who bought into the IPO are still underwater).

As it turned out, Judge Schulman ruled that these gig economy workers are to be treated as employees in the State of California, and sure enough, Uber is now threatening to pick up their ball and go home.

People following my writings may be surprised that I’m not approaching this as yet another government inflicted wound against capitalism, like how laws mandating higher minimum wages actually increase unemployment. It’s a fair point.

But we’re not talking about countless mom-and-pops and other main street businesses having their costs jacked up by economically illiterate career politicians. Even in a climate of government mis-micromanagement and overreach, the so called “free enterprise” participants should be competing under the same conditions. If an independently owned and operated driver service in the state has to operate under onerous taxation and terms, then being a Silicon Valley unicorn shouldn’t exempt you from suffering the same conditions.

In this case we’re talking about Cantillonaires who feel entitled to special privileges and exemptions but the reality is this:

These companies were never intended to be economically viable.

Uber and Lyft started the year with $11.3B and $2.8B in cash on their balance sheets respectively. They posted TTM losses of $10B and$ 2B respectively.  They are valued around $54B and $9.2B

The only thing that mattered from the outset was to cannibilize the entire market, driving down prices and wages while operating at a loss so that they could garner the next financial event, be it a series D, E or F up-round and then eventually some monster acquisition or IPO. Within truly un-manipulated, free market competition, Uber and Lyft would have either had to compete, viably, with numerous entrants and competitors all fighting under their own steam, or else be snuffed out by economic reality.

The truth is that you can’t actually build a business where every transaction and input is subsidized, ultimately by central bank stimulus, while  all normal course responsibilities of operations, like expenses, are externalized.

With the Everything Bubble finally looking to pop, and pent up reality s-l-o-w-l-y beginning to reassert itself, these Unicorns will have to face the same situation that every other non-unicorn, non Silicon Valley funded business has to face: Whatever your “boil-the-ocean” big idea is, you’re gonna have to do it in an economically viable way, or it’s not going to happen.

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This is part of the ongoing Jackpot Chronicles, looking at four possible Coronavirus scenarios or lenses.

The last instalment was “Force Majeure”, which posited a complete breakdown in seemingly permanent institutions. As it may turn out, these outwardly immovable edifices may not survive this economic collapse and be left out of “the new normal” that emerges out the other end.

Given that the idea of Coronavirus being concocted in a Wuhan Lab has gone from being a conspiracy theory that could get you deplatformed, to being seriously looked into by Western intelligence agencies, now may be a good time to look at the “Tin Foil Hat” scenario, and try to discern where viewing this pandemic through the proverbial conspiracy theory lens actually gets us.

Conspiracy theories make for tricky subject matter for anybody who tries to look deeper than the veneer of conventional narratives. What we are expected to accept unquestioningly out of mainstream circles is sometimes less plausible than what we are expected to dismiss as conspiracy theories.

It get’s even more distorted when inversions or backwardations occur between what is fringe and what is, ostensibly, “fact”.

Russiagate was a conspiracy theory, one that was platformed as common knowledge by multiple mainstream media outlets for over two years before finally being conceded as a nothingburger by the Mueller Report. There are still people walking around believing that the current US president was installed as a Manchurian candidate by the Kremlin, and you’re the one in the tin-foil hat for pointing out how disconnected from reality that actually is.

I’ve been very clear about this all along. Russia hacked 2016 in advance, and changed vote totals by deleting registrations. But it was NOT enough to put Trump over the top. Without Comey’s last minute letter, Trump would have lost. This is very, very simple.

— Palmer Report (@PalmerReport) May 15, 2019

(somwhere along the line, legendary usenet kook alt.genius.bill-palmer got himself a blue check)

This is typical of the hall of mirrors you enter when trying to understand the dynamics of conspiracy theories. Even the term “Conspiracy Theory” is itself the subject of conspiracy theories. The legend goes that the term was invented by the CIA to marginalize pesky truthers (another loaded word) that were finding all kinds of holes in the official explanation of the JFK assassination.

Whether it’s the implausibility of a “magic bullet” in Dealey Plaza or what many building engineers and pilots have to say about 9/11, the official explanatory cover for such world-changing events are so riddled with inconsistencies and flaws that they can only be believed by those who do not examine them.

The danger in admitting to oneself that at least some aspects of the most pivotal events of our era are not what they seem, is that it can pull you into a downward spiral where everything becomes a conspiracy and nothing is as it seems.

