Dollar inflation — The opportunity of a lifetime ?

written by cryptofolyo@gmail.com | 29 Dec 2023

In the financial world, there’s a big worry about the dollar losing its value fast — something called hyperinflation. This could cause problems for regular folks and businesses. But here’s the thing: instead of just worrying, we can actually find ways to protect ourselves and even make the best out of this tricky situation. In this guide, we’ll break down what dollar hyperinflation means, what issues it could bring, and how we can smartly tackle these problems, not just to survive but to come out even stronger.

USD M1 money Supply

To understand the severity of the situation, take a look at the chart above. It illustrates the M1 money supply of the USD, showing a sharp increase over recent months. This rapid rise might seem like more money in circulation, but it’s a red flag and was the reason for the rising inflation. As we can see from the chart, the increased money supply has contributed to a surge in inflation.

To tackle this rising inflation, policymakers responded by increasing interest rates steeply in the last couple of years. Raising interest rates is a measure aimed at slowing down spending and curbing inflationary pressures. While it can help stabilise the economy, it also brings challenges, impacting borrowing costs and influencing investment decisions.

What makes this situation particularly concerning is that a significant portion of this new money was generated during 2020 at very low interest rates. In an effort to cushion the economic impact of the pandemic, interest rates were kept at historically low levels. While this approach aimed to encourage borrowing and spending, it also had consequences. We’ve already witnessed the aftermath of increasing interest rates, which led to a decrease in the valuation of bond portfolios held by banks and resulted in the collapse of banks, such as the unfortunate case of Silicon Valley Bank, First Republic Bank etc.

In the aftermath of these measures, we find major financial institutions, including Bank of America, grappling with potential losses. Reports suggest that Bank of America, among others, is sitting on unreflected losses of around $130 billion on a total bond portfolio of $650 billion ( Source : Link ). These losses, though not yet reflected in the books, raise concerns about the stability of financial institutions and the broader economic repercussions.

Federal Funds Rate — Source macrotrends.net

The chart above depicts the federal funds rate over the last few decades, providing insights into the interest rate policies that have shaped our economic landscape. Notably, from the 1930s to the 1980s, interest rates were on an upward trajectory, reaching as high as around 20%. This period of steadily increasing interest rates aimed at controlling inflation and stabilising the economy. However, as the chart vividly illustrates, the trend reversed, and interest rates started to decline, reaching almost zero by 2008.

From 2008 onwards, facing a situation where traditional interest rate adjustments were no longer feasible, policymakers turned to unconventional measures. With interest rates near zero, the primary avenue for economic stimulation became quantitative easing (QE). This involved injecting a substantial amount of money into the financial system, a move aimed at spurring lending, investment, and economic activity which resulted in the recovery of economy following the 2008 crisis

To delve even deeper into the intricacies of the long economic cycle and gain valuable insights, I invite your attention to a video by Ray Dalio. As mentioned in the 18th minute of this video, the developments from 2008 onwards are part of a deleveraging phase of the long economic cycle. The entire 28-minute video is worth a watch to grasp the nuances and patterns shaping our current economic landscape. From 2008 onwards as the interest rates couldnt be lowered further the federal reserve resorted to increasing the money supply as part of the Quantitative easing programs.

Starting December 2015 Federal reserve started to increase the rates again as u can see in the chart. The first Quantitative tightening started in October 2017

However this didnt work for long time. From July 2019 onwards federal reserve again had to change its direction and started to cut the interest rates again citing ‘global developments’ and ‘muted inflation’

In September 2019 a major event happened in the money markets.

On Monday, September 16, SOFR printed at 2.43 percent, 13 basis points higher than the previous business day. With pressures in the repo market spilling over into the fed funds market, the EFFR printed at 2.25 percent, 11 basis points above the Friday print and at the top of the FOMC’s target range. On September 17, the EFFR moved above the top of the target range to 2.3 percent and the SOFR increased to above 5 percent.

