🟠 2023 Financial Crisis Is Here
TLDR inside TLDR: Argentina is good at football but bad et economy, the world is entering a financial crisis and the U.S government sells their bitcoin stash
It’s Arsen, bringing you the 8th (I’m on a streak!) edition of TLDR - the newsletter that keeps you informed AND entertained.
First off, happy Sunday to 1,085 of you reading today.
This email will be a bit longer than usual. You’ll need some background info to understand today’s topics. I promise to keep it shorter next time. Cool?
The panic in the air is palpable. Everything is pointing to the beginning of a financial crisis. Grab your popcorn🍿
Alright, let’s get into it.
Here’s what I got for you:
Argentina is hyperinflating
The 2023 financial crisis is here
The U.S. government has paper hands
Estimated read time: 5 minutes and 47 seconds
ARGENTINA IS HYPERINFLATING
Where would you go if you wanted some excellent steak, watch exciting football, and sun your balls?
Yup, you’d go to Argentina.
But like my idol Rocky used to say, "The world ain't all sunshine and rainbows.” And Argentina is out of both. Argentina’s inflation rate is 100% for the first time in three decades.
This makes the Latin American country have the 7th largest inflation in the world. Unheard of for a G20 country.
In 2022 the Argentine people were crying from happiness after winning the World Cup. Now they’re just crying. But how did it get to this? A short (and very simplified) history lesson:
In the 1930s, Argentina was developing from an agrarian economy to an industrial economy. Things were all fine and dandy until the military junta came into power after a coup d'état (oui oui). After this, the country slipped back into an agrarian economy.
To put it short: Incompetent military leaders without an understanding of economics made a series of bad decisions that started a chain reaction leading to the current situation.
But only blaming the junta would not be fair. After the junta came a “democratic” government that tried to improve things. Instead, they made a bunch of wrong decisions instead of just letting the free market do its thing.
By the way, did you know that Argentine has free education and health care? Now, I’m not saying that’s not a bad thing. What’s bad is the way the Argentine government achieved this.
What did they do? They whipped out the trusted good ol’ money printed and performed a monetary operation called ‘Brrrrrr.’
The result? 100% inflation.
If you’re an Argentine pleb, say bye-bye to those excellent steaks. Only bread for you.
But you know what is even higher than Argentine inflation? Google searches for ‘bitcoin’ are up 150%
The worst part?
In addition to raging inflation, Argentina is trapped in a $44 billion IMF loan.
So yeah, you could say that the IMF is an immoral unelected organization whose role is to trap countries in debt forever.
ELI5: a kid promised the other kids he would give them candy if they voted for him to become the class president. The kid ran out of candy and had to borrow more from bigger kids. The kid learned a painful lesson about how interest rates work.
If you’re reading this, you know what I will say: bitcoin fixes this.
By the way, does anybody have Señor Bukele’s phone number? Maybe he can give some pointers to the Argentine government.
BTW. If you want to better keep track of real inflation (not the cherrypicked government numbers), check out Dayflation - a fun new app created by @Bitcoincarl_.
Dayflation app lets you track inflation in Bitcoin and in fiat. The official estimation of inflation is 6% in the U.S., but what is it for specific items you buy? Dayflation lets you find out.
THE 2023 FINANCIAL CRISIS IS HERE
Interest rates are rising. Banks are failing. Bitcoin is pumping. What the hell is going on?
A financial crisis. That’s what going on. To understand why we’re here, we must go back three years to 2020, when COVID became a thing. The good ol’ times when the unemployment rate was low and the inflation rate was under 2% (officially).
You know what happened then. The world was shut down, and consumer spending dropped off the cliff. This spooked investors.
This also caused a flight to USD. Every other asset (including bitcoin) was dumped.
That’s when the U.S. government woke up. They had two choices:
Do nothing and let the free market correct itself
Intervene with helicopter money and QE (Quantitative easing)
The Feds and the central bank chose the ‘brrrrr’ option. They printed trillions of $$$ and lowered rates to 0%.
Remember those stimmy checks you used to stack sats? Yeah, those were good times.
Unfortunately, ‘brrrr’ has one significant side effect: inflation. Ask Argentina.
In 2021 inflation picked up. We went from 5% → 10% inflation. They told you inflation was transitory (spoiler alert: it wasn’t).
