Let's build on two of the points I was chatting about in my Hyperinflation post a couple of days ago.
1) Confidence in the local economy is key to prevent capital outflows
2) Expect hyperinflation due to printing money BUT it will be will not be visible on the surface
If anybody is following Latin America right now you know a few things. Venezuela is a tragic failed state. Remember to think of a country's economy as pretty much a corporation. Well, Venezuela has had all of the assets of the country essentially embezzled out of the country and into the pockets of its heinously evil dictator and a few of his cronies. In case you have ever been curious what happens when you extract the wealth in gold and oil out of the economy, it implodes. It collapses. It's one of the most evil regimes in modern history but it sadly doesn't get press time because the media is only obsessed if it's a Muslim state but Catholic Latinos do not have the same pull at the ballot box so they are left to fend for themselves. It's tragic. When I was in Colombia there are Venezuelans that have stacks of Venezuelan Bolivars. completely worthless. The currency is worth more as a paper to make crafts with then as a currency
That's the once jewel of Latin America. In 2020 alone the IMF estimated it hit around 200,000% inflation. For those of you poor at math...that's bad. When people loose confidence in their country's fiat currency (and can you blame them?) it's natural to move the value to a safer currency or precious metal. Gold can be hard to get access to and countries formerly could control capital outflows to other currencies like for example making it illegal to exchange to USD or preventing people from taking the local currency out in cash. Like at the border when you must declare if you are travelling with over $10,000. Can you imagine the safety of shifting your rapidly devaluing currency into a currency that is digital, essentially held on your phone and that can be converted to cash in any currency anywhere you may go...anonymously? Hmmmm
Okay but that is Venezuela...a freak case right? No. Argentina is very close behind it, as is Chile, Colombia, Brazil, Mexico.......
What do those countries all have in common? For one thing they are incredible places to visit but beyond that they have rampant corruption deep in the fabric of their economy. Again think of a country as a company. Rotten at the top leads to a failed state like Venezuela as an unchecked ruling class embezzle the funds out of the economy for personal gain.
The US has always been a great place to stash wealth and the epicenter of so many discoveries and innovations largely because it has been a nation built on checks and balances. In spite of the Left's mass hatred of Trump campaign the US is a relatively noncorrupt place to do business (hey nowhere is perfect). Like I said in the previous post TRUST IS EVERYTHING.
When people loose trust in a local economy you can watch the capital flow out into safer places. So it is not even remotely surprising that you now see record levels of capital flowing from these economies into Bitcoin. But, in spite of the reports being pumped everywhere by Crypto evangelists that this is the golden age long predicted, if you scratch the surface things look very different.
You see most report this trend as measured by the amount of fiat currency being dumped into Bitcoin. If we see 10x the amount of Chilean pesos being used to purchase Bitcoins than we saw a month or a year ago...we first have to ask the question of how the pesos is fairing compared to a month or a year ago. Yes there is definitely a small uptick in volume but the 100x that is often being quoted is because value of the currency fell through the floor.
Ouch. My point is twofold. First, not all bit-hype is gold and secondly, you always must scratch below the surface. Watch for the same trend in other currencies as the fallout from the Corona virus begins to really be felt globally. We are still on the very very front end of a global Black Swan event. The real effects will be felt by all of us as the shock and trauma slowly works its way through the economy. Now is a great time to ensure you are on the winning end of that equation.
Reach out and get in touch. If you are not already a part of our community, I would love to chat with you about where you are at, what your goals are, and if creativeX would be a great help in you ensuring that you reach them.