Quoting from the article in federal reserve website

In response to elevated money market rates, especially with the fed funds rate printing at the top of the target range on September 16, the Desk announced an overnight repo operation to be conducted at 9:30 AM on September 17. The operation offered up to $75 billion against Treasury, agency, and agency MBS collateral. This operation provided $53 billion in additional reserves and led to an immediate decline in rates.4 The Desk offered up to $75 billion in overnight repo each morning for the rest of that week, with all three operations fully subscribed. With subsequent announcements of further repo operations, overnight rates stabilised over the remainder of the week and EFFR returned to well within the target range.

On October 11, the Fed announced two important steps to ensure that the supply of reserves remains ample at or above the level that prevailed in early September 2019. First, the Fed announced it would purchase Treasury bills at a pace of about $60 billion per month through the second quarter of 2020. Additionally, the Fed extended both its overnight and term repo operations through at least January 2020.5 These actions have been successful in stabilising money markets, even on Treasury issuance and reporting dates when modest rate pressures are expected.

Fortunately, the COVID-19 pandemic provided an unexpected solution. Public demand for increased money supply led to stimulus checks and further Quantitative Easing, culminating in a massive increase in M1 money supply to $19.8 trillion by December 2022.

As anticipated, inflation soared due to the exponentially increased money supply, prompting the Federal Reserve to initiate Quantitative Tightening and steeply raise interest rates from March 2022 onwards, akin to the events in December 2015. The sharp increase in interest rates resulted in the devaluation of long-term treasury bonds issued in 2020, leading to bank runs and the collapse of banks like Silicon Valley Bank.

To address this, the Bank Term Funding Program was introduced, highlighting the cyclic nature of Quantitative Easing leading to increased money supply and inflation, followed by increased interest rates and Quantitative Tightening, resulting in recession and shrinking liquidity.

Presently, the Federal Reserve has hinted at a potential pivot in the coming months — lowering interest rates and possibly embarking on another round of Quantitative Easing to infuse liquidity into the markets. However, this could reignite inflation and potentially lead to hyperinflation of the dollar.

The Federal Reserve faces a dilemma, compelled to choose between the lesser of two evils. One option is to increase interest rates to control inflation, risking the collapse of banks. The alternative is to decrease interest rates to zero and continue with QE measures, potentially resulting in hyperinflation. Understanding this dilemma unveils the opportunities that lie ahead in the coming years.

What is Money?

Before diving into the complexities of economic challenges and their solutions, let’s start with the basics: money. Simply put, money is like the heartbeat of economic activities, making it easier for people to buy and sell things. It’s a crucial tool that helps us save for the future, measure the value of stuff, and exchange goods and services with others. Think of it as the glue that holds our economies together, playing a vital role in how societies function around the globe.

Money is a universally accepted medium of exchange that facilitates transactions and serves as a measure of value within an economy.

Key Functions of Money being the following :

• Store of Value: Enables individuals to preserve wealth by holding money for future needs.
• Unit of Account: Simplifies the process of comparing and measuring the value of different goods and services.
• Medium of Exchange: Facilitates the smooth exchange of goods and services, promoting economic transactions.

Properties of Money

1. Durability:

• Money should withstand wear and tear over time to ensure it remains in circulation.

2. Portability:

• Money should be easily transferable and portable, allowing for convenient transactions.

3. Divisibility:

• Money must be divisible into smaller units, enabling transactions of varying amounts.

4. Fungibility:

Each unit of money should be identical, promoting standardization and widespread acceptance.

5. Scarcity — Limited Supply

• A controlled and limited supply of money helps maintain its value and prevents inflation.

6. Acceptability:

• Money must be widely accepted as a medium of exchange within a given community or society.

7. Recognizability:

• Money should be easily recognizable and distinguishable from other forms of currency.

8. Not easily counterfeitable

Understanding these properties is essential for evaluating the effectiveness and stability of a monetary system.

Are there any other elements in the Periodic table other than Gold and Silver meeting these properties? As there is none Gold and Silver were being used from time immemorial as money.

History of Money

1. Early Gold Peg (Till 1935):

From the formation of the Federal Reserve until 1935, the U.S. dollar was intricately tied to gold, pegged at a fixed rate of $20 per ounce. This fixed exchange rate meant that the dollar’s value was directly linked to a specific quantity of gold, creating a symbiotic relationship where the dollar represented gold, and gold represented the dollar. This connection was foundational to the perceived value of the dollar.

