How fiat will kill itself \ stacker news ~econ

4429 sats \ 24 comments \ @SpaceHodler 13 Feb econ

I currently live in the UK. We have tax-advantaged pension accounts here called SIPPs, which are similar to 401k's in the US.

With the rising prices we also have a cost of living crisis, with many people struggling to pay their bills, eating poorly, living in unheated homes, getting evicted for rent arrears etc. I've heard rumours that the government may consider the possibility of letting people borrow money against their SIPPs to help them make ends meet. Something like 15% LTV, and presumably at a favourable interest rate, sponsored by money printing (because what else?)

We don't have access to bitcoin ETFs, but people can gain exposure to BTC through their SIPP e.g. by buying MSTR. (custodianship implications aside...)

Imagine this scenario: You have £100k in a SIPP. The government passes a bill like the above and now you can borrow £15k. You borrow and immediately buy BTC with it. Now you have more exposure to BTC - not only via MSTR in your pension, but also the newly bought BTC. It's effectively a fiat short, and a leveraged long BTC position. Sponsored by the government and its money printing, which only contributes to you being on the right side of the trade, because it devalues the fiat you've just shorted.

And the government did it to "help the poor", of course. But the poor either don't have pensions or willl spend the borrowed money on consumption and struggle to pay it off, so the government will have to step in again... In the meantime, the wealthy get wealthier, courtesy of the government and fiat. Fiat shorting to be precise - because in the mind of a wealthy and smart person, shorting is fiat's only use case.

For the wealthy person, the value of the borrowed fiat drops, making it easier to pay off, while at the same time making their bitcoin-exposed pension go up, so they can now borrow more. Rinse and repeat. Mortgage strategy 2.0, with bitcoin and bitcoin-backed equity instead of real estate.

Incidentally this is also exactly Michael Saylor's strategy with his common stock, which will be adopted by more and more companies.

Going back to the government, this is just one way in which the system can accelerate its demise. Another way to "help the poor" with the fiat-induced cost-of-living crisis would be UBI. The poor get cash for food and shelter, the wealthy sovereign individuals get cash to buy BTC...

I just hope those poor benefit at least indirectly from the world moving onto a Bitcoin standard.

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253 sats \ 4 replies \ @orthwyrm 13 Feb

Yes, nice write-up.

Another example would be the idea of 1% deposit mortgages, which has been making the rounds recently as a way of helping first-time buyers enter the market. By lowering the deposit cost, one can allocate more capital into BTC and be further leveraged against the debasing currency the loan is taken out against.

187 sats \ 3 replies \ @carlosfandango 13 Feb

I think those are almost a certainty in the next UK budget for political reasons more than anything else. The one sticking point (which is also holding up the Bill related to rental agreements in Parliament) is that so many senior politicians are landlords and don’t want no-fault evictions banned.

Hmmm. Michael Gove’s Damascian conversion, perhaps having realised that people without property have nothing to lose (and following how Thatcher hammered the fight out of the working class in the 80s) he needs to get generation rent into houses…. but sadly there are no houses so his property developer lobbyists can get building.

I would expect a significant bump in house prices…. and then other assets to follow. And we are back to square 1 with the rich asset holders just a little richer and the renting classes now locked into ownership. I’m certainly no leftie but can smell desperation….

Of course that’s nothing to do with the OP lol

177 sats \ 2 replies \ @shado_op 13 Feb

Imv house prices have jumped due to QE. The money went into assets, bonds, shares, property, even BTC. There is no way house prices are falling back to affordable levels for anyone in the South. There are still pockets of affordability elsewhere but they are also declining. QE and Gov borrowing has stolen our country's future. And it cant be reversed without destroying the economy (as Liz Truss found out!)...

25 sats \ 1 reply \ @carlosfandango 13 Feb

There is so much money sloshing around that the elite are struggling to spend it - take a quick look at the ski slopes of Europe this week.

QE played its part and created the need for an inflation hedge but also the scarcity of supply due to foreign investment and lack of building is significant.

0 sats \ 0 replies \ @shado_op 13 Feb

Yes, fair points

25 sats \ 0 replies \ @KeynesianClowns 13 Feb

Your last point will remain an issue so long as the fiat system continues anyway. Those close to the money printer obviously benefit the most, and then the people with excess capital to act quickly to take advantage of any market inequalities, and then the poor are stuck paying increased prices having derived no benefit from the monetary expansion (Cantillon effect).

This makes the benefit that the poor would derive from transitioning to any hard money standard (Bitcoin being the hardest money ever) one that takes time to take effect, but it would level the playing field in a way that addressing the fiat system with fiscal policy changes never could.

