• Podcast

    Inflation Or Deflation? Here’s How It Will All End

    Market researcher Luke Gromen is confident he has the answer
    by Adam Taggart

    Friday, March 5, 2021, 9:29 AM

Highly-respected market researcher Luke Gromen concludes that we’re living in a unique period of history given that we currently facing three massive threats:

  • the first bursting global sovereign debt bubble in over 100 years
  • the first time in 50+ years that foreign central banks are no longer financing the US economy (i.e., they have stopped growing their holdings of US Treasurys)
  • the US’ long-standing “petrodollar” advantage is eroding as other countries increasingly strike deals to trade key commodities in non-USD currencies

As these challenges mount, how will they resolve?

Will increasing weakness cause defaults on the debts that can’t be serviced? (“deflation”) Or will the central planners “do whatever it takes” to keep the economy alive, printing ever-more currency to nominally meet debt payments and support asset prices? (“inflation”)

Like other recent guest experts like Grant Williams, Jesse Felder, and Jim Bianco, Luke calculates inflation appears bar far to be the likelier outcome. Though he presents his own unique and compelling rationale for why.

That said, he remains very wary of today’s drastically deformed market (over)valuations, and doesn’t discount that one or a series of major downward market corrections — like the 65-85% correction predicted later this summer by recent guest expert David Hunter — may happen along the longer path of rising inflation.

Which is why Luke agrees that now, more than ever, is the time to partner with a financial advisor who understands the nature of the risks and opportunities in play, can craft an appropriate portfolio strategy for you given your needs, and apply sound risk management protection where appropriate:

Anyone interested in scheduling a free consultation and portfolio review with Mike Preston and John Llodra and their team at New Harbor Financial can do so by clicking here.

And if you’re one of the many readers brand new to Peak Prosperity over the past few months, we strongly urge you get your financial situation in order in parallel with your ongoing physical resilience preparations.

We recommend you do so in partnership with a professional financial advisor who understands the macro risks to the market that we discuss on this website. If you’ve already got one, great.

But if not, consider talking to the team at New Harbor. We’ve set up this ‘free consultation’ relationship with them to help folks exactly like you.

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58 Comments

  • Fri, Mar 05, 2021 - 12:53pm

    #1
    brushhog

    brushhog

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    Joined: Oct 06 2015

    Posts: 543

    7

    Interesting interview

    The trouble I run into with the inflation scenario is that I just cant see inflation running very far. How much debt is out there? How many jobs are service jobs in nonessential industries?

    So when prices go up people's money doesnt go as far right? As the cost of living gets higher and higher, people will have to cut back on nonessentials. Thats means unemployment goes up, that means people default on their debts. How high can the price of a house go? There are real world limits and the amount of personal debt out there must tether the reach of inflation to some extent.

    I really do feel like the number of variables make prediction impossible. Like Luke said , those in Weimar Germany who owned gold lost their wealth 5x. The tectonic shifts of the massive forces at play make investing for the little guy a crap shoot at BEST. The mark at a rigged table run by Don Corleone more like....although to be fair to Don Corleone he never proposed to have everybody "own nothing and be happy".

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  • Fri, Mar 05, 2021 - 4:26pm

    #2

    sand_puppy

    Status: Platinum Member

    Joined: Apr 13 2011

    Posts: 2808

    3

    Like to Recommend Interview by Saifadeen Ammous on BTC

    Recommended several times by MM, Ammous is the author of the book, The Bitcoin Standard.  A big name writer and thinker in the bitcoin community.  Very easy to understand and interesting for me.

    Starts at the 3 minute mark

    This is a very articulate explanation on the function of money and the way that bitcoin fills several of the roles of "money" better than anything else we have.

    1.  Bitcoin is "the hardest money" we have ever had, in that nobody can create more of it at will.  It cannot be inflated.   This had a profound effect on the desire and capacity to save and be sure that one's money in the future will hold value.  Gold is a close second increasing at only 1.5%/year.  The value of a hard money rises with time.  (Money moves to the soundest form it can find.  People are discovering bitcoin stores value better than their current "money" and are moving their stored value over to the "harder" money.  Increasing numbers of people concerned with storing the value of their life work in a hard currency drives up the price of the harder money relative to the other.)  Examples from Switzerland and history where citizen savings rates correlated with the hardness of their currency.  More savings.  Less debt.

    2.  International and long distance transfer of value.  BTC excels in the role as a means to transfer value across distance and borders.  Settlement is completed within the hour, not in 7-10 days.  This is the first, outside-the-banking-system way to send value internationally.

    3.  Greatly limits the use of monetary policy as a tool for political power.  It is not dependent on central banks, anywhere.  It does not use or depend on any bank or institution.

    4.  Bitcoin at this point is a better store of value than a payment system.  Bitcoin  transactions remain steady at 500,000/day.  The value of the average transaction is growing larger with time.  Small payments (like a latte at Starbucks) will not use the block chain primary layer.  But secondary layers for small transactions will eventually be built.

    5.  Austrian school:  Easy money is simply central banks planning the economy.  --something that always fails eventually.  Easy money and interest rate manipulation are the reasons for the business cycles, recessions and inflations.  Hard money is the solution to the business cycle.  Example from Switzerland.

    7.  Bitcoin offers a way out of the "tower of babel" that is the foreign exchange market.  Fluctuations in currency prices are more important to companies than business fundamentals.  Fx is about 1,800 Trillion, 25x global GDP!  (lots of money changing going on!)   Previously a gold standard offered a global neutral money.  But this was un-invented in the 20th century.  [SP example-A company in Argentina gets a loan in US dollars, builds a factory, makes widgets and sells them locally for Argentine pesos.  Then it makes payments on its loan in US Dollars.  A fluctuation in the ARS-USD exchange rate is a bigger deal for the company than optimizing production costs, boosting sales or other business fundamental considerations.]

    Summary:

    Bitcoin is a technological and apolitical solution to 2 problems

    1.  international value transfer

    2.  savings

    His book is available in 24 languages.

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  • Fri, Mar 05, 2021 - 4:57pm

    Mots

    Mots

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    1

    "Small payments (like a latte at Starbucks) will not use the block chain primary layer. But secondary layers for small transactions will eventually be built."

    Thank you Sand Puppy
    Your summary reveals an important detail that addresses the biggest problem with bitcoin (it costs about 37$ in energy per transaction (divide the energy cost last year (not to mention computer infrastructure) by 500,000 transactions to get this figure), and this energy cost will only increase with time). I dont think that the brick and mortar old banks required this much overhead per transaction but would like to be informed by new info.  Many people believe that energy is an extremely important factor in human civilization and that we need more energy efficient life, not higher energy consumption.  How bitcoin will do this by evolving should be a major discussion.  I am glad to see this in your summary.

    ”Small payments (like a latte at Starbucks) will not use the block chain primary layer.  But secondary layers for small transactions will eventually be built.”

    So, we can actually use the bitcoin system to efficiently replace money for all transactions and not just as an investment vehicle and economical transfer vehicle for large sums, while relying on new "investors" in bitcoin to pay the enormous energy costs.

    I would love to see what shape those secondary layers will take.  Many improved versions of cryptos have been invented since Bitcoin was first invented more than 12 years ago.  This summary indicates that Bitcoin itself will evolve into something that uses less energy. I cant wait to read more about this. As much as we love and need Bitcoin, energy is still the most important driving force in civilization and sooner or later the bitcoin-energy issue will be tackled.

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  • Fri, Mar 05, 2021 - 5:30pm

    #4

    sand_puppy

    Status: Platinum Member

    Joined: Apr 13 2011

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    0

    Secondary layers on the BTC network

    I have heard VTGothic and MM mention these.  I would love to learn more about them too.  Maybe we can elicit a treatise on the topic by VTGothic if we show our interest and ask very nicely.  🙂  His greenhouse is still buried under the Vermont Snow Drifts and he doesn't have anything else to do today.