2. Adjusted Valuation (1934–1971):

The era of the early gold peg underwent significant changes starting in 1934 with the issuance of Executive Order 6102 by President Franklin D. Roosevelt. This executive order prohibited the hoarding of gold within the continental United States. Concurrently, the Gold Reserve Act of 1934 was enacted to protect the U.S. currency system and enhance the utilization of the nation’s monetary gold stock. As a result, the statutory price of gold was raised from $20.67 to $35 per troy ounce, leading to an adjusted valuation of the dollar from 1934 to 1971. This revaluation had immediate implications, causing those holding their wealth in dollars to experience a substantial reduction in their wealth in 1934.

FORECAST : It’s a historical event worth noting, especially as gold prices surge in the present day (as of writing, trading at around $2050 USD per ounce). I am forecasting an upward trajectory in gold prices, potentially driven by economic uncertainties, global events, and the historical role of gold as a hedge against inflation.

3. Gold Peg Breakdown (Late 1960s):

Until the late 1960s, the U.S. dollar was pegged to gold under the Bretton Woods system, and countries held dollars as reserves with the expectation of exchanging them for a fixed amount of gold.

4. Demand for Gold (Late 1960s):

During the late 1960s, countries started demanding gold in exchange for their accumulated dollars, putting immense pressure on the U.S. gold reserves.

5. Nixon Shock (1971):

In response to the escalating demand for gold, President Richard Nixon announced the Nixon Shock on August 15, 1971. This pivotal moment marked the end of the gold convertibility of the U.S. dollar, as Nixon suspended its convertibility into gold. The inflation adjusted value of Gold in USD hit around the historic high of 2700 USD per ounce in 1980s as the aftermath of nixon shock.

6. Implications:

The Nixon Shock had profound implications, leading to the collapse of the Bretton Woods system. Currencies became fiat, detached from any physical commodity, and their values were left to be determined by market forces.

7. Shift in Monetary Paradigm:

The breakdown of the gold peg and the Nixon Shock signalled a significant shift in the global monetary paradigm. The era of fiat currencies had begun, with currencies deriving value from the trust and confidence of users.

Understanding these historical events is crucial for comprehending the evolution of the international monetary system and the transition from gold-backed currencies to the fiat system we have today. Additionally, a noteworthy point from the Gold Reserve Act can be found in the attached PDF

Alternatives to the Dollar: Exploring Gold, Silver , Bitcoin and Ampleforth

In the face of potential inflation and hyperinflation of the U.S. dollar, individuals and organizations are increasingly seeking alternative stores of value. Gold has historically been a preferred choice, but in the digital age, a new contender has emerged — Bitcoin.

Gold and silver stand out as the only two elements in the periodic table possessing all the essential attributes of money. Bitcoin, often described as a synthetic or digital counterpart to gold, mirrors all the properties of gold and, in many aspects, proves to be even better suited for the demands of the modern world.

Throughout history, gold served as a widely accepted form of money, and until 1971, the dollar was pegged to gold. The use of silver as money has faded from memory, leading to a significant drop in the gold-to-silver ratio from historical values of 1:10 to around 1:80. A resurgence of silver for monetary purposes could potentially revert the ratio, propelling silver prices faster than gold.

Despite its superiority in many monetary properties compared to gold, Bitcoin’s market capitalization is currently less than one-tenth of the total gold market cap. For instance, Bitcoin’s Lightning Network enables the swift transfer of tiny units, such as 0.0004 USD worth of satoshis, as seen in platforms like NOSTR (a censorship-resistant alternative for Twitter). Bitcoin’s divisibility and portability position it well for a future where global knowledge sharing involves microtransactions in satoshis.

While the growth potential in Bitcoin may outpace that of gold and silver, it’s essential to recognize that gold and silver provide a different kind of protection against unforeseen risks in the crypto space.

Gold and silver have stood the test of time as tangible assets with intrinsic value. They are not reliant on digital infrastructure or technological advancements, making them resilient to potential disruptions in the cryptocurrency ecosystem. In times of uncertainty or unforeseen events, precious metals like gold and silver often serve as a safe haven, offering a store of value that is physically tangible.

