Have You Bought The BRRR?

These days, individuals who, like John Locke, “love truth for truth’s sake,” are far and away in the minority.  Out of the bowels of America’s higher learning institutions comes a young populace with sullied brains and fanatical hearts.

At a hefty price tag now being piled on taxpayers, they learned not how to think; but, what to think.  And in doing so, they’ve retarded their mental abilities.

Those who skipped college to learn a trade are more readily able to discern an objective truth using basic common sense.  They weren’t subjected to an abundance of rubbish like their college educated counterparts.  This affords them the freedom to independently separate fact from fiction.

Debasement of thought goes hand in glove with the decline of the west.  In fact, with open eyes and a listening ear, one can observe that as society degrades, reality is distorted in unnatural and fallacious ways.

Over the last decade, for example, pronouns have been corrupted to authenticate non-binary gender designations.  ‘They’ is used in the singular to convey the unspecified.  The supposed social enlightenment of it all takes priority over violations of both biological fact and English grammar.

And recently, Google’s new AI image generator produced racially diverse Nazi soldiers among other fakes.  Principles of diversity and inclusion exceeded historical facts.  This also illustrated that AI mirrors the biases of its creators.

However, the ultimate debasement of society, bar none, starts with the debasement of the currency.  To this end, inflation – of both consumer prices and asset prices – starts with the inflation of the money supply.

Here, for instruction, let’s take a moment to consider the actions and effects of an important historical episode of extreme currency debasement.

Extreme Currency Debasement

Rudolf von Havenstein had been president of the Reichsbank – the German central bank – since 1908.  He knew the workings of central bank debt issuances better than anyone.  He was a central banker’s central banker.  He was good at it.

Thus, when he was called upon by history to deliver a miracle for the Deutches Reich in the aftermath of WWI, he knew exactly what to do.  He’d deliver monetary stimulus.  In reality, he’d already been at it for several years.

On August 4, 1914, at the start of the war to end all wars, the Goldmark – or gold-backed Reichmark – became the unbacked Papermark.  With gold out of the picture, the money supply could be expanded to meet the endless demands of war.

To this end, von Havenstein took public debt from 5.2 billion marks in 1914 to 105.3 billion marks in 1918.  Over this time, he increased the quantity of marks from 5.9 billion to 32.9 billion.  German wholesale prices rose 115 percent.

By the war’s end, Germany’s economy had fallen into a massive contraction.  Industrial production in 1920 had dropped to just 61 percent of the level seen in 1913.  With a weak economy, and under the crushing weight of debt, it was time for von Havenstein to really crank up the money printers.

In truth, he didn’t have much of a choice.  The limits of fiscal and monetary prudence had been crossed when the Goldmark was replaced with the Papermark.  Reversing course now would have brought an immediate economic collapse and societal breakdown.

When Trust Is Lost

Von Havenstein, faced with the choice of post-war depression or inflation, chose what he thought would be the easier softer way.  He considered inflation the lesser of two evils.  Plus, it would lighten Germany’s war debt.

Initially, the consequences of the Reichsbank’s money supply inflation seemed to be limited.  As real, inflation adjusted wages declined, unemployment actually fell to record lows.  But, alas, a real McCoy crack-up boom was underway.

As the value of the Papermark continued to decline wage earners were continually shredded.  To combat the increasing destruction to wage earners the German government introduced mandatory wage indexing.

This government intervention had a predictable result.  Unemployment immediately soared…running from record lows to record highs within just two years.

At the same time the decline in the Papermark’s purchasing power and external value accelerated until the currency, for all practical purposes, ceased to function as a viable medium of exchange.

Printing money can be stressful.  But printing extreme amounts of money can be downright terminal, in every way.

By the time von Havenstein died in late-November 1923 of a myocardial infarction, the central bank of Germany had printed over 500 quintillion marks.  Moderate inflation transformed to hyperinflation.  One U.S. dollar was worth 4.2 trillion marks by December 1923.