We all know somebody who thinks every news story, every event that occurs is a direct outcome of some shadowy cabal that controlled the event, manipulated the circumstances that precipitated it, and selected the outcome to serve their own agenda.

This is not to say that people and groups don’t conspire, that societal elites don’t have a self-serving agenda and that moral hazard and pathological opportunism do not play a significant role in outcomes. In essence, that’s politics. But here’s the crucial duality of conspiracy theory:

To the degree that all major events being manipulated behind the scenes by hidden conspirators is actually impossible, so to is the degree to which  the mainstream media explanations of events are mostly inaccurate and at times infantile.

Into this milieu, enter the tin-foil-hats, and things become inordinately more precarious. What we get is a type of three-body-problem writ large where the three independent narrative forces can be described by three age-old adages, ( all of which are possibly apocryphal quotes):

1. “Never ascribe to conspiracy what can be explained by stupidity” (a.k.a Hanlon’s Razor, often attributed to Napoleon Bonaparte)
2. “Never let a good crisis go to waste” (Winston Churchill)
3. “Never believe anything until it is officially denied” (Bismarck)

The outcomes we as citizens experience, subject to our leaders following varying degrees of these three impulses can be rendered in a Venn diagram with three drivers: Stupidity, self-dealing and duplicity.

As I’ve been exploring a lot lately, we live in something that  increasingly resembles a cyberpunk bizarroverse. One where the explanatory powers of mainstream media are in secular decline and in which our institutions have largely discredited themselves. Two powerful coping mechanisms are:

1) to pretend nothing is wrong and that business as usual can continue even though the underlying scaffolding of the system is imploding (hypernormalisation)

2) subscribe to some non-sanctioned narrative that purports to reconcile the discrepancy between what we believe should be happening with what we are actually experiencing.

For my part, I find the most useful components of both conspiracies and consensus is that they are both known to provide an explanation of events that I can reliably assume as having near zero accuracy. A useful concept for this came out of Douglas Adams’s Hitchhikers Guide to the Galaxy. In it his concept of the recipriversexcluson describes a number whose value can be only be defined as anything but itself. Whatever the expert consensus is saying is happening or will happen, that’s the one outcome you do not need to plan for. Same goes for most conspiracies.

Introducing the Gell Mann Amnesia Effect

The last idea I’ll introduce is that mainstream media has itself, become a type of conspiracy theory. There is less reporting, less actual journalism and mostly punditry and editorializing. Ben Hunt gives us the concept he calls The Gell Mann Amnesia Effect (the phenomenon was originally described by Michael Crichton):

“Briefly stated, the Gell-Mann Amnesia effect is as follows. You open the newspaper to an article on some subject you know well. In Murray’s case, physics. In mine, show business. You read the article and see the journalist has absolutely no understanding of either the facts or the issues. Often, the article is so wrong it actually presents the story backward—reversing cause and effect. I call these the “wet streets cause rain” stories. Paper’s full of them.

In any case, you read with exasperation or amusement the multiple errors in a story, and then turn the page to national or international affairs, and read as if the rest of the newspaper was somehow more accurate about Palestine than the baloney you just read. You turn the page, and forget what you know.”

I noticed this phenomenon years ago, but didn’t have a name for it. In my case, most articles I read in the mainstream press about the domain name system, DNS, and naming in general are so bad as to be cringeworthy. This is one of my faves:

Applying all this to Coronavirus narratives, we can look at what a specific narrative says is or will happen, what it probably preludes from happening.

So when experts say we may have to be on lockdown for 2 years, I assume it’ll come in lower.

When some authority says we we will never shake hands again, I don’t bank on it.

When people on Youtube say 5G causes Coronavirus, I’m pretty sure it doesn’t.

When they say the virus was engineered and released deliberately to bring about a totalitarian police state, I think that gives too much credit to the people who run governments (see Venn diagram).

So where does all this get us?

Enter  Radical Uncertainty.

This is the title of Mervyn King and John Kay’s latest book. King was the Governor of the Bank of England from 2003 to 2013 and presided over the Global Financial Crisis, writing about his experience in his previous book The End of Alchemy.  Kay is an economist who held various positions in academia (former Dean, Oxford Business School, also London School of Economics) and author of Other People’s Money.

Their central theme is that many problems we face are inherently unknowable and that no amount of data or sophisticated modelling is going to get us anywhere near a reliable probability of what any of it means, or what will happen.