In contrast, Bitcoin, as a digital asset, is subject to the dynamics of the rapidly evolving cryptocurrency market. While it has proven to be a robust store of value and a potential hedge against inflation, it also comes with its own set of risks, including regulatory uncertainties and technological vulnerabilities.

Diversification, considering both traditional precious metals and digital assets like Bitcoin, can be a prudent strategy to mitigate risks and enhance overall portfolio resilience. Each asset class brings its unique strengths, and a balanced approach allows investors to navigate the complex landscape of financial markets.

Bitcoin as a Hedge Against Inflation:

Bitcoin, often referred to as digital gold, presents a decentralised and finite alternative to traditional currencies. With a capped supply of 21 million coins, Bitcoin is immune to the inflationary pressures that can erode the value of fiat currencies like the dollar. Its decentralised nature, borderless usability, and scarcity make it an appealing option for those looking to hedge against the devaluation of traditional currencies. The scarcity of Bitcoin is not only a result of its capped supply but is also reinforced by the limited availability of the specialized equipment required for its mining. The intricate process of mining adds an additional layer of scarcity, contributing to the overall finite nature of this digital asset.

Institutional Adoption:

Major financial institutions, including BlackRock, Fidelity, and Vanguard, have recognized the potential of Bitcoin as a store of value. Notably, these giants have filed for Bitcoin Exchange-Traded Funds (ETFs), signalling a growing acceptance of cryptocurrencies within mainstream finance. While the ETFs are settled in USD which is not that good for the bitcoin ecosystem,, the move suggests a shifting sentiment toward digital assets.

Direct Ownership vs. Bitcoin ETFs:

Despite the rise of Bitcoin ETFs, direct ownership of Bitcoin is a more effective way to benefit from its unique properties. ETFs settled in USD might not fully capture the essence of Bitcoin as a decentralized, non-inflationary asset. Individuals and institutions can consider holding and securing their own Bitcoin, thereby bypassing the traditional financial system.

Simplicity and Accessibility:

Bitcoin’s ease of use, global accessibility, and the ability to transfer value without intermediaries make it an attractive alternative to holding an ever-inflating dollar. The transparency of the blockchain ensures that participants have direct control over their assets, offering a level of financial autonomy that contrasts with traditional banking systems.

Why Bitcoin over Inflating Dollar:

The question arises: Why would individuals and institutions opt to keep their funds in a currency subject to inflation when Bitcoin provides a straightforward alternative? Bitcoin’s fixed supply, borderless nature, and its role as a decentralized store of value position it as a viable option in a world where traditional financial instruments face challenges of depreciation.

As the global financial landscape evolves, the role of Bitcoin as a natural alternative to the dollar continues to gain attention. Whether as a hedge against inflation or a diversification strategy, Bitcoin presents itself as a digital asset with the potential to redefine the concept of currency and store of value.

Dollar Vs Gold Vs Bitcoin ( Source )

Please Note : 0.0004 USD = 1 Satoshi

In Lightning network and platforms like NOSTR it is possible to transfer values like 10 Satoshi. That level of granularity is not possible in most of the FIAT currency transfer system. Zapping ( Transfering 10 Satoshi or 100 Sats ) instead of liking a post is very common on the upcoming censorship resistant decentralised social media platforms like NOSTR

These transfers can happen from one continent to another at very high speed which is not possible in Gold or FIAT

AmpleForth

Ampleforth is a protocol that aims to create a stablecoin with a unique twist. Unlike traditional stablecoins that are pegged to a fiat currency like the US Dollar, Ampleforth uses an algorithmic approach to achieve price stability. The protocol automatically adjusts the supply of its native token, AMPL, in response to market demand.

In the context of Spot.cash, which is mentioned as an algorithmic flatcoin resistant to inflation, it is a derivative of Ampleforth. Algorithmic flatcoins are designed to maintain price stability through algorithmic mechanisms rather than being pegged to a specific fiat currency. These coins often adjust their supply based on market conditions to keep their value stable.

In summary, Ampleforth and its derivatives, like Spot.cash, represent innovative approaches to stablecoins, exploring alternatives to traditional pegged models like USDT having the requirement of asset backing.

While Bitcoin serves as a valuable store of value on a global scale, its price volatility can present challenges for day-to-day transactions. This is particularly true in regions with high inflation, where local currencies may experience rapid devaluation.