Moreover, the destruction of the mark brought destruction of society…and the rise of national socialism.  When trust is lost, and the masses are compelled to believe nothing, they will believe anything.

The political repercussions of this economic catastrophe soon engulfed the whole world.

The Second Wave of the 2020s Great Inflation

To be clear, the consequences of the money printing and currency debasement let loose in 2020-22 to combat the coronavirus fiasco aren’t going away anytime soon.  Not without a deep depression to make money dear.

In other words, we’ve already entered the second wave of the 2020s great inflation.

Bitcoin, gold, and the S&P 500 have all recently made fresh all-time highs.  Even silver, the forgotten monetary metal, has gotten some love.

These rising asset prices also represent falling dollar values, as it takes more and more dollars to buy bitcoin, gold, and stocks.

Yet, the dollar index somehow holds over 100.  Why?

You’ve likely heard the tired metaphor of the dollar being the cleanest shirt in the dirty laundry basket to explain this phenomenon.  Perhaps the euro, Japanese yen, pound sterling, and other dollar index currencies are in worse shape.  Maybe the petrodollar is helping sustain the dollar’s value against these other currencies.

This all may be true.  But we also think there is more to the story.  That is, the U.S. dollar is a mirage, living off its past glories.

If this is true, and given the fundamentals we have every reason to believe it is, then the dollar is at increasing risk of an abrupt, and extensive, devaluation.  But against what?

The U.S. dollar is digital/paper fiat.  And so are its international currency competitors.  In the age of inflationism, all nations and currency blocs debase their currencies in tandem.

So, the dollar’s devaluation may not occur on the dollar index.  But that doesn’t mean the devaluation isn’t occurring all the same.  Right now, at this very moment, it’s occurring in radical fashion.  As noted above, it’s occurring against alternative money options and financial assets.

And as the devaluation progresses, we could face $10 cups of coffee and $25 McDonald’s Big Mac meals by the end of the decade.  Don’t be surprised when this happens.

Have You Bought The BRRR?

Inflation, remember, starts with the inflation of the money supply.  Where it runs – and when – isn’t always clear.  Several years ago, aided by the coronavirus fiasco, it ran into consumer prices and residential real estate.

Before that it ran into speculative technology stocks.  Now, after a reprieve in 2022, and a compelling AI story, speculative technology stocks are again the speculator’s vehicle of choice.  Bitcoin and gold are also being sought out as protective measures.

Indeed, the great inflation of the 2020s will continue to flow in ways that are almost predictable – and always obvious in hindsight.

Several years ago, when the Federal Reserve was busy adding $5 trillion to its balance sheet, there was an amusing demonstration of art imitating life.  A creative fellow developed the website Money Printer Go BRRR, where a meme of a central banker at the Fed goes mad cranking the printing press.

Over the last 24 months, the Fed has reduced its balance sheet by nearly $1.5 trillion.  Nonetheless, its balance sheet is still $3.5 trillion above where it was at the onset of the coronavirus madness.  The Fed has also hiked the federal funds rate from near zero to 5.5 percent.

These steps were taken to curb consumer price inflation.  Still, U.S. government fiscal policies remain radically inflationary.

Specifically, the U.S. national debt is rising at a rate of $1 trillion every 100 days.  Bank of America investment strategist Michael Hartnett believes this pattern will continue.  This is inflation at the extreme.

Hence, in a reverse demonstration of life imitating art, a new bitcoin ETF was born into the world on January 10th under the ticker BRRR.  The fund’s purpose is to hold bitcoin – and it’s already up over 54 percent in less than two months.

Are you seduced?

Come on, now!  With a name like BRRR don’t you just have to have some?

All kidding aside, the real implication here is that, like the German Papermark in the early-1920s, your money is dying.

So why not buy some BRRR and have a little fun on the way to the boneyard?

[Editor’s note: It really is amazing how just a few simple contrary decisions can lead to life-changing wealth.  And right now, at this very moment, I’m preparing to make a contrary decision once again.  >> And I’d like to show you how you can too.]


MN Gordon
for Economic Prism

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