beautifully written! I'd put a higher percentage on Bitcoin, but that's a matter of taste.
But: I think you can hold bitcoin (or gold) even if you don't believe in their future monetary role. Just another risk asset in your basket, increasingly popular among even large institutions for its unique return profile.
Very succinct. A monetary reset = Deflationary event, right? Not done voluntarily by the gov/fed. so hence it requires an external, fairly catastrophic event. WWII was the last one we had. It would have to be global, so that all agree to a reset. Gov/fed could simply cancel out public debt, but that would not change anything. Hence, we need to define what we actually mean by 'reset'. First principle thinking. Higher nominal rates would be a secondary effect only, so is inflation. The first principle would be a redistribution of wealth. A reset in asset prices so that the population at large can again participate in the acquisition of wealth. And this with a declining working population. Easier said than done. Short of such a catastrophic external event, Japanification looks very attractive. Especially if the gov steps up social programs, education, healthcare, and other social transfers to keep social order. The US will find itself in a more and more aggressive competition with China. That has not yet sunk in.
100% agree... Lacy Hunt in his recent interview with Demartino Booth basically gave away that he is for sound money. Gold will eventually take its place back as the only true collateral.
In my opinion, the average retail investor preparing a conservative portfolio towards retirement faces two main problems: find a reliable store of value to combat inflation that ALSO provides some yield so our capital works for us. Unfortunately with yields so low and valuations so high, it has become almost impossible to find a decent yield without going to the extreme end of the risk spectrum.
Thanks Alfonso, really enjoyed this article. all someone has to do in look back in history and look a the empires\countries that held the status of reserve currency and see how it ends. History just repeating over and over. go back and look at the Dutch and British empires. US is near the end of it's Debt Cycle. I like that you brought up Demographics as an aging population is the cause for less output in the economy and also a push on Inflation. Thank again Davin
Great read! I wonder how all this ends, as I 100% agree that politicians are not capable/motivated to take the responsibility and revert the policy. Hence, this should be some "black swan" event. BTC/ETH definitely have >0% probability to take a store of value role, but the problem is that crypto space is way too small (yet) and has been heavily inflated over recent years. So need some correction first.
A great article Alf! One question, however, is are the low bond yields purely as a result of limited growth going forward, largely due to demographics, or are there other embedded reasons? For example, what about the prospect of productivity improving due to the advent - or at least progression - of AI and robotics this decade? If there is marked improvement here and we still have ageing demographics we could see higher growth which could manifest itself in higher bond yields in the future, or am I missing something?
Another great post. I'd be interested in better understanding how planning for this long-term issue overlaps with planning for other long-term risks, like a PRC invasion of Taiwan.
beautifully written! I'd put a higher percentage on Bitcoin, but that's a matter of taste.
But: I think you can hold bitcoin (or gold) even if you don't believe in their future monetary role. Just another risk asset in your basket, increasingly popular among even large institutions for its unique return profile.
Very succinct. A monetary reset = Deflationary event, right? Not done voluntarily by the gov/fed. so hence it requires an external, fairly catastrophic event. WWII was the last one we had. It would have to be global, so that all agree to a reset. Gov/fed could simply cancel out public debt, but that would not change anything. Hence, we need to define what we actually mean by 'reset'. First principle thinking. Higher nominal rates would be a secondary effect only, so is inflation. The first principle would be a redistribution of wealth. A reset in asset prices so that the population at large can again participate in the acquisition of wealth. And this with a declining working population. Easier said than done. Short of such a catastrophic external event, Japanification looks very attractive. Especially if the gov steps up social programs, education, healthcare, and other social transfers to keep social order. The US will find itself in a more and more aggressive competition with China. That has not yet sunk in.
100% agree... Lacy Hunt in his recent interview with Demartino Booth basically gave away that he is for sound money. Gold will eventually take its place back as the only true collateral.
Clear thinking at its best.
Thank you for the article Alf.
In my opinion, the average retail investor preparing a conservative portfolio towards retirement faces two main problems: find a reliable store of value to combat inflation that ALSO provides some yield so our capital works for us. Unfortunately with yields so low and valuations so high, it has become almost impossible to find a decent yield without going to the extreme end of the risk spectrum.
Love your writing style, no fluff, very clear.
Thanks Alfonso, really enjoyed this article. all someone has to do in look back in history and look a the empires\countries that held the status of reserve currency and see how it ends. History just repeating over and over. go back and look at the Dutch and British empires. US is near the end of it's Debt Cycle. I like that you brought up Demographics as an aging population is the cause for less output in the economy and also a push on Inflation. Thank again Davin
Great read! I wonder how all this ends, as I 100% agree that politicians are not capable/motivated to take the responsibility and revert the policy. Hence, this should be some "black swan" event. BTC/ETH definitely have >0% probability to take a store of value role, but the problem is that crypto space is way too small (yet) and has been heavily inflated over recent years. So need some correction first.
Absolutely love these 'mini podcasts' you're doing alongside the articles!
a must read!
A great article Alf! One question, however, is are the low bond yields purely as a result of limited growth going forward, largely due to demographics, or are there other embedded reasons? For example, what about the prospect of productivity improving due to the advent - or at least progression - of AI and robotics this decade? If there is marked improvement here and we still have ageing demographics we could see higher growth which could manifest itself in higher bond yields in the future, or am I missing something?
"Japan leads the way in this experiment, with the EU lagging by 8 years and the US by 15 years approximately."
I have been saying this for 5-7 years - which begs the question - will the US 10 yr bond yield go negative ?? It isn't a zero likelihood, right ??
But NOBODY has it on their bingo card right now. I'd guess there is a 20% chance it happens by 2025.
Another great post. I'd be interested in better understanding how planning for this long-term issue overlaps with planning for other long-term risks, like a PRC invasion of Taiwan.
Sad, but true.
Great macro insights
wonderful and quality macro research for free!