Algorithmic flatcoins like spot.cash are designed to address this issue. By leveraging algorithmic mechanisms to maintain price stability, these flatcoins aim to provide a reliable medium of exchange for everyday transactions. Users in high inflation countries, such as Argentina, can benefit from the stability offered by algorithmic stablecoins when conducting routine purchases, avoiding the volatility associated with other cryptocurrencies like Bitcoin.

The utility of flatcoins in daily commerce showcases the versatility of blockchain technology and decentralized finance (DeFi) solutions, offering alternatives that cater to different needs in various economic environments. As the utilisation of spot increases it is likely to increase the demand for ampleforth leading to expansion of supply of ample in an elastic way and in a way which will benefit the early investors of Ampleforth.

On February 18, 2009 Sepp Hasslberger had posted the following question to Satoshi Nakomoto

It is important that there be a limit in the amount of tokens/coins. But it is also important that this limit be adjustable to take account of how many people adopt the system. If the number of users changes with time, it will also be necessary to change the total amount of coins. Is there a formula to decide on what should be the total amount of tokens, and if so, what is the formula? If there is no formula, who gets to make that decision and based on what criteria will it be made?

Satoshi answered as following

If there was some clever way, or if we wanted to trust someone to actively manage the money supply to peg it to something, the rules could have been programmed for that.

The clever way to determine the value of real world things came into being with Chainlink. Ampleforth team precisely utilised this opportunity to act as a central bank to adjust the money supply as the population of users grows as described by Satoshi. They built one of the most beautiful protocols i have ever came across in crypto. Ampleforth built it in a way that was previously not possible at the time when satoshi proposed bitcoin.

AMPL targets the purchasing power of the 2019 USD. When price is higher than AMPL’s target, the number of AMPL tokens in user wallets automatically increases. When price is lower than AMPL’s target, the number of AMPL tokens in user wallets automatically decreases. And the newly generated supply of AMPL is redistributed across the existing holders thereby reversing the cantillon effect of US dollar but at the same time maintaining the value of 2019 US dollar and beating inflation.

What is Cantillon Effect ?
The Cantillon Effect, named after the 18th-century economist Richard Cantillon, refers to the uneven distribution of new money in an economy and the resulting impact on wealth distribution. The concept suggests that when new money is injected into an economy, it doesn’t spread evenly across all individuals and sectors. Instead, the early recipients of the new money benefit more than those who receive it later or not at all.

Key points of the Cantillon Effect include:

• Unequal Distribution: The effect highlights that the initial recipients of newly created money, often those close to the source of money creation (such as central banks or financial institutions), enjoy increased purchasing power before prices rise. This gives them a benefit in terms of lower prices for goods and services.
• Asset Price Inflation: The Cantillon Effect can lead to inflation in asset prices, such as real estate or financial assets, as the newly created money first enters financial markets.
• Delayed Impact on Consumer Prices: While asset prices may rise quickly, the impact on consumer prices may be delayed. This is because the new money takes time to circulate through the economy, affecting different sectors at varying rates.
• Wealth Inequality: The effect contributes to wealth inequality as those who receive the new money early on can accumulate assets and benefit from price increases, while those who receive it later may face higher prices without the same asset accumulation.
• Economic Distortions: The uneven distribution of new money can lead to economic distortions, misallocations of resources, and inefficiencies in the allocation of capital.

The Cantillon Effect is particularly relevant in the context of monetary policy, central banking, and quantitative easing, where the injection of new money into the financial system can have significant consequences on different segments of the economy. It underscores the importance of understanding how the flow of money affects various economic agents and can contribute to disparities in wealth and economic outcomes.

The Solution — The million Dollar Portfolio for 2023 December

Portfolio 2023

It may be better to buy AMPL ( Ampleforth ) than wrapped AMPL — WAMPL is used in the table for easier calculations of the portfolio growth in a future date.