    Jack Maller's company Zap, has a beta release app called Strike, which uses a secondary layer to make frequent small transactions possible over the Bitcoin network.  Strike can convert funds in a local currency to satoshis (BTC), transmit the satoshis across thousands of miles and national borders, and then sell the satoshis back into  into the local currency for delivery.  All for very little cost.

    I would love to have our BTC Gurus explain this better.  This system is getting ready to handle the many small transactions that "money" needs to be able to manage.

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  • Fri, Mar 05, 2021 - 6:38pm

    Mohammed Mast

    Mohammed Mast

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    2

    sp

    i do not and have not used the lightning network. but in general it is a layer on top of the bitcoin blockchain. it is not a blockchain in and of itself. btw it functions on the litecoin blockchain as well. it is a network. my first go to for questions about bitcoin is andreas antonopolous. the following is a video of a simple explanation.

    for a technical explanation the following video takes a technical deep dive. this is good for dave and will keep him out of trouble for a few minutes.

    then there is this one where antonop explains some features

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  • Fri, Mar 05, 2021 - 7:36pm

    Mohammed Mast

    Mohammed Mast

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    hi mots

    please provide data to back up your assertion that btc transactions cost $37.

    that does not correspond to the latest data i have

    https://ycharts.com/indicators/bitcoin_average_transaction_fee#:~:text=Average%20Bitcoin%20transaction%20fees%20can,from%200.6012%20one%20year%20ago.

    transaction fees in btc are not static they change based on the congestion of the network and are determined in a free market process where someone can choose a regular fee or a custom fee which will process more quickly for a higher cost. one can also specify no fee. these will take longer because the bitcoin protocol is capitalism in action. miners make money by mining new blocks of btc . currently that is 6.25 btc every 10 minutes or 900 btc per day.

    https://support.blockchain.com/hc/en-us/articles/360000939883-Explaining-bitcoin-transaction-fees

    as there are fewer blocks being mined miners make more of their income from fees. miners provide the service of making the bitcoin blockchain the most secure network  on the planet.

    How Bitcoin Transaction Fees Are Determined

    of course the big fud that the media loves is the amount of energy the bitcoin network uses. of course it gets regurgitated here on pp ad infinitum.

    the following are two articles which present a more accurate picture of electric usage. there is an estimate that bitcoin miners use 74% renewable energy. electricity of course is the largest portion of a miners overhead. for that reason miners are constantly searching for the cheapest electricity available. there are large plants that produce more than can  be consumed, this is called orphan energy. miners negotiate with producers to buy this electricity that would other wise be wasted. no one is being deprived of electricity and no one is paying more for electricity because of btc. miners are now utilizing gas that is being flared.

    clearly there are some people here who are very knowledgeable about electricity. perhaps instead of railing against btc they could do something productive to help provide electricity for the only sound money on the planet, that is uncensorable, democratic , decentralized, immutable and brings financial stability to many people around the world. i guess it's just me but it seems more worthwhile than trying to tear it down w/o providing something near as good.

    https://blog.trezor.io/three-myths-about-bitcoins-energy-consumption-ef613a1f3d5

    nic carter with the last word on btc energy consumption

    https://www.coindesk.com/the-last-word-on-bitcoins-energy-consumption

     

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  • Fri, Mar 05, 2021 - 9:50pm

    #7
    MKI

    MKI

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    3

    Gromen = Whale

    I'm so impressed you landed Gromen! Very very impressive.

    Every time I have been wrong economically (and that's...ahem...a lot!), Gromen has been right. But I don't feel bad, because even Hugh Hendry has said the same. I haven't yet listened to the podcast but it's next up for me, and I'll hang on every word, and will sure have a lot to say afterwards! In the meantime Adam. thank you very much for pulling this guest.

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  • Sat, Mar 06, 2021 - 3:08am

    VTGothic

    VTGothic

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    Hugh Hendry v. Luke Gromen

    @MKI,

    Hendry is wrong about a lot of things. About most things, actually, which is why his hedge fund died after some early success. His incarnation of "even a broken clock is right twice a day" occurred very early in his hedge fund career. The rest was almost all wrong. I don't listen to him at all - even his interviews since Raoul Pal resurrected him a year or so ago trend toward incoherent abstraction as if he likes playing with ideas more than putting his candle down. And when he does put his candle down he places it incorrectly. I've come away thinking he really doesn't understand first principles at all; that he's so open-minded he's finally empty.

    Luke Gromen, on the other hand, is well worth listening to, and not just because he's bullish Bitcoin. He's bullish Bitcoin because he does understand first principles.

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  • Sat, Mar 06, 2021 - 3:18am

    VTGothic

    VTGothic

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    Posts: 647

    1

    Bitcoin's Energy Use

    Mohammed, I think Mots is factoring in what he has read is the cost of the energy used to run the computer network overall (miners and node operators), not the tariff on each transaction. Problem is, the energy consumption touted by mainstream media and arrived at by "consensus" of mainstream analysts is wrong in at least 2 directions: (1) it uses the average global market rate for commercial energy produced by carbon-centric energy plants; and, (2) it usually includes a comparison to the global fiat system in which only a minor portion of the fiat monetary system's energy use is recognized or accounted for - because most of the energy consumption required to mine, purify, shape, and distribute a fiat coin, or source a fiat dollar is hidden. No one knows how much we spend in that endeavor, either in dollars or in carbon footprint. Nor do we know how much in dollars or carbon is spent on the digital side of fiat coinage; and no one thinks about the fact that bitcoin isn't just competing against one nation's fiat coinage cost, but against the entire globe's fiat regimes, including people and their costs to get to work each day and occupy buildings and plants and mines or lumber mills. It really isn't necessary to add all of that up to realize - when we pause and think about it - that a single wholly-electronic money  for the world is far, far less costly in both dollar terms and carbon footprint than what we have embedded into the global monetary networks' fiat system.

    @Mots,

    I have addressed the energy issue more than once. Most recently just this past week when I took exception to the Bloomberg hit piece in the March 1 Daily Digest. I'll quote myself:

    We know a great deal about the energy bitcoin uses. We know, for example, that the bitcoin system's energy usage is typically compared to a only a segment of the energy used to run the fiat system of any one government (let alone the entire global, interconnected system of fiat monetary systems). That's a false comparison that underestimates what it costs to run just the US financial system - which necessarily includes the cost of the tens of thousands of local banks we all depend upon, and which are obviated by bitcoin, plus the mining, manufacturing, printing, and distribution of coinage, the operating of credit card networks and underlying companies, the SWIFT and ACH systems, and on and on. I doubt you need to add it all up to grok the real comparison (reference).

    We also know that bitcoin mining operations are mobile, now often set up in cargo containers so that they can be moved seasonally to take advantage of the cheapest sources of energy. Increasingly, bitcoin mining is taking place at the sources of energy production, where it can take advantage of what would otherwise be wasted energy production. For example, gasses that are otherwise flared into the atmosphere at a complete waste to the economy are now being captured at their sources and deployed into producing bitcoin. Similarly, excess energy produced by hydro power plants is being diverted to bitcoin mining (in China, rigs are moved seasonally to take advantage of the seasonal changes in hydro waste energy availability on the one hand, and either conventional energy, or renewable energy like solar on the other). In reality, such projects don't consume additional energy, but better utilize stranded energy and convert wastage into income for energy companies, local economies, and the national treasuries that tax energy companies. The development is still uneven, but the trend is clear: some operations are 76% clean energy, and the overall global mining community is now sourcing about 39% of its energy from renewables (source). See also, “Green Innovation in Bitcoin Mining.”