Stocks were up. Real estate was up. Bitcoin was up. Everyone felt invincible. The economy was like a drug addict, needing more and more cheap printed money to keep the party going.
When the Fed realized their mistake, they started contracting its monetary policy (quantitative tightening) by:
Hiking interest rates 0% → 4%
Reducing their balance sheet by $1 trillion
Bold strategy, Cotton. But it did nothing to help. Two years later, we’re still at over 5% inflation.
But all that money sloshing around had to go somewhere, right? Yup, $4.2tn poured over to U.S. banks like SVB and Signature.
Let’s take a quick peek behind the scenes at your local bank:
Banker 1: “What should we do with all this money?”
Banker 2: “DUH, we gamble with it!”
And if you read the last edition of TLDR bitcoin (of course you did), you’d know that this is precisely what happened.
But it’s not just SVB and Signature. The entire global banking system operates on fractional reserves with billions in unrealized losses on their balance sheets. The banks are totally illiquid.
And if enough depositors withdraw their money from the bank, there will be a bank run. Poof. All your money is gone.
The Fed has stepped up and promised to bail out the depositors. To do that, they need cash. A lot of it. And what’s the central bankers’ favorite tool to get money? You guessed it: brrrrrrrrrrr
This is where it gets really tricky for the Fed. There are two options;
If they do quantitative tightening → major banking crisis with global consequences.
If they do quantitative easing → More money printing and inflation
I think they will choose option 2. No way Fed will allow a banking crisis to happen.
TLDR: Our financial system is f*cked.
But it’s not all doom and gloom. This is where bitcoin will shine. Two reasons:
Inflation will increase asset prices, including bitcoin
Bitcoin will be seen as an inflation hedge
People’s hard work is being debased. And they’re waking up to a more robust and fair monetary system.
I’d say Bitcoin is well-positioned.
Sorry to interrupt your reading. I have something to share.
I've written ‘Bitcoin as Money’ research paper for my university. I’ve only shared it with my professor and kept it private until now.
Share TLDR with 1 person, and I will send you the research paper.
THE U.S. GOVERNMENT HAS PAPER HANDS
You smell that?
That’s the smell of 9,861 BTC being moved.
No, that’s not me doing my usual stacking with Relai. That’s the U.S. gubberment moving bitcoin from a self-custody wallet to Coinbase.
But where did the Feds get all this bitcoin?
In the depths of the 2021 bear market, the FBI raided the house of Silk Road hacker James Zhong and seized 50,000 BTC.
And recently, 9,861 of that bitcoin ($260M) were transferred to Coinbase. We can also expect the remaining 50,000 bitcoin to be sold at some point. The Feds selling bitcoin is very bullish. Bitcoin belongs in people’s hands.
has had Libra.
Governments have fiat.
People have bitcoin.
Unfortunately, the U.S. gov is not the only one that holds bitcoin:
China has 194,000 BTC
Ukraine has 45,351 BTC
El Salvador has9,500 BTC
Finland has 1,981 BTC
Georgia has 66 BTC
“But governments selling off their bitcoin will tank the price!!1”
Not quite. The bitcoin market is YUUGE, with a $523.30B market cap and over $35B in trades happening daily
So, no, governments selling their stashes won’t kill bitcoin. Very much the opposite.
BTW, I wrote in February about Lugano and how he will steal your girlfriend. Remember that?
Well, I have another Italian Chad - and he will steal your attention. Meet Federico - he writes The Bitcoin Train newsletter in Italian 🇮🇹
While he doesn’t like pineapple on pizza (boo), he loves creating high-quality Italian bitcoin content. Click the button below to subscribe.
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This week in a meme
H/t @TheBTCTherapist for the meme
Job of the week
Relai is looking for a seasoned CFO to handle our finances and all that fun legal stuff.
Are you a bitcoiner that’s good with numbers? You might be our guy/gal.
As yes, your title can be ‘Master of Coin’
From the archive
That one time in 2011 when somebody paid a random guy 32 BTC to dress in a whacky outfit and hold this sign on a busy street.
I hope the guy in the picture hodl’d. Otherwise oooof.
Shoutout to a fellow bitcoiner and writer. Follow him for more orange signal.
Shoutout to Satoshi Nakamoto (I know you’re reading this).
9 pages. 3192 words. Changed the course of humanity forever.
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2023 Financial Crisis. There’s a lot going on there. And it ain’t over.
Great post as usual. Thanks!