• Gold, Silver and Bitcoin ETF not recommended.
• Bitcoin should be bought and stored in self custody than depending on any centralised exchanges. Almost all centralised exchanges have shut down at one point or other leading to loss of bitcoins or cryptos held in these exchanges. Most people are not aware about the importance of self custody of bitcoin. The biggest challenge in buying cryptos is proper awareness on how to buy and how to store for long term without losing access or getting hacked.
• Portfolio Reasoning
• Dollar inflation may lead to increase in the price of Gold, Silver, Bitcoin and Ampleforth
• In case of bitcoin private keys getting compromised by any reasons Gold and Silver is likely to compensate for the loss in crypto
• Rate of growth of silver may be around 10 times higher than that of gold as Gold : Silver ratio may tend to 10:1 ( Downside — Silver is less liquid than gold )
• Rate of growth of Bitcoin may be higher than that of Silver and Gold as the market cap of bitcoin compared to that of gold is very low but bitcoin is more portable and more divisible and cannot be counterfeited and much suitable for the internet era than gold to be used as money.
• The market cap of bitcoin may eventually surpass gold for the above mentioned reason
• If dollar undergoes significant inflation then flatcoins that resist inflation like Spot.cash may become widely adopted for day to day transactions in countries with bitcoin adoption like elsalvador, argentina etc as the value of dollar in 2019 is being tracked by SPOT thereby protecting the user from dollar inflation. This may result in increased volumes in spot competing with the stable coins like USDC and USDT and result in higher demand for Ampleforth. The higher the demand for Ample the quantity of Ample keeps growing in the wallet. Rate of growth of ample in wallet may be exponentially higher than that of gold, silver and bitcoin
• Even if the dollar is not headed for inflation the QE measures is likely to push the valuations of crypto higher like that happened in 2020
• TESLA — Optimus Robots , Self driving cars and Artificial intelligence together in one company coupled with the leadership of elon musk and the bitcoin in balance sheet may help tesla to survive any financial crisis
• Microstrategy headed by Michael Saylor is one of the companies having a good number of bitcoin in its balance sheet ( Leveraged buying can become a risk )

The Rise of Algorithmic Companies in Economic Uncertainty

In the ever-evolving landscape of economic challenges, certain types of companies are proving to be remarkably resilient and adaptive. Algorithmic-driven businesses, characterized by flexible and innovative models, are gaining prominence, particularly in the wake of economic downturns. Here are key factors contributing to their success:

• Agility in Demand-Supply Matching: Companies such as Uber and Airbnb, with algorithms optimizing the matching of demand and supply, showcase the power of agile business models. This adaptability ensures efficient operations even in the face of fluctuating demand.
• Low Fixed Expenses, High Resilience : Businesses with minimal fixed expenses emerge as resilient players during economic uncertainties. The ability to scale operations based on actual demand, without being weighed down by fixed costs, provides a significant advantage.
• Freelancer-Centric Models: Platforms embracing freelancers or independent contractors, where payouts are proportional to income, foster a symbiotic relationship. Such models allow for flexible workforce scaling, a crucial aspect during economic challenges.
• Organic Growth Strategies: Companies capable of achieving organic growth through online onboarding, even in economic downturns, position themselves for robust expansion when conditions improve. This adaptability to changing circumstances proves vital for sustained success.
• Cryptocurrency Integration and Innovation: The integration of company-specific cryptocurrencies, exemplified by Telegram’s TON coin, hints at a potential trend. Tech giants like Google may explore proprietary cryptocurrencies, streamlining transactions within their ecosystems and driving innovation.

As economic uncertainties persist, these algorithmic companies not only weather the storm but also pave the way for a new era of business resilience and innovation.

Some Inferences calculations and projections and forecasts based on the above data points

• Run on banks like the twitter fuelled bank runs may force the banks to sell of their bond portfolios at loss leading to collapse of the bank like that happened in Silicon Valley Bank, First Republic Bank etc. Major banks like bank of america is sitting on notional loss of around 130 billion dollar on a total of 650 billion dollar bond portfolio ( Source : Link )

Source Article ( Link )

• Stock markets, banks and most of the assets depending on dollar is at risk if dollar and banks are at risk
• People may want to exit risky assets and take entry into less riskier assets that protects their earnings from inflation ( Gold + Silver + Bitcoin )
• The current dollar denominated debt may have to be revalued in Gold + Silver + Bitcoin + Ampleforth

Source : Link

As per IMF the global debt is around 238 trillion dollars

Total Gold Supply : 208874 tonnes of Gold valued just around 14 trillion USD ( Link )