147 sats \ 0 replies \ @Bell_curve 13 Feb

I’m in USA and have lots of MSTR and miners in my IRA

147 sats \ 0 replies \ @KLT 13 Feb

It’s so unfortunate the Uk system is making it so difficult to even get price exposure to bitcoin via an ETF

122 sats \ 0 replies \ @shado_op 13 Feb

Good post...great to see more comment from the UK! ... Pension laws here in the UK mean you cant get the money out until you are 55, so there are cases of people losing their homes whilst at the same time having money in pensions they are not allowed to access! Rather than just let you have your own money when you need it (god forbid!) our decepit Establishment come up with even more complicated rules, hence the loan idea which has been around for a while ... ... You are right it is impossible to buy any Bitcoin fund in the UK. The FCA have made sure investment providers cannot let you buy them (retail, not wholesale, who can do want they want...). Agree MSTR is the proxy for those with Sipps in the UK, as long as you can stomach the risks, which most bitcoiners would (fees, exchange rate, stock market trends, proxy ownership). ... As far as the politics is concerned, imv ALL political parties have hollowed out the working class (what the US call the middle class) and there is basically nothing left to lok forward to but stagnation, decline, crime, addiction, increased authoritarianism. All the good jobs have gone and they're not coming back .. Either QE or Brexit could have been used to chart a different course, wouldn't have been plain sailing, but that would require leadership, and dont have any. ... All we can do is stack sats and encourage, in a friendly, non-dogmatic way, anyone who is open minded enough to listen, to do the same...

122 sats \ 1 reply \ @pillar 13 Feb

Shorting is always there, with or without the tax advantaged account regulation you present.

The truth is that the fiat game is won by getting the best debt you can find at the largest amount your cashflow allows. Then buy assets with it.

0 sats \ 0 replies \ @SpaceHodler OP 13 Feb

Sure it's always there, but this will just add to the funds you can short against.

55 sats \ 1 reply \ @OriginalSize 13 Feb

This is why they want the cbdc. They'll make you spend it the way they prefer.

45 sats \ 0 replies \ @SpaceHodler OP 13 Feb

Yeah, bitcoin is the kind of corn you can't buy with food stamps.

50 sats \ 7 replies \ @0xIlmari 13 Feb

Leveraging yourself to buy Bitcoin is risky. Michael Saylor has a whole department of people working on making it safe for him and the company. Do you?

10 sats \ 0 replies \ @SpaceHodler OP 13 Feb

I'd say if you're a boomer with £1m in your pension and have just discovered Bitcoin, you can rather safely borrow £40k against it to buy a whole coin. And if your £1m pension suffers a 96% drawdown to wipe you out, you have a bigger risk-management problem, whether you're borrowing or not.

The point is, there is more nuance to leverage that just saying it's dangerous.

Another example: I own a house with a mortgage. My LTV is 30%, which is fairly low. The valuation of my house would have to drop by two thirds to liquidate it. That's very unlikely. If things get that bad, millions of people will get in trouble way before me, and the government will step in and "do something."

10 sats \ 5 replies \ @shado_op 13 Feb

Agreed. Stock market history is full of people who were destroyed by leverage. Unlike the US, here in the UK you cant leverage your pension or investment account. So presumably what is being suggested is borrowing in your pension to take the money out and invest elsewhere.
It's up to individuals what they do with their money but investing with borrowed money is very high risk...

35 sats \ 4 replies \ @SpaceHodler OP 13 Feb

There is also the question of whether the government will allow people's pensions to be wiped out due to a market drawdown, or bail them out with more money printing.

35 sats \ 3 replies \ @0xIlmari 13 Feb

Oh I'm sure they would bail them out. Everyone at working age has a pension plan. And most people would be content with it because they do not understand that bailout money ultimately comes from their own pockets anyway via debasement.

10 sats \ 2 replies \ @shado_op 13 Feb

UK wise, defined benefit (final salary) schemes already have a bail out mechanism in the Pension Protection Fund. Other schemes dont, however post covid the principle of the magic money tree is now firmly established in most people's minds and it is inconceivable any elected politian would hesitate if they thought there was near term electoral advantage...

111 sats \ 1 reply \ @0xIlmari 13 Feb

Pretty sure every protection or insurance fund, be it for pensions or bank deposits has limits on size and generally holds enough money to bail out one, maybe two failing institutions.

In case of a systemic failure I'd assume all such schemes to be basically tits up and "please central bank bail us out of our idiocy so we can continue to scam our customers".

0 sats \ 0 replies \ @shado_op 13 Feb

Yes, they exist to bail out an occasional or small failure. QE originated due to systemic risk, there's plenty of sources and interviews from the credit crunch where it all began... Systemic failure = its all over, for everyone!

10 sats \ 1 reply \ @OT 13 Feb

Its a good idea.

How many will act though? Especially with such a new technology and constant mainstream media FUD.

45 sats \ 0 replies \ @SpaceHodler OP 13 Feb

Increasingly more. Gradually then suddenly.

0 sats \ 0 replies \ @SaToSHiWoMaN 13 Feb outlawed

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