    To the extent bitcoin mining utilizes stranded energy it actually doesn't add anything to the energy consumption of the planet; it just virtuously improves on humankind's use of energy we're already producing at a cost to the environment. No fiat banking system has even thought about employing similar strategies because fiat banking is ultimately underwritten by taxes extracted from citizens' pockets. Bitcoin mining, on the other hand, is a fully and truly free market competition; therefore, miners are motivated to find the most inexpensive and most efficient means of mining. That leads them to innovate in resource utilization; they negotiate lower than market fees to use up stranded resources; but also can be idled when mainline energy needs spike.

    Competition also leads miners to pursue and drive innovation in computer chip design. As a result of that, recent generation ASICs oriented toward bitcoin mining are operating at higher speeds on lower energy and with less heat loss (thus less direct energy loss, and less demand for ancillary cooling systems with their energy demands). As a side benefit, those targeted improvements will find their way into our computers, driving our energy demand down as performance rises - in the same way that race car innovation has provided many improvements to street vehicles, and the space race gave us ballpoint pens and Tang.

    Comment #12, here.

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  • Sat, Mar 06, 2021 - 4:21am

    VTGothic

    VTGothic

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    Joined: Jan 05 2020

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    2

    Re: Bitcoin Layers and the Strike app

    @Sand_puppy,

    Regarding "secondary layers" on Bitcoin. You're comment is actually indicating tertiary layers, per this brief explanation: Beginner's Guide to Blockchain Layers.

    By that etiology, the Lightning Network is a secondary layer. It is an application built on the bitcoin blockchain that can be used by tertiary programs directed at providing solutions to particular problems.

    The Strike app is an example of a tertiary solution. Its purpose is to facilitate instant, free micro-payments. Strike is a program that connects banks, payment rails (Visa is their team partner), and crypto exchanges across the globe to allow payments from one country to another, and from any one currency (including bitcoin) to any other while in instant transit.

    Strike operates on the Lightning Network; the Lightning Network is an application that aggregates many small payments into one larger bundle and then inserts that bundle into the bitcoin blockchain as one transaction. As a result, many micro transactions (many Strike micro-payments, for example) can be conducted each second and be accumulated into one Lightning bundle. The final resolution of those payments takes place when that bundle of transactions is entered into a bitcoin block at the next 10-minute interval. It then becomes a part of the immutable permanent record that can be reverse traced (audited or validated) from the block location back into the bundle of micro transactions to any original transaction. This 10-minute settlement is much faster than your typical SWIFT 3-5 day, or even Visa Card 30-90 day settlement. (The blockchain settlement is actually closer to an hour on average because a blockchain entry is not considered absolutely settled until it has been locked into place by at least 6 subsequent 10-minute-interval block validations.)

    What the Strike app actually does is to take any input fiat payment (from a bank account, credit or debit card, or even an ATM machine), instantly translate it into bitcoin, shoot the bitcoin to the destination, convert it to the chosen output currency's valuation of that bitcoin (through a regional exchange partner), and deposit it into the destination wallet or bank account. Similarly, any fiat can be input into Strike, get converted to bitcoin (via a partner exchange), and be deposited into a destination wallet. Strike's founder/developer, Jack Mallers, anticipates soon being able to convert any cryptocurrency into any other, too, by passing them through their BTC valuations.

    Strike is a first-of-kind, and demonstrates that anything can be done on the bitcoin protocol that is proposed for Ethereum and other solutions-oriented cryptocurrency or blockchain projects. It's brand new; in a short while it will expand upon its own success, and other entrepreneurs will follow with their own solution-level projects.

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  • Sat, Mar 06, 2021 - 6:18am

    #11

    sand_puppy

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    Strike—gateway to lots of micro payments?

    A couple of questions.

    would Strike be an application that would let a user make multiple small micropayments—say on a shopping trip to the mall?

    We have heard a great deal about the security of the base layer, Bitcoin.  Can the Strike/Lightening network be secured well, also.

     

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  • Sat, Mar 06, 2021 - 11:35am

    #12
    PreCambrian

    PreCambrian

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    4

    Luke Gromen

    The Luke Gromen interview was amazing.  I liked his facts and reasoning.  I definitely didn't take that he said to be out of the market.  He said to be solvent longer than the government, about 3 months!  Very unsettling to have to worry about political/economic actions which we can't control and a future of high inflation. His stock sector picks were commodity companies, industrials, technology, etc.  There are still some fairly valued and undervalued (sometimes I would go for only slightly overvalued) companies out there.  There are good REITs without much debt paying 4-7%.  I definitely wouldn't go all in but I wouldn't be 100% cash.  Too much chance of seeing it all inflate away.  Pick companies that aren't too highly levered so that they can withstand a downturn.

    I agree that the Fed can't prevent all crashes but I have never seen the Fed act like it has now.  So I am going to look at a 30% allocation (of liquid assets) to stocks as a hedge against inflation also.

    Stephanie Pomboy was great also.  She had good facts and figures to support her arguments.

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  • Sat, Mar 06, 2021 - 1:21pm

    #13
    Mohammed Mast

    Mohammed Mast

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    2

    btc for latte

    you can add as many layers as you like to the btc blockchain. i will not spend it in my lifetime. a $5 latte today purchased with $5 worth of btc is spending what in 4 years be worth $50.

    however i would gladly spend my dogecoin for a latte

    btc will be a store of value and a settlement system for the very long foreseeable future if the stock to flow model doesn't have holes in it

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  • Sat, Mar 06, 2021 - 3:58pm

    ohhtay

    ohhtay

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    ohhtay said:

    Look at DBC.

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  • Sat, Mar 06, 2021 - 8:43pm

    #15
    MKI

    MKI

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    3

    Perfect interview

    I've listened to every Gromen interview out there, and Adam, this was like squeezing an orange dry! I'm going to listen to it even once more before I comment on details, but wow, what a tour de force. I thought I knew every shade and turn of Groman's philosophy, but it's pretty clear he thinks we are very near the end. Time to tighten up stop losses and increase the gold %.

    One of Gromen's classic lines is how he prefers gold to silver (or BTC). Why? Central banks don't buy silver (or BTC). This is gonna be a wild ride...

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  • Sun, Mar 07, 2021 - 4:56am

    #16
    robie robinson

    robie robinson

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    Posts: 1154

    2

    trans

    cript?

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  • Sun, Mar 07, 2021 - 7:14am

    garvanitis888@gmail.com

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    I believe he said that those who were leveraged gold lost their money, not those who owned gold.

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  • Sun, Mar 07, 2021 - 7:27am

    brushhog

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    brushhog said:

    I think you are right about that garvantitis. Though the point being that gold went up and down quite a bit for ten long years until it finally ended high.

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  • Sun, Mar 07, 2021 - 10:21am

    #19

    travissidelinger

    Status: Member

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    1

    Great discussion!

    This was good.  Thank you Adam.

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  • Sun, Mar 07, 2021 - 3:40pm

    #20
    Rick

    Rick

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    Gold in Germany, BTC and LODE silver/gold digital coins

    I shared this interview  around - I have listened to hundreds of financial podcasts - this is one of the bests. I listened to pieces of it multiple times and may listen to the entire one again.

     

    Sandpuppy - i want to read the info you shared here on BTC. I have .267 BTC so just a little incase it goes to a million but I have a hard time fully understanding BTC backed by air - IO guess because I am old I am drawn to gold and silver.

    Bushhog - He did say folks who leveraged gold in the depreciating currency lost money - I wish I understood that idea better. Think he was saying do not use leverage. Seems if you borrowed money when inflation was taking off one would pay it back easier.