Total Silver Market Cap : 1.36 trillion ( Link )

Total Bitcoin Market Cap : 833 Billion

Total Ampleforth Market Cap : 100 million ( around )

If there is a dollar hyperinflation then the 238 trillion dollars will have to become equal to the revalued with whatever is going to be used as money after the revaluation ( Gold + Silver + Bitcoin + Ample + Other ) which means that the valuation of all the components will have to go higher in terms of present day dollar

Tentative Projections

The above table assumes that the Total market share of Gold will be 30% of the 238 trillion dollars, Silver will be 23% and Bticoin will be 30% and Ampleforth will be 5%

In that case Gold is likely to grow by a factor of 5 times, while silver might grow 40 times and bitcoin 86 times and ample around 119000 times. This table is purely an assumption.

Some Interesting Charts

Dow to Gold Chart — Last 100 years — Source : macrotrends.net

The Dow to Gold chart provides valuable insights into the relationship between gold and the stock market, particularly the Dow Jones Industrial Average (Dow). The chart reveals distinct cycles tied to interest rate movements.

Analysis:

• Interest Rate Hike Cycle (Up to 1980s): During periods of interest rate hikes, represented up to the 1980s, the Dow experienced downward trends. In contrast, gold prices tended to rise during these cycles, indicating a preference for gold as a store of value when interest rates were on the ascent.
• Rate Reduction Cycle (1980s Onward): The dynamics shifted after the 1980s when the interest rate reduction cycle began. This cycle peaked around the year 2000, leading to a decline in interest rates. During this phase, the Dow saw an upward trajectory, reaching new highs. Note that after 2000 even if the interest rates was coming down Dow did not perform well against gold.

Understanding the Shift:

• Historically, gold has been viewed as a hedge against economic uncertainty and inflation. Therefore, during periods of rising interest rates and economic challenges, investors sought refuge in gold, causing its prices to rise.
• Conversely, in times of economic stability and declining interest rates, investors often favoured equities, contributing to the Dow’s ascent.

The Dow to Gold chart, with its distinct cycles, underscores the dynamic interplay between different asset classes and investor preferences based on economic conditions and interest rate movements. Analysing this chart provides investors with valuable insights into historical trends and potential market shifts.

Dow to Gold chart — 30 years — Source : macrotrends.net

The Dow to Gold ratio chart provides a fascinating perspective on the historical dynamics between the Dow Jones Industrial Average (Dow) and the price of gold. The analysis highlights significant shifts in the relationship, particularly post-2008 and the effects of quantitative easing (QE).

Key Points:

• Pre-2008 Decline and 2008 Financial Crisis: The chart shows a decline in the Dow to Gold ratio leading up to the 2008 financial crisis. Gold gained prominence as a safe-haven asset during times of economic turmoil, causing the Dow to lose ground against gold.
• Post-2008 Recovery and Quantitative Easing: Following the 2008 crisis, quantitative easing measures were implemented to stimulate economic recovery. This led to a recovery in the Dow to Gold ratio, indicating a period of economic stabilisation.
• 2020 and Unprecedented Stimulus: Despite heavy stimulus measures and quantitative easing in 2020, the Dow to Gold ratio did not see a significant uptrend. This observation suggests that Dow is not able to maintain its uptrend and may break down to the 1980 levels leading to an increase in Gold prices or decrease in DOW
• Inflationary Concerns: The analysis suggests that the growth seen in the Dow might be attributed to inflation rather than genuine economic expansion. Inflationary pressures could influence both the Dow and gold, but their divergent trends highlight complexities in the current economic landscape.

Gold Silver Ratio — Last 100 years — macrotrends.net

In this chart u can see that the Historically Gold Silver Ratio tends to go down to the levels near 10 when economy enters receding cycles. Add to this around 10 times more Silver is mined compared to the total mined Gold.

FORECAST : As on today while writing this article, Gold trading at around $2065 USD per ounce and Silver trading at 24.17 USD per ounce — The Gold Silver Ratio is at 85.43). I am forecasting an downward trajectory for Gold Silver Ratio to touch between 10 and 20 which means that the rate of growth of silver in USD terms may be higher than the rate of growth of gold in USD terms.