Radical uncertainty cannot be described in the probabilistic terms applicable to a game of chance. It is not just that we do not know what will happen. We often do not even know the kinds of things that might happen. When we describe radical uncertainty we are not talking about ‘long tails’ — imaginable and well-defined events whose low probability can be estimated, such as a long losing streak at roulette. And we are not only talking about the ‘black swans’ identified by Nassim Nicholas Taleb — surprising events which no one could have anticipated until they happen, although these ‘black swans’ are examples of radical uncertainty.‘?

We are emphasizing the vast range of possibilities that lie in between the world of unlikely events which can nevertheless be described with the aid of probability distributions, and the world of the unimaginable. This is a world of uncertain futures and unpredictable consequences, about which there is necessary speculation and inevitable disagreement — disagreement which often will never be resolved. And it is that world which we mostly encounter.

So the ramifications of radical uncertainty go well beyond financial markets; they extend to individual and collective decisions, as well as economic and political ones; and from decisions of global significance taken by statesmen to everyday decisions taken by the readers of this book.

Radical Uncertainty means gearing our efforts toward coherently responding to events as opposed to insisting on modelling them with an eye toward achieving optimal outcomes, be that “full employment”, a targeted inflation rate or the elimination of the business cycle.

“Governments choose policies to maximise social welfare. A moment’s introspection is enough to tell us that they don’t. They could not conceivably have the information required to do so. They do not know all the available options, and they are uncertain what the consequences of them will be. They do not even know whether what they wish for today will be what they still want if they achieve it tomorrow….the notion that a government could calculate what maximises social welfare is simply ridiculous. The consequences of policies and actions are far too uncertain….”

It is arguable that many of the problems we experience today, such as debt bubbles and brittle supply-chains are the result of trying to prevent bad outcomes of the past instead of facing them head on and taking the requisite pain when they happened (no bailouts, allowing the over-leveraged to fail). But they didn’t and this is a major reason why the pandemic, when it finally hit, is having such a disastrous effect for something that all else considered, isn’t as deadly as pandemics of the past.

Ironically, Radical Uncertainty was written just before the outbreak, it’s publication date was March 17, just as things were really coming unglued…

“The Black Death will not recur – plague is easily cured by antibiotics (although the effectiveness of antibiotics is under threat) – and a significant outbreak of cholera in a developed country is highly unlikely. But we must expect to be hit by an epidemic of an infectious disease resulting from a virus which does not yet exist. To describe catastrophic pandemics, or environmental disasters, or nuclear annihilation, or our subjection to robots, in terms of probabilities is to mislead ourselves and others. We can talk only in terms of stories. And when our world ends, it will likely be the result not of some ‘long tail’ event arising from a low-probability outcome from a known frequency distribution, nor even of one of the contingencies hypothesised by Martin Rees and colleagues, but as a result of some contingency we have failed even to imagine.”

So as I try to balance out these varying imperfect narratives from mainstream sources, official sources, and the tin foil hats, I try to use them more as filters to identify what to take out of the equation than as providing information and having explanatory power.

1. I eliminate what the prominent futurists and experts say will happen
2. I  eliminate the reason why conspiracists say something is happening
3. I severely discount what the MSM says is happening.

Then I  look at what’s left and try to make sense of it. To that end while I personally think that all most of the hysterical outcomes, in terms of millions of deaths, mandatory implants, FEMA camps,  are highly improbable, under the Jackpot’s Tin Foil Hat Scenario I’d be wrong (think China, everywhere).

What I am positioning for is a mother of all economic depressions, rampant inflation, joblessness, war on cash and basically everything described in the second part of Graham Summers’s The Everything Bubble (tl/dr Inflation, NIRP, War on Cash, Bail Ins and wealth taxes). When I run through all of this filtering and analysis this is what looks more imminently probable to me.

While I don’t think of these anticipated events in terms of a coordinated global conspiracy to screw all the plebes (again, consult the Venn diagram), I do expect that the rationalizations of these events along with the narratives justifying them will be rife with conspiracy-sounding elements. This brings us back to the hall-of-mirrors aspect of what is conspiracy versus what Jaques Ellul called “integrative  propaganda” in such times as these.

For the next edition of The Jackpot Chronicles I decided to rename the “Mandatory Pollyanna” scenario. That’s the one where central planners and bureaucrats manage to “save” the economy yet again. However the cost of that would be to undertake an LBO of the entire economy and running it as a centrally planned utility. I’ve decided to rename that one “The Great Bifurcation”, after the the inevitable result of that would be emergence of an even more pronounced and starkly divided Two Tier Society.

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