    Digital Silver and gold using LODE.one AGX AUX coins is going to be a big deal. Carry silver on your mobile phone anywhere in world. Buy it when physical hard to get or high costs due to premiums and taxes. I recently bought a little digital gold and silver on my phone and signed up for the LODE debit card. I want to keep up with technology and be in a position to buy more to complement/diversify from: physical, miners, PSLV

    check  out LODE's progress (much has happened in last few weeks and will in the next few) - lots of detail business plans and strategy documents

    https://members.lode.one/register/joinwith/2768776680/link

     

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  • Sun, Mar 07, 2021 - 5:06pm

    Mohammed Mast

    Mohammed Mast

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    1

    sorry rick

    btc is not backed by air . it is backed by the strongest most powerful computer network the planet has ever seen. it is backed by thousands of miners and people running nodes. it is in fact the soundest money ever created on planet earth.

    gold has value simply because people say it has value. most of those people use it for jewelry. as a matter of fact 78% of  gold usage is jewelry. as a store of value in the last 10 years it is about on par with a savings account.

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  • Sun, Mar 07, 2021 - 5:15pm

    #22
    Mohammed Mast

    Mohammed Mast

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    awesome interview

    i usually don't pay too much attention to these interviews since i am not interested in the stock market and i keep up with macro trends daily on real vision. but this was completely different.

    what i found really entertaining was the dismay written all over adam taggart's face when luke said how much he allocated to bitcoin. adam taggart's response was classic pp. "well what do you see as the risks"? it was like the dismal btc 101 interview with alex saunders. which was anything but btc 101.

    the circuits were certainly blown when luke gromen a very well respected financial analyst said he is into bitcoin. thoroughly enjoyed it and am going to watch it again

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  • Sun, Mar 07, 2021 - 5:40pm

    #23
    cgarcia

    cgarcia

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    2

    Both inflation and deflation

    IMO we'll see a combination of both inflation and deflation:

     

    Raging inflation for food.

    Moderate inflation for medical supplies, basic meds, generators, guns and ammo, workhorse cars and trucks.

    Deflation for everything else like real state, wages, luxury items.

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  • Sun, Mar 07, 2021 - 7:36pm

    Adam Taggart

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    12

    Boy, you are way off the mark

    MM -

    Boy, you really misread me.

    You have a long-standing habit of stating your assumptions as truth that can come off as quite condescending.

    I've been so busy lately that I haven't stepped in to deliver this feedback earlier. But now that it's on my radar, please review our Site Posting Guidelines & Rules to refresh yourself with the expected etiquette here -- not just towards me, but to all PP.com commenters.

    If you don't adjust, moderation will be the next step.

    As an FYI, there were zero "blown circuits" because an important part of the reason I asked Luke to come on the show is BECAUSE he favors Bitcoin. A number of viewers wanted to hear his rationale for owning it.

    I had planned to get to the topic sooner in the interview, but Luke was delivering such great answers I didn't want to shortchange the conversation.

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  • Sun, Mar 07, 2021 - 9:30pm

    MKI

    MKI

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    Posts: 350

    6

    I didn't want to shortchange the conversation

    AT: I had planned to get to the topic sooner in the interview, but Luke was delivering such great answers I didn't want to shortchange the conversation.

    That was a dang good interview job, no BS. Luke was indeed "delivering"; I haven't seen all of Luke's work, but I've never seen his thoughts BTC so clearly expressed as you pried out of him here.

    My fear about BTC? Even if it displaces gold through time (to date it's basically 10 years vs 1,000+ years for gold, no competition) it faces a 3-way risk: 1. A better-designed crypto could displace it, 2. The nation states/central banks could unify to outlaw/attack it esp if it becomes a real risk, 3. the currency collapse we face may cause central banks to create a shortage of gold while BTC languishes in comparison as the banks ignore it. IOW, it could go the way of GameStop, while gold may see its biggest gains ever.

    Luke humbly says the "technologists" think #1 won't happen, but #2 & #3 he just ignored so it's safe to say he's simply too intelligent to take a position on something so uncertain. But he gave a clear enough answer to infer a position so I call it a win for you. Thanks again for this interview.

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  • Mon, Mar 08, 2021 - 3:23am

    #26
    brushhog

    brushhog

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    Joined: Oct 06 2015

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    6

    brushhog said:

    Adam - Thank you. Ive been waiting for somebody to throw a rope around that steer.

    MKI - Good point about the risks. I would add one risk for BTC being that it very well might be a conditioning mechanism to get people used to digital currency. When its fully accepted the government and the fed will move out from behind the scenes and take hold of it.

    My main objection to bitcoin? Its too volatile. Moreover, right now its on the high end of its volatility curve. If there was a time to invest in Bitcoin, you missed it. Remember the golden rule; buy low sell high. Its simple but almost nobody does it Fear Of Missing Out [ FOMO ] rules the decisions of most investors.

    Bitcoin is a highly speculative, highly volatile gamble. It is the purest game of 'greater fool'. And right now strikes me as the worst time to buy in...when everybody is talking about it, when its advocates have reached peak obnoxiousness. No way. If I had any now Id be selling. Talk to me about bitcoin at the beginning of the next cycle when the talk has quieted down and its advocates have been humbled.

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  • Mon, Mar 08, 2021 - 4:54am

    VTGothic

    VTGothic

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    We are here: BTC cycle

    @brushhog, regarding bitcoin: We are here on 03.07.21 compared to previous 2 cycles. Worst case, about 1/2 of the way to the top in this cycle. Low end high this time: $100,000. Very possibly almost thrice that ($288,000).

    Retail has only been on-scene in any numbers for 2 months. They're just building momentum. The new participation so far has been institutional, and they're not playing hit-and-run, they're buying as a hedge on the increasingly fragile dollar. More institutions will come in over the next 2 quarters now that the market cap is at the trillion dollar level, and right as supply becomes critically short, so "number go up."

    Most newly purchased coins are going into off-chain wallets - that's institutions holding for the long term, not traders prepared for a quick exit, nor under-informed retail gamblers who barely understand wallets.

    The peak for this cycle will come in late fall to early winter: between October and January. With all the institutional demand, which will grow over the next couple years, it's increasingly likely the next pull-back will not be 60-80% as in the past, but in the 30-40% range, with a much faster rebound. Some analysts wonder if this is the last cycle - meaning the demand will keep the price climbing with no more setbacks than the 20-30% consolidation and sideways chop that we've been experiencing these last few weeks. That's just about over, now.

    Consolidation is a good thing, of course: shakes out the weak hands, reduces available trading supply, and sets the base for the next leg up.

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  • Mon, Mar 08, 2021 - 5:28am

    brushhog

    brushhog

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    brushhog said:

    Very interesting, thank you.

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  • Mon, Mar 08, 2021 - 6:37am

    dreinmund

    dreinmund

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    3

    BTC backed by energy or air ?

    btc is not backed by air . it is backed by the strongest most powerful computer network the planet has ever seen. it is backed by thousands of miners and people running nodes.”

    I think this assessment needs some clarification / correction.

    BTC is not “backed” by computers or energy in the traditional sense / definition of the word. “Backing” implies a reserve set aside, amd often available for redemption. That’s not the case for BTC, since I can not “redeem” BTC for the underlying energy / computing power. (That’s part of my gripes with BTC evangelists - they frequently change the meaning of words or apply a new definition, all of which makes things seem very legit, but it’s actually blurring the lines.)

    IMO, the correct way to state this is that BTC was created by and is maintained / upheld by computing power and energy. That is NOT to say BTC could not exist w/o. BTC can be stored in a cold wallet, not needing any energy. The energy / computing power is needed once a transaction is supposed to take place. The computing ensures legitimacy of the blockchain and its underlying BTC value.

    Interestingly, this is not unlike gold. You can compare this to assaying gold bars. There is a cost involved in that. What makes the gold vs. BTC comparison fascinating is that the cost for assaying BTC is fixed (regardless of underlying BTC amount). With gold, one would not assay smaller forms of gold (like well recognized coins), because these are specifically created to be easily recognizable and evaluated (weight, size, density). Simple tools can do that for almost no cost. (and I have never heard of a tungsten filled gold eagle). However, for larger gold amounts good delivery bars), that cost can be quite high.