Bitcoin price in Argentina Peso

The chart illustrates the price of Bitcoin reaching historic highs in countries experiencing high inflation, such as Argentina. This phenomenon suggests that individuals in these nations might become early adopters of Bitcoin, gaining a strategic advantage.

FORECAST : In contrast, people in developed countries could be late to embrace Bitcoin, potentially facing significantly higher prices for acquisition than those in countries grappling with inflation (e.g., Venezuela, Turkey, Argentina).

Countries themselves have a unique strategy to combat inflation. By engaging in Quantitative Easing and allocating a portion of newly issued money into assets like Bitcoin and Ampleforth, they can harness the growth in cryptocurrency assets. This approach may offer a pathway to reducing fiat debt over time. Universal basic income plans may be rolled out for people by doing a QE and utilising that QE money to buy Bitcoin or Ampleforth and the Stimulus checks can be given as bitcoins or ampleforth

Navigating the Economic Landscape: Key Signals to Watch

In the intricate dance of economic indicators, astute observers keep a watchful eye on specific signals that can foretell impending shifts. These signals act as the compass in the stormy seas of financial uncertainties, guiding individuals and organisations alike. Here are some critical signals to be vigilant about:

• SOFR Fluctuations: A spike in the Secured Overnight Financing Rate (SOFR) could signal underlying stress in the financial markets, reflecting potential liquidity concerns.
• Precious Metals Surge: A sudden surge in the prices of precious metals such as gold and silver, surpassing critical thresholds like $2100 per ounce for gold and $30 per ounce for silver, may indicate growing concerns about currency devaluation and economic instability.
• Bitcoin Boom: As the flagship cryptocurrency, Bitcoin, approaches or surpasses $70,000 per Bitcoin, it could signify heightened interest and confidence in decentralised, inflation-resistant assets.
• Wrapped AMPL Dynamics: Watch for movements in Wrapped Ampleforth (WAMPL) prices, especially if they surge beyond $200 per token. This could be indicative of changing trends in algorithmic stablecoins.
• Stock Market Volatility: Panics and sharp fluctuations in the stock market, accompanied by high volatility in Treasury bond markets, may hint at broader economic uncertainties and investor concerns.
• Short Squeeze Scenarios: Keep an eye on potential short squeeze situations in assets like gold and Bitcoin. A sudden surge in demand to cover short positions could lead to rapid price increases.
• Bitcoin On-Chain Activity: Monitor on-chain activity for Bitcoin, particularly the percentage that has not moved from wallets in the last year. A significant proportion remaining static might indicate a long-term investment strategy.
• Bitcoin on Exchanges: The decreasing percentage of Bitcoin on exchanges suggests a shift toward long-term holding strategies, reflecting increased confidence in Bitcoin as a store of value.
• Divergence in Gold Values: A noticeable divergence between the values of physical gold and gold held in Exchange-Traded Funds (ETFs) may signal discrepancies and potential risks in the financial system.
• Logistics of Physical Gold/Silver: Defaults in delivering physical gold or silver, coupled with potential meltdowns of overvalued tech companies, can be critical indicators of systemic stress.
• Institutional and Corporate FOMO: An influx of institutional and corporate interest in Bitcoin can indicate a broader acknowledgment of its role as a hedge against inflation and economic uncertainties.
• Treasury Yield Movements: A sharp increase in Treasury yields, driven by decreased demand, could signal concerns about inflation and impact borrowing costs.
• Bank Stability: Keep a close watch on the stability of major banks, as signs of collapse or distress can have cascading effects on the broader economy.

As we navigate through these signals, each holds a piece of the puzzle, contributing to a comprehensive understanding of the economic landscape and the potential challenges and opportunities that lie ahead.

Inspire the author to write more articles by donating in bitcoin or ether

Bitcoin Address : 1EfioCrmSy9CxTqjednPuXQRmeQpHdUpXg

Ether Address : 0x486A9350B574FFf0C4300c9D73e34Ef6Edd26c5D

For Queries Connect with the author : https://x.com/cryptofolyo ( DM on X )

Nothing in this document may be regarded as monetary advice. The author is simply sharing some facts and figures and opinions.