You have to take what Chanos says with a grain of salt (and that may be putting it lightly). He currently has massive short positions on COIN. What do you honestly expect he is going to say about crypto besides anything negative?
Crypto Crash Survivors Could Become Tomorrow’s Amazons, Bank of England Says
- Thread starter johnarb
- Start date
I think the reason for this is because we went down a different path that nobody ever thought we could go down. The interest rates were dropped to zero and stayed there for practically ever. I don't think anyone ever thought this could happen for this long, and without consequences. Of course what was happening was that inequality was just getting started and it will end with a bang. But I do agree that years passed without any major blowup. The interest rates stayed at zero, and the debt grew and grew, but no big blowup.
This is because the FED essentially said they will buy anything, all private company bonds and MBS, which is against their mandate. From what I've come across, this is actually illegal, but they did it anyway. When the market learns that there is a perpetual bid in the market, its risk free to own worthless junk bonds. So why not scoop some up, make some profit, and if you need to dump them, the FED will take them off your hands.
Its kind of like watching a bum in the alley shooting up heroin. You think that he is about to die, but just around the corner is an ambulance. They take him to the hospital, and even though his organs might be toast, they hook him up to a ventilator to do the breathing, and dialysis machine to replace the kidney function. He is essentially kept alive, but in no condition to ever return to a normal life.
This is where we are now. The economy is forever hooked on stimulus, and even though they are going to trying QT, it will be apparent that money will always have to be printed and injected into the economy. The interest rate rises will stop, and inflation may very well start dropping because asset prices will have collapsed and the demand will naturally fall off a cliff. Of course food and energy will be in short supply, but the price won't matter since the supply is actually limited by real world factors and not things the FED can control.
I can't say when this will all happen, but I bet we are months away from things breaking down further and further. Since we already tried zero rates forever, and since we already flushed the world with printed money, what is left to try? See, back in 2007, we didn't have rates so low, so this worked quite well for a while. Then in 2020, we never had the FED directly print money and distribute it. And we saw how well this worked too. But none of these are real solutions. If someone has another idea of what they can try next, I'm all ears, but it sounds like its demand destruction by making everyone poor and this will take care of inflation and lack of food and energy since people will be forced to be very stingy. At least this way the dollar may survive longer, but at the expense of jobs and the economy. But this is about the only thing left they can do before the system collapses.
This is not the first time interest rates have been held very low for an extended period of time. The period during and after WWII was very similar. No matter how mad you think the current financial system is, I wouldn't bet against it just carrying on. As Specterx says, many have been predicting a big reset for donkey's years and it's never transpired.
History tells us that many reserve currencies survive about 100 years. This is where we are now. I agree that I don't think i will wake up tomorrow and find the dollar is useless, but I'm just saying there isn't a rabbit that the FED can pull out of a hat anymore. Either the dollar gets crushed with more printing, or the economy with interest rate rises and QT. Both are bad, and both lead to a lower quality of life for most people. When you look at all the homelessness, you can see that its been a lower quality of life for these people already.
Going out of their way to promote crypto trading, I see.