    That’s one of the reasons why BTC will less likely to be a “transaction digital currency”, but rather a digital reserve asset.

     

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  • Mon, Mar 08, 2021 - 7:04am

    #30
    Hans

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    7

    Paradigm "Now" and paradigm "then"

    When I think about resiliance, I have a certain image in mind how to become resiliant. More locally. Less complicated. Less dependend on large systems. Less dependend on technology. Consuming way, way less energy. Using simpler technology. Short supply chains. Grow your own food. Back to basics. Barter and trade in precious metals.

    That image has nothing to do with romance or a nostalgic longing to the good-old-days. This image I have because the collapse of Environment, Energy and thus Economy which are forcing us to it. Of course we will have high-tech available but when electricity costs $90, mommy will not allow little price or princess to go on the Internet to play an online game or check Facebook every 30 seconds.

    When I look at the podcasts of Adam about financial resiliancy I always have the idea that this has one leg in the "now"-paradigm and one leg in the "then"-paradigm. Crypto's are, in my opinion, part of the "now"-paradigm, like Amazon, Facebook, Netflix, McDonalds.

    When the big hit comes. When we have to cut energy-consumption to 10%, this will shake the tree very, very hard. The bigger the bullshit, the sooner it will fall on the ground. Tesla going first, Apple going next. In the end only the most necessary will survive.

     

     

     

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  • Mon, Mar 08, 2021 - 7:06am

    Mohammed Mast

    Mohammed Mast

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    gold lol

    well well i knew a " correction" would be coming forthwith. i'm psychic that way.

    actually the market is flooded with fake gold coins. mostly they come from china. i was first made aware of this back in 07 when i loaded up. in anticipation of the meltdown.

    https://www.coinscarats.com/post/fake-gold-silver-coins-online

    https://www.nbcnews.com/business/business-news/glitters-not-gold-fake-gold-silver-coins-flooding-market-n591201

    bitcoin cannot be counterfeited. big difference and valuable difference between analog, traditional gold and digital gold.

    so you might end up with something "tangible" but worthless.

    you pays your money and you takes you chances.

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  • Mon, Mar 08, 2021 - 7:11am

    #32

    sand_puppy

    Status: Platinum Member

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    1

    Valuing BTC: Money is a symbol, not a "thing"

    I believe that there are 2 underlying assumption that causes trouble with bitcoin in us older folks.  The first is that we think of bitcoin as a thing and apply value metrics useful with things to it.

    We are used to valuing things:  used cars, jewelry, winter coats, stock, houses, land etc.  What is that thing worth?

    But money has no use as a thing.  It is only a symbolic representation that can be used to facilitate trade of actual things.  Consider glass beads, marks on a ledger, Ones and Zeros in a bank's computer archives.  In themselves not worth much.

    Consider this thing.

    And compare it to this thing.

    As things they are nearly identical.  6.14 inches x 2.6 inches, heavy paper, ornate and complex green ink, a picture of a president....

    If you carefully compared these pieces of paper and attempted to value them as things using conventional metrics a terrible error would occur.

    Their value comes from the role that they can play in human commerce.  A role given to them by their symbolic value.

    The value of money only exists in the symbolic realm.

    ----------------

    The second source of confusion is the comparison of the price trajectory of an  immature form of money with a mature form.

    Immature forms still have people coming to recognize their advantage and converting funds into the newer form.  This causes a price rises.  Upon maturity, the price of the new superior form of money should become stable, level and show little volatility.

    This rising price is confused with the rapidly rising price of a stock or a beloved flower bulb.  There is a failure to recognize that many have caught on to the true value potential of the new money and are buying in.  A revolution in the way of doing things is happening.

    Consider a metaphorical example.

    In a small town everyone tills the soil by hand.  They have always done it this way.  One day a traveler comes through with a horse and improvises a harness and plow.  He shows them how he tills a field with his plow.  After a period of suspicion and rejection, the towns people realize the value of the horse plow and pile in buying up horses and plow making supplies causing the prices to rise rapidly.

    If you were to look at the rise in prices alone, it would be possible to mistake the rising horse prices as "a speculative bubble" in this "newfangled contraption."

    But this would be inaccurate.  The price rise was driven by true utility.  A true revolution in farming technique was occurring.

    I want to clearly acknowledge that there are risks to bitcoin.  This has been mentioned may many smart and respected PPers.

    That is the reason that only 25% of my savings, not 100%, is in this form of money.

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  • Mon, Mar 08, 2021 - 7:18am

    dreinmund

    dreinmund

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    3

    Fake gold coins

    Which of the above coins is real? It can be extremely hard to tell, especially when the weights and dimensions of the coins are identical. ” (Quoted from MM link)

    Well, that’s nonsense - weight and dimensions can’t be identical - gold has a very specific (and high) density.
    Average Joe wouldn’t know the difference, but avg. Joe would get duped on crypto as well.

    You always need to be knowledgeable in the subject matter you are investing in, or pay a premium to have a trusted party do it for you.

     

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  • Mon, Mar 08, 2021 - 8:10am

    Rick

    Rick

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    Rick said:

    Sandpuppy continue to appreciate your thoughtful contributions.

    IMHO 25% is a lot in anything these days especially something so new and limited (in adoption) like BTC. Of course if you are correct re BTC you will be one happy guy one day.  Diversification in non fiat based (ALT) investments makes a lot of sense and would seem to be necessary seeing we have NO idea what bad things are coming our way Except there are bad unintended consequences for all the economic bad behavior.

    I do have a little bit of BTC safely tucked away on a hard wallet  and hope it does go to a million $$ - then I will wish I had 25% LOL. When BTC increases in value I sure hope to see all different types of gold and silver options also increasing including digital gold and silver for many of the same reasons you reference for BTC.

    Good luck to us all

    rick

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  • Mon, Mar 08, 2021 - 8:27am

    Mohammed Mast

    Mohammed Mast

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    adam

    my assumptions about your stance and the general pp stance about bitcoin is based on years of careful observation of what get covered and what does not. and also how it gets covered.

    there is a dearth of quality discussion here on pp by the owners and the members on crypto. the last coverage by pp was the interview i cited with alex saunders entitled "bitcoin 101" alex is very knowledgeable and articulate on the subject. i was heartened to see him here and thought with the title "bitcoin 101" there would ensue a good introduction to bitcoin for the members here who clearly do not understand the space , which btw has grown from zero to $50k today.  that interview was a major disappointment. your questions were mainly a rehash of much of the fud around btc.  it was anything but btc 101.

    i have also contacted pp about arranging an interview with brian armstrong the ceo of coinbase, numerous times. i have not even received a polite no thank you. btw coinbase is the largest crypto exchange in the u.s. and has 7000 institutions and over 40 million customers world wide. it is preparing to go public with a dpo. current market valuation of over $100 billion up from 8 billion in 2018. i have also suggested other people knowledgeable in the space like andreas antonopolous.

    i have posted regularly on crypto, in an effort to provide information to help people become resilient financially. i post "actionable" ways to navigate the crypto space. now from my perspective i have done that with no expectation of any kind of reward. not even a pat on the back. i spend hours everyday researching crypto and have for 9 years. on pp i have fielded every bit of fud from what i call fudsters. i call them that because fud is all they offer to the discussion. it is the same fud over and over again by the same people. so if i seem condescending then so be it. i find nothing constructive for the discussion or this site to continually try to derail any discussion of crypto. i get that this site is what it is. it is a site for preppers who are pm bugs. it is populated mainly by boomers who are interested in the preservation of wealth rather than its creation. it is an analog, legacy population. that is fine. this site does not offer much to the digital millennials who don't have wealth to preserve, who have actually been screwed by the boomer generation. they are in need of new ways of generating wealth. the digital financial system offers that to them. defi has grown from around $686 million to $15.6 billion in one year. there are great opportunities to generate financial independence. for example . if one were to have put $1000 in btc 10 years ago and one woluld have put $1000 in gold one would now be financially independent with the crypto and one would have lost money with gold. the data is crystal clear. now i am not suggesting in any way that pp promote crypto but it would be nice if there were a space here for intelligent data based dialog.

