VoB: The End of the Beginning

A few weeks ago, I gave the attached presentation (see below) at the Value of Bitcoin Europe conference (June 3, 2020). The presentation discusses recent and unprecedented actions taken by the Federal Reserve in response to global macro crises. Through the end of May 2020, the Fed digitally created $2.9 trillion dollars over the course of a 13-week period. A trillion is a big number; 3x that is even bigger and it represents complete and utter insanity. While investors in the mainstream will rationalize it as crazy but necessary to stave off a crisis, it is more appropriately “crazy but still crazy” and marks the end of the beginning, which is the title of the presentation. In the attached, I chronicle the measures the Fed has taken with historical context to past cycles of QE and revisit the 2008 financial crisis to help frame the cause/effect of QE as a policy tool and what the future has in store (hint more QE). I also discuss the impact central banking action has on global pricing mechanisms, including a fundamental discussion of the pricing mechanism itself, which naturally leads to a discussion of bitcoin and the distinction (as well as the contrast) its pricing mechanism provides. The central banking model trades short-term stability for long-term volatility while bitcoin trades short-term volatility for long-term stability. At the end of the day, bitcoin represents a currency whose supply (and derivatively its pricing system) cannot be manipulated, whereas fiat money is subject to systemic, persistent and significant debasement, which leads to the long-term deterioration of both its pricing mechanism and functional viability as a currency system. As more people figure this out, bitcoin adoption increases and more and more individuals increasingly opt out of the legacy system on a marginal basis. I hope you find the presentation valuable and please leave comments if you have any questions.