Simone Wapler – La Chronique Agora (France) –
Does the fall of bitcoin mark the beginning of a new financial crisis? Whatever happens, gold today seems a very reasonable investment.
It all started with bitcoin
Maybe if we are at the beginning of the big crash, we will soon read in the media: “it all started with bitcoin” …
The rise of bitcoin marks both the speculative madness that reigns 10 years after the 2008 financial crisis and the increasing public mistrust of central bankers’ maneuvers.
Bitcoin is – in my opinion – not a currency, but a free and open trading network whose promise is not to be polluted by central banks.
With the introduction of fiduciary currencies unrelated to gold or silver, everything became debt. Your “money” in the bank is only an acknowledgment of the bank’s debt to you. To transfer money to bitcoin is therefore to join a club of creditworthy people (each paying bitcoins cash) who wish to carry out transactions with each other without the units of account used depend on the whims of a central bank.
This is my version of bitcoin. But most people who have recently rushed on this virtual currency we just saw that “it went up” and therefore they wanted “to be”.
|Congratulations on your increase of € 1,500 per month!
How? Your income has not changed, the latest news … And yet … the extra € 1,500 a month is a reality, and could start falling on your bank account next week.
Domino effect: bitcoin, stocks, bonds
The decline in bitcoin was followed by a fall in equity markets. All against the backdrop of a slow fall in bonds (when the rates go up the bonds go down).
Is this the beginning of the big crash and a new financial crisis? We know that everything is too expensive and that everything is a bubble: stocks, bonds, real estate. But that’s not a good enough reason. It’s been a long time since everything was too expensive, probably since 2015. For three years, all these assets too expensive have not stopped becoming even more so.
My British colleague Nick Hubble is looking at a battery of indicators and what they can tell us about the current situation. He concludes that the best way to stay invested is to buy what is cheap today.
Which brings me to gold.
Gold: a tangible and tangible bitcoin
Gold is both a material and tangible bitcoin. Those who have gold are solvent because they own a financial asset that is not debt.
Gold is not expensive …
Here is a chart showing the evolution of gold (in yellow) silver (in gray) and Dow Jones (blue) and S & P 500 (red).
I deliberately chose a very long-term chart that begins in 1970, knowing that the dollar was taken out of gold in August 1971. That’s when we switched to credit. A system where money has become credit (and therefore debt).
But the fact is that since 2000 or 2008, gold has performed better than stocks . Gold can really be an investment, even if it is nothing more than a piece of metal that does not yield returns.
Gold does not suffer from Fed rate hikes
It’s important to understand the nature of the environment in which gold climbs. Because these conditions are about to be repeated. Here is a Bloomberg chart. It shows you that the price of gold has reacted upward with every interest rate hike in recent years.
Intuitively, it sounds weird. When the Fed raises its key rates, it reduces the amount of credit that enters the system.
Gold: a bull market that is just beginning
The bull market for gold is just beginning. And maybe a surge of inflation begins to form, as in the period 1970-1980. At that time, interest rates rose but lagged behind inflation. Negative net returns (the return on any investment minus inflation) then pushed people to take refuge in gold.
Krach or not, gold (and silver) in the medium term seems a very good option today.
By buying gold now:
- you follow the big rule: you buy cheap to resell more expensive;
- you will protect yourself against a possible bond and money market crash;
- you’ll protect yourself against a possible surge in inflation.
[Note: Find outherehow to invest in the future bull market for gold (and silver) and increase the rise of these metals.]
If we are at the start of the crash, gold may be in decline as professional investors who may have to sell it to pay for their losses.
However, these same investors have much less than in 2008. They have not bought an asset that has fallen since 2012. So sales and decline will be much more limited than during the crisis of 2008.