    now you own this site and i completely understand if you find what i have to offer unpalatable to you and your goals here. i actually only got back on here because of the excellent coverage of the virus.  i have gotten a lot of pm's asking about crypto so i have felt it worthwhile to continue to post and field the fud and the insults (recently called a jerk) you are well within your rights to do whatever you wish whether that be "moderation" or send me to vacation with granny. or the people here can as you have said take what you need and leave the rest.

    i will point out something that you might consider. real vision added a crypto channel last year and added 50k new subscribers in one month. just as a business model being a little more crypto "friendly" might be a good idea.

    ps out of respect for you an chris and this site i have been posting lying on my back with one finger for weeks, due to an injured right arm. so my patience with fud is very thin right now.

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  • Mon, Mar 08, 2021 - 8:44am

    Mohammed Mast

    Mohammed Mast

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    0

    yes of course

    experts in the pm space would clearly publish nonsense.

    my mistake

    non experts would clearly know better

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  • Mon, Mar 08, 2021 - 8:58am

    brushhog

    brushhog

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    Joined: Oct 06 2015

    Posts: 543

    15

    Man up

    I just have to say something here. Your whole post just reeks of defensiveness, self importance and immaturity. Not once in that whole diatribe did you take RESPONSIBILITY for your shitty behavior.

    Yes you were called a jerk [ I saw remember that post ], but thats not the point, is it? The point is not that you were called one, its that you were ACTING like one. But that seems to have bounced right off your poor-put-upon head. Now here again you are being warned by the site creator about the same thing and instead of considering that YOU might be the problem you turn it into a bitcoin persecution.

    This site is not a bitcoin site. Bitcoin is covered but its about alot more than one thing. So your recommendations for bitcoin hosts werent taken. So now you are going to come here everyday and crap all over the site because your mad?

    Whatever benefit you bring here in regards to bitcoin knowledge, you destroy with your insults, snark, immaturity, and anger. In my opinion you bring this site way down.

    Even your final snarky remark is so telling..."MY ARM hurts". So your arm hurts, kid. You think that gives you an excuse to treat people that way? Your arm is YOUR problem. Man up and stop making a damn fool of yourself.

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  • Mon, Mar 08, 2021 - 9:17am

    MKI

    MKI

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    Posts: 350

    6

    Trouble with bitcoin

    I believe that there are 2 underlying assumption that causes trouble with bitcoin in us older folks.

    I think this misses the real discussion.

    Most people just ignore recent history. Quick summary: the international system always used gold/PM as money. But this was replaced by the USA who had 1) won WWII thus owned most of the world's gold and  2) outlawed gold's private use to force everyone to use USD (if they wanted to trade). It worked; the USA became a benevolent hegemony.

    What is happening today, as Luke points out, is truly historical. The USD's unopposed fiat game is coming to an end. The US is no longer a total hegemony that can continue to enforce USD fiat (as much as TBTB, even most non USA nations) wish it to continue.

    Enter gold and BTC to this historical moment. What makes gold and BTC so different (and thus sparking this debate) is a) gold is used by central banks, and b) BTC is only a decade old and used by few institutions. It is the newness of BTC that makes it so scary for most conservative people (young or old) because money requires widespread acceptance over time a long time (save today, spend tomorrow), and BTC is in her baby steps of social acceptance. It may fall out of favor, or just be replaced by an "approved" version by the TPTB. This has happened to every single currency but gold to date. Most know something like BTC could dominate and eliminate gold. But is BTC really it, and if so, is the time now? This IMO is the debate, not that people are too old or too dumb to understand money.

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  • Mon, Mar 08, 2021 - 9:21am

    dreinmund

    dreinmund

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    Joined: Mar 19 2011

    Posts: 191

    16

    dreinmund said:

    MM - I do (for the most part) appreciate your comments on crypto - I learn from the discourse and the different points of view. Please don’t make this a “PP hates crypto” thing, because that’s not true.
    Some people are skeptics, and that’s ok. You started your journey early, give others time to catch up.

    It’s your attitude that’s the buzz kill. And if people are dismissive, please don’t take it personally. Respond kindly and matter of factly, or don’t respond. Just let them be wrong  (if that’s what you think), but don’t treat them with contempt.

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  • Mon, Mar 08, 2021 - 10:04am

    #40

    sand_puppy

    Status: Platinum Member

    Joined: Apr 13 2011

    Posts: 2808

    0

    I understand MKI, I agree

    MKI wrote:

    What makes gold and BTC so different (and thus sparking this debate) is a) gold is used by central banks, and b) BTC is only a decade old and used by few institutions. It is the newness of BTC that makes it so scary for most conservative people (young or old) because money requires widespread acceptance over time a long time (save today, spend tomorrow), and BTC is in her baby steps of social acceptance. It may fall out of favor, or just be replaced by an "approved" version by the TPTB. This has happened to every single currency but gold to date. Most know something like BTC could dominate and eliminate gold. But is BTC really it, and if so, is the time now?

    I very much agree with the presence of risk here for these very reasons.  Again, that is why 25%, not 100%, of my investible income is in BTC

    ----

    I didn't mean to insult "old people," but I do believe that I see a generational difference in the rate of acceptance of BTC.  Kind of like there is with piercings and tattoos.

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  • Mon, Mar 08, 2021 - 11:05am

    #41
    David Henry

    David Henry

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    Joined: Sep 20 2019

    Posts: 103

    4

    irascible, and really valuable

    Chris' virus coverage and the crypto info has easily been the most actionable & profitable info on this site for me in the last year. Sometimes I feel like the mainstream reaction to the "horse paste" is the same as to crypto. You mean there's a cure for this (monetary) sickness? And we weren't told about it? Yup.

    MM is one of the main voices that pushed me to actually *think* seriously about crypto, so many thanks. I'm a Gen Xer, not a Boomer, but his critique of how the site skews is valid and insightful, though I agree his delivery could be more tactful. Good manners are what allow people of different viewpoints to interact.

    Adam's interviews have been good and this one was fantastic. As other people mentioned, there is a lot to digest here and I'll be watching it again. Also ditto other people: Gromen's always interesting, but Adam's interviewing skills are what brings out the best. I'm glad that btc was an aspect of this interview, and would love more crypto focused content in the future if possible. I'm keeping my small amounts of au/ag, but dca'ing into crypto as fast as I can.

    I'm biased in my feelings in favor of au/ag personally over crypto, but logically btc seems to perform some of the functions of hard money better than pm's. I was probably imagining a "low tech, low energy" future (ala John Michael Greer's 2008 "The Long Descent"). But I now think that is wrong. We may be headed for a "high tech, low(er) energy" future. Maybe we'll have to turn our thermostats down and not drive as much, but we'll still be falling into our smart phones all the time. Greer's 2016 book "Retrotopia" seems to imagine some of this, with it's vision of each county choosing how much technology to employ and thus how much tax to assess on its citizens. (Great thought experiment, interesting read but not great art.)

     

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  • Mon, Mar 08, 2021 - 12:18pm

    #42
    VTGothic

    VTGothic

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    Joined: Jan 05 2020

    Posts: 647

    3

    More Gromen Perspective

    Gromen has a number of other interesting observations, including about bitcoin and tptb, scattered around the Youtube universe. Here are two I remember catching recently.

