Close, but no cigar.
Yet...
For many that have been in the ‘game’, it’s known that the markets can be un-rational far longer than you can remain solvent. This is one of the reasons I’ve never really taken much notice of options/leverage. I remember back in ’09 in the office a chap whose father lost his main residence during ’07/’08 trading on leverage; they were living in a wooden beach chalet, ironically that sat on land associated to our family. It wasn’t until one day I grabbed a ride home with him that I realized — naturally I remained tight-lipped. Anyway, it was a story that has remained with me ever since. I don’t like shorting either; I see this as an act of breaking dreams and aspirations of people. I.e., I may believe something is overvalued and due a pullback, but on the other side of that trade there is someone likely with a family, and investing emotionally. I don’t want to be a widow-maker or a house-breaker.
So I ride the storms, and sit in a port between them. A storm is best represented by liquidity. Sure, there are people that go out to work every day that believe they are having a productive input into the GDP of the country and that their sacrifice is respectful. The reality, of course, is governments debase at ~10.3% per year and inflation adds an additional 2–4% on top, whilst the GDP of the nation is ~5%, so in essence the state is ‘printing’ ~9% on top of the 5% of output. This basically means the lives the average person works, not only is the state being hollowed out, but the average person is becoming poorer in real terms, bit by bit, every day.
This is, of course, due to the debt, and naturally the state prints the difference, so the debasement rises year on year just a little bit extra to accommodate the debt rollover periods — call it compounded misery.
Now for most people, they don’t even want to contemplate this or use their neurons to work through the math, or cursory have it go through their head: “Did you catch the game last night?” So in essence the vast majority of people get wiped out either slowly (historically since ’07) or all at once (2022, → in the future). But for those of us that sat there and worked it out, then verified it over and over via different benchmarks, it’s provided a fruitful return.
Which brings me to the current ongoing market — close but no cigar. Now it might fall; if you’ve had assets you’ve done pretty well since October 2022 (when liquidity started to roll upwards), but I am sure you’ll also know non-asset holders who’ve been hollowed out and are on the breadline — I do. Fuck, the amount of support I’ve provided would have been enough to cover my own overheads for life. Instead, those around me evidently are struggling both financially and mentally; there’s a breaking point eventually…
I think back to a few areas where others recognized the issues. I.e., one person once asked a central bank worker offhandedly: if you are just printing the money (liquidity) to juice the system to create an environment for commerce, to generate GDP to roll the debt over, why don’t you just print the money and clear the debt? To which they responded: “the need for illusion.” This basically meant that if the government(s) were to do this, people would question why they paid taxes and would demand the government(s) support them with printed funds rather than productivity, which would break the system and result in social breakdown. So the process of gradual debasement-repression enabled the illusion to continue.
Then I think back to Raoul (Raoul Pal) post-’08 wanting to establish a full-reserve bank after the ‘bail-ins’ in Cyprus — trotting around the globe speaking to various central banks. One such (US) said it was a great idea, but he’d never get the license — they need fractional-reserve lending to inflate the currency (via lending into existence). Otherwise, they’d steal all the banking as people flood into their bank and starve the system of credit creation (monetary inflation).
Peter Schiff likewise tried this —> his bank was attacked for money laundering, years after there’s never been a case of-such and depositors are still waiting for their funds back.. Peter tried it offshore, they still (5 nations) attacked him from all different angles - should have just bought BTC Peter…
The reality is the system can’t change, for if it does, it breaks the illusion. The illusion is Western supremacy and American hegemony — but it’s all fake. And this fakery is what ‘steals’ wealth from non-Western nations.
For example, using dollars to buy oil: countries such as Kenya have to produce something (a product), which is then sold on dictated terms by an overseas purchasing corporation, paid for with dollars. Those dollars are, in essence, generated at whim (Fed, Treasury, banking sector) at low interest rates (prevailing, etc.) and exchanged for the goods. Kenya then uses these dollars to buy oil.
Whereas in the US, for example, the company either used its revenues to obtain those dollars or borrowed (credit) to obtain them for the purchase at a rate of, say, 5%. In Kenya, they borrowed closer to 20% (downstream via various loans) and then committed real man-hours (human life) into production. In the US, it’s packaged and then sold to the consumer at a much higher cost.
This benefits the US and creates the cycle of enrichment the US has enjoyed as the hegemon, as dollars are always in demand. Countries need to sell something real for something created to service their own needs, be it their own growing debt pile (commercial, state, etc.) denominated in dollars, or their energy requirements priced in dollars.
But this illusion cracked.
China is on the rise. The sanctions and the ‘theft’ of Russian reserves have forced countries to reconsider their exposure to the US. Economic issues globally have forced countries to look at other ways to tax their populace to obtain wealth, which is then exchanged for their own social programs or the needs of the state (dollar-denominated debts, etc.).
Then throw in liquidity games (Biden era), where trillions of dollars were flooded into the US economy via YCC-Not-YCC and QE-Not-QE in an attempt to re-win the election, before being drained just as Trump came into office. This has created a bifurcated economy, or business cycle. Couple that with debt being termed out (≈$9T in 2026) and you have a problem — that problem is evident most in Crypto.
At a time when liquidity (from the Fed) is needed, the Fed hasn’t played ball, forcing the Treasury to do so (QE-Not-QE). This is basically issuing longer-term debt as shorter-term as it comes up for rollover. The problem now is they need to push this shorter-term debt to someone. SLR changes allow that to be the banks, but the banks need to earn a yield, so they will lend against it into the markets — that’s inflationary, both monetary and variable. By contrast, Fed QE is primarily monetary inflation, as it gets captured in assets, whereas Treasury QE gets captured on Main Street and, to a lesser degree, in assets.
The US ISM above has pretty much been in recessionary settings since 2022. It has, in modern history, never been this long (though it should explode higher). In the chart below, you have the US central bank balance sheet (this is what we track, in part, for US debasement annually). As you can see, it’s gone below its trend line; below, the oscillator is turning up, and the YoY change will follow. This is achieved by QE being enacted (≈$500 billion due) and QT ending (it went too far).
This doesn’t necessarily mean assets will explode higher. I.e., the Trump administration are looking to do Treasury QE, which inflates away the debt (cost of living rises), rather than Fed QE (assets rise), because Americans are priced out of assets — juicing Main Street. At the same time, they recognize that unless they ‘somewhat’ juice the financial system, there won’t be enough liquidity, causing friction and blowouts. Therefore, they are pushing for lower rates (which helps Main Street) and slightly higher, but controlled, Fed QE (which loosens financial conditions).
It’s important to do both. As many claim, Debt/GDP is important, but the reality is Debt/Liquidity is what matters. Liquidity is too tