On the energy spectrum, wealthy Western citizens decided to underinvest in fossil fuels, which provide a high return relative to the energy invested in them, and invest heavily in renewable energy, which has a much lower return relative to the energy invested.

The demand for hydrocarbons continues to rise as CAPEX falls. This bass-ackwards energy policy does and will continue to produce high and rising fuel prices.

What’s interesting is that the West’s financial response was not built on a model accounting for the macroeconomic outcomes that might occur in worst case scenarios. Instead, it appears as though they approached the situation as a financial fiduciary would. That is, they looked at past history as a gauge for future results, and tailored their response to the 95th percentile of outcomes — essentially weighing the outcomes with a 5% or less likelihood of occurrence as too unlikely to be worth accounting for.

The issue is that in times of crisis like pandemics and wars, the tails are immediately stressed. What has never happened before suddenly becomes what is happening right now.

The West’s decision to financially cancel the largest global energy and commodity producer is the biggest advertisement for the existential need of Bitcoin in a sovereign’s currency savings portfolio.

Germany is, for now, dead set against a complete embargo on Russian energy. It would completely cripple its manufacturing base. If you assume Germany could replace Russian energy from some other source instantly, it would likely be via the US — which would cost an additional 30% to 40% more.

I will repeat– no government EVER voluntarily goes bankrupt. The prescription is always money printing and inflation.

Some aspects of bank soundness would have to be relaxed in order for US commercial banks to step up their purchases of treasuries.

The Federal government will soon pay more in interest on its debt than it receives in tax receipts if it’s forced to pay an interest rate that is much higher than today’s. That is the start of an insolvency doom loop.

YCC [Yield Curve Control] is how we get to $1 million Bitcoin and $10,000 to $20,000 gold. There is no other politically palatable option, and the actions against Russia all but assure that YCC is coming sooner than you think.

Most of Southern Europe would be considered developing countries if it weren’t for the financial assistance of their German, French, and Scandinavian brethren.

Now the doom loop begins. Inflation prior to the Russian conflict was already running at 40-year highs across the EU member states.

The PIGS’ (Portugal Italy Greece Spain) only option at that point would be to go off the Euro so that they can redenominate Euro debt into local currency debt, giving them financial flexibility. That would be the end of the Euro.

The ECB is trapped, the EU is finished, and within the decade we will be trading Lira, Drachmas, and Deutschmarks once more.

The breakup of the EU = $1 million Bitcoin.

The EU doom loop is a certainty at this point. The degree to which Russian energy flow is curtailed determines the speed of collapse.

Chinese policy advisers never believed Washington would go so far as to weaponize the entire world’s financial system.

China will continue trading with the world in USD and EUR terms. The issue is what to do with the existing stock of USD and EUR denominated assets– as well as the savings that will be generated internationally going forward.

There are three things China can purchase with their international fiat savings: storable commodities, gold, and Bitcoin.

China accomplishes nothing by exchanging USD or EUR for CNY, pushing the CNY exchange rate higher, and denting its relative pricing attractiveness of its exports vs. other countries.

Most rigs are produced and assembled by Chinese firms inside of China. Therefore, China currently has a natural advantage over other flags when it comes to procurement of essential hardware.

In responding to its savings problem, China will accelerate the Western Doom Loop I previously described.

A virus spreads slowly, then exponentially.

El Salvador is the first small, but extremely important step towards denting the hold orthodox economic thinking has on global monetary policy makers.

Even if the sanctions were removed today and Russia had free use of its funds once more, the mere fact that such sanctions could (and did) happen serves as a warning to never allow oneself to be put in such a situation again.

We must agitate for self-interested flags to save part of their current account surplus in Bitcoin so that Bitcoin farm-to-table economies sprout around the globe.

TLDR:

The West has untenable economic policies Bad policies -> deficit financing -> inflation Net Exporters don't want to own inflationary USD Net Exporters want gold and BTC No marginal buyer on USD debt -> more inflation -> YCC $1mm BTC and $20k gold

https://twitter.com/CryptoHayes/status/1519107130389049344