    1.

    Every day that Michael Saylor doesn't get audited by the IRS makes me think that there is at least an element of Washington that has tacit approval of what he's doing.... I know they understand what this is. … Now, why would they look the other way?

    In this 6-minute clip Gromen offers a speculative, contextualized answer to the question he poses. It's a pretty interesting viewpoint, imo. (Feb 23, 2021, Swan Signal Live)

    2.

    Bitcoin is the last functioning smoke alarm that they haven't been able to disable...and it's sending a pretty clear message that most central bankers would find alarming. [If it was just a curiosity] I don't think they'd be talking about it as much as they have been over the last month or two.

    Mar 1, 2021 interview on the TD Ameritrade Network.

     

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  • Mon, Mar 08, 2021 - 2:06pm

    #43
    MKI

    MKI

    Status: Bronze Member

    Joined: Jan 12 2009

    Posts: 350

    1

    Crypto

    drein, Please don’t make this a “PP hates crypto” thing

    I don't think (nor said anything like) that "PP hates crpto". I commented merely to help clarify the discussion, precisely because I think it very much worth having with smart people who *don't* hate crypto.

    SP: I didn't mean to insult "old people,"

    Of course you didn't, I certainly didn't mean to imply you did (heh, I'm probably younger than you are :-)). But it's a fact that many, even most, people that are rabid believers in crypto tend to slant young. It makes sense to address all positions to have a real discussion, hence my comment.

    To get off of me and onto somebody really interesting, I actually think Luke, you, and I agree on most crypto issues; I'm simply too cowardly or cheap to act on it, like Luke and you have. Kudos to you guys.

    What I did find interesting:  how Luke framed the discussion about how crypto may or may not have an impact on money itself at the central bank level. These are big times, big changes, and I don't think we can pay close enough attention to both gold and crypto. Like Y2K, crypto may be the "next big thing" or the biggest nothingburger ever. So I'm here to learn, not exhort.

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  • Mon, Mar 08, 2021 - 4:43pm

    pinecarr

    Status: Platinum Member

    Joined: Apr 13 2008

    Posts: 1325

    3

    Great 6 min Gromen clip on China and Bitcoin, VTGothic!

    VTGothic, that 6 min clip with Luke Gromen is incredible.   His speculation on how our gov't may be looking at Bitcoin given the global economic situation, as well as how Luke sees the Gov't both reacting (and not reacting) to Bitcoin, seems plausible (and mind-blowing).  Wow, what a fresh thinker!

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  • Mon, Mar 08, 2021 - 7:08pm

    agitating prop

    agitating prop

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    Joined: May 28 2009

    Posts: 851

    0

    agitating prop said:

    actually the market is flooded with fake gold coins. mostly they come from china. i was first made aware of this back in 07 when i loaded up. in anticipation of the meltdown. MMast

    Sorry to hear you were wiped out buying Chinese tungsten. That sucks.

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  • Tue, Mar 09, 2021 - 5:51pm

    #46
    Redneck Engineer

    Redneck Engineer

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    Joined: Mar 16 2020

    Posts: 162

    1

    BTC stock/flow vs inflation hedge

    I'm thinking over BTC and had a few thoughts and questions.

    BTC price follows the stock/flow ratio pretty well. Looking at the price volatility and growth, isn't it more accurate to say BTC is a speculative asset rather than a store of value and an inflation hedge? The ideal inflation hedge would generally appreciate at the inflation rate, and follow changes in inflation. Real assets (real estate, PM, commodities) generally perform better than stocks and bonds in inflationary periods.

    Is gold an inflation hedge? Sort of. It appears to follow the inverse real 10 year treasury rate pretty well. When that goes negative, gold price surges, reflecting movement out of the bond market. At that time, bonds are producing negative real yield; investors would rather hold onto something yielding nothing than hold onto something guaranteeing a loss of principle. When gold appreciates in dollars, people make money in dollars.

    What's the yield on BTC? Like gold, nothing, at least for now. Maybe in the future there will be BTC-denominated bonds.  Like gold, the value in it comes from appreciation.

    Why are people buying BTC? Is it speculation on price increase? Speculation on having a share of some future currency? Or to use them to buy things? Correct me if I'm wrong, but people are not buying BTC for the sake of using it as currency - as a means of exchange - in the present or very near future. SOMEDAY the dollar collapses and the BTC is worth something; SOMEDAY the network is widespread and it is as easy to purchase things with BTC as it is with dollars.

    For these reasons, is it fair to say BTC investment is more speculation than true inflation hedge or hard currency? When I talk IRL to BTC investors and miners, they speak in terms of speculating on future price. That's ok, I hear the same from many PM investors. But I don't think in the near future about taking an ounce of silver to the grocery store. Someday maybe that happens, or I convert PM to some new currency post-hyperinflation.

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  • Wed, Mar 10, 2021 - 3:03am

    #47
    VTGothic

    VTGothic

    Status: Gold Member

    Joined: Jan 05 2020

    Posts: 647

    1

    BTC is a young, emergent money. Everything else is noise.

    @Redneck_Engineer: my thoughts toward your questions.

    When the Florentine florin became the international settlement coin in the 14th and 15th centuries, it did so because it was recognized as a reliably consistent unit of measure over time – stronger than its competitors. As a major currency, it was both a payment rail and a store of value. The one did not preclude the other.

    However, the florin did not become the international standard in a year, nor a decade. In fact, it took well over a century for its virtues to spread across the trading nations of the time, and for a fully developed banking and remittance system to mature around it.

    Similarly, gold did not become the 5000 year standard for wealth exchange and preservation the moment the first nugget was picked out of a stream. That, too, required millennia to develop.

    We all need to exercise a similar long-term perspective on bitcoin. That seems to me a difficult thing to ask of us moderns, who think a long-term investment is something over 12 months; in some cases, merely over a quarter. Our very short term thinking (historically speaking) feeds the refrain that because bitcoin has not already become a payment rail or store of value it never will.

    Plus, bitcoin is currently classified by the IRS as a commodity, and is taxed as such. That designation follows and reinforces the idea that bitcoin's use case is as a supplement to, alternative to, or replacement for physical gold (precious metals in general). That's a switch from the last cycle, during which the popularly shared use case for bitcoin was as an alternative payment rail and a permissionless – even shadow – currency. Times change and the narrative changes. It will again. But that's just noise; the noise of the market trying to figure out what bitcoin is and how it might mature.

    The IRS designation encourages us to constrain our ideas of what bitcoin is and what its future can be. However, bitcoin is already more than the IRS recognizes. In some parts of the world bitcoin functions today just as the florin did centuries ago: as an international settlement currency, as a payment rail, and as a reliable store of value. The places where that's taking place are on the periphery of the first-world-dominated trading regime, among the unbanked and in the emerging market economies where the value of local fiat currencies is unpredictable.

    The fact that bitcoin is already proving its worth as more than a store of value – that it is in fact not adequately described as a commodity – means the IRS will one day have to change its definition. I am certain that the day will come when bitcoin is recognized for what it actually is: a truly international, independent, market-based, hard money.

    Until you understand what bitcoin really is, you will continue to struggle to categorize it and imagine how to use it.

    What we are watching in real time is the birth of a new money. At twelve years old, it is just entering into its teenage years. It's still growing, still maturing, and while we can see signs of what it will look like when it has reached its adulthood, we can't be certain we understand it or its potential. Like any proud parent imagining that a child shows signs of becoming a doctor or lawyer, our projections might help shape bitcoin's development – but might do so negatively as well as positively. What we project might poorly fit bitcoin's maturity and so won't materialize over the long term. I think the designation that it is a commodity is one such projection that will prove inadequate to all of the attributes present in bitcoin awaiting the right time to unfold. But, hey, I could prove as wrong, in part or whole, as anyone else.

    Because bitcoin exists independently of any human authority, it will find its own way in the world. We will adapt to it. And because the infrastructure is already emerging that makes it increasingly easy and safe to use bitcoin to make micro-payments, the pressure to liberate the coin from the stricture of realized capital gains taxes for using it to buy a good or service will grow. Exponentially, I think, over the next handful of years.

    Well within the decade the IRS will have to change its treatment of bitcoin because it will, in fact, be increasingly used as a payment rail around the planet, and it will increasingly supplant national currencies as a reliable and consistent and non-political settlement medium. As that character emerges, the IRS will either scrap the current designation and tax structure, or retard the participation of the US in the future global economy. We might be slow about it – as might be the West in general – because it undercuts our advantages, but in time we will have to recognize that bitcoin is money, and the only objective, market-based standard through which all national currencies are calibrated.

    Until the redesignation, if I use bitcoin to make a purchase I have to track the exact coins I used, their acquisition basis, their value at the moment of conversion, and the corresponding cap gains tax implication. It's too onerous to be practical for trivial transactions. Therefore, I am forced for awhile to use bitcoin as a combination long term investment and emergency savings account. That's alright with me, though, because bitcoin's value is still growing dramatically: our adolescent is still growing into her full size and maturity.

    By the time she's 20, her volatility will have reduced significantly, like all young adults. But it will be yet another decade or 15 years on before she'll have become maturely stable. Meanwhile, an early investment in her future assures me of a share of her future wealth.

    It's also a great hedge against the increasingly rapid debasement of every fiat currency. In fact, bitcoin is not rising in dollar terms; a bitcoin is always a bitcoin. The dollar, however, is being rapidly inflated, and so is declining against a bitcoin. The smartest thing to do to preserve purchasing power is to trade as many devaluing dollars as possible for hard money, and bitcoin, like the ancient florin in its day, is the hardest.

    As with the florin then, you can trade a bitcoin back into local fiat if you have the need; and you'll nearly always be able to do so at a higher exchange rate. Even with cap gains tax treatment you'll nearly always be well ahead of where you would be if you kept your savings in fiat, fiat equivalents, or even government-regulated and -manipulated precious metals.

    TL;DR: bitcoin is an emergent money. Its volatility comes from the market finding its value, but that value is not zero, and steadily grows over time as its adoption as money expands while its new supply is trending toward zero. Its use case is still developing, but is larger than any one government or enthusiast yet realizes. Everything else is just the noise of humans trying to impose order and understanding onto an emergent, wild phenomenon.

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  • Wed, Mar 10, 2021 - 3:20am

    #48
    mrwigglesby21

    mrwigglesby21

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    mrwigglesby21 said:

    @vtgothic, how safe it is to hodle our BTC in BlockFi? Also, I would love to hear your thoughts on PaxG and earning interest on it in BlockFi  versus purchasing physical.  Perhaps do a little of both?  Thank you in advance!

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  • Wed, Mar 10, 2021 - 10:06am

    VTGothic

    VTGothic

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    I'm the wrong guy

    @mrwigglesby21,

    (Great handle!)

    I'm the wrong guy to ask these questions of because I don't put my BTC out to lend and I'm firmly of the conviction "not your keys, not your coin." That goes for the PaxG concept, too. There are others here who have looked into these opportunities who can better advise you, I think.

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  • Mon, Mar 22, 2021 - 8:35am

    #50
    MyBiz

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    Nice quality content

    I enjoyed listening to your podcast. Thanks for your article, this would be an eye-opener for us to prosper in life and in my personal business shipping companies Seattle.

     

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  • Mon, Mar 29, 2021 - 6:05pm

    #51
    enjblog

    enjblog

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    Good points, but whats the goal?

    The video I just watched was very helpful,  but it made me wander if we sometimes think too far ahead and not enjoy the current moments with family and friends. just something to consider.

    Kelly
    www.scaffoldinghirehobart.com.au

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  • Tue, Mar 30, 2021 - 4:13am

    drobs

    drobs

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    BlockFi is probably safe, but never know

    The biggest risk to BlockFi would probably be exposure to a failure of the COMEX. Since they're earning based on the BTC futures spreads, if the COMEX were to one day have a catastrophic blow up (maybe in the gold/silver markets?) then perhaps BlockFi has exposure because theoretically you're lending those Bitcoins to BlockFi. They may hold enough reserves or they may not. I think theres too much risk personally.

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  • Tue, Mar 30, 2021 - 6:12pm

    MGRS

    MGRS

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    DeFi Counterparties

    Thanks drobs, I've hesitated to jump into the DeFi world with my coins because I don't understand the risks and who the counterparties are.  Who on earth is taking out a loan denominated in BTC or ETH and paying 7%+ so that I can earn that interest?

    Bitcoin futures spreads; gives me a place to do some more research since I still don't understand the actual mechanism and counterparties.

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  • Sun, Apr 11, 2021 - 4:20pm

    PreCambrian

    PreCambrian

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    1

    Fake Gold Coins of Proper Dimensions and Weight

    There really are fake gold coins made of gold plated tungsten (which has essentially the same density as gold).  I got to test one in my Fisch (it passed the weight and dimension tests).  For 22k gold eagles and krugerands, these coins will "ring" if you "flick" them (the fakes won't ring).  I have a special device called a "Ringer" made by Fisch.  For pure gold coins (such as Gold Maple Leafs) the fakes are difficult to distinguish except by looking by magnifying glass for errors or lack of detail because both the genuine and the fake don't ring.  I also have a device from Sigma Metalytics which measures the resistivity of the coin (or bar) and compares it to a database and gives you the proper dimensions of the coin or bar. See https://www.thefisch.com/ and https://www.sigmametalytics.com/pmv-videos-improved

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  • Sun, Apr 11, 2021 - 6:41pm

    kunga

    kunga

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    Silver bells

    Hey, PreCambrian,

    Back in the day when I worked some retail jobs, at the end of the shift, I had to count out my change drawer.  I always carried some pot metal change coins in my pocket. I'd grab a small handful of dimes or quarters and drop them on the counter. You could hear the ring from a silver coin in the bunch.  I'd find that coin and exchange for one in my pocket.  Gresham's Law and all that.

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  • Sun, Apr 11, 2021 - 11:00pm

    Mysterymet

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    Fake plated gold coins vs real gold coins

    You should be able to tell the difference with electrical conductivity pretty easily. I would think that a plated coin isn’t plated very deeply so frequency selection for an eddy current based conductivity tester should be no problem at all. Maybe I can buy one of those knock off plated coins you see in various places for “collectors” and try an experiment at work. I have a few other pieces of equipment that could work as well. Seems to be a decent difference in acoustic velocity of gold vs tungsten as well.

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  • Mon, Apr 12, 2021 - 7:16pm

    PreCambrian

    PreCambrian

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    Joined: Mar 06 2021

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    PreCambrian said:

    Yes the Sigma Metalytics device uses an eddy current principle.  Ultrasonic thickness measurement works as well as long as you measure the location where there is the fake metal.  In gold bars sometimes they just put in tungsten rods and cast gold around them.  It depends on how sophisticated (and how much money) they want to put into the fake.  If it passes the density test and either the bulk resistance or the ultrasound test it has a very high probability of being genuine.  I haven't seen or heard of a fake passing both tests.  The good fake coins are relatively expensive (several hundred dollars) because of the processes required and because making gold coins such as Eagles, Maple Leafs, Krugerrands, etc  is counterfeiting of a sovereign currency (as opposed to making a fake gold bar).

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  • Thu, May 13, 2021 - 8:48pm

    #58
    magnoliagardens

    magnoliagardens

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    Joined: Apr 21 2021

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    magnoliagardens said:

    What are our thoughts on crypto?

    - fence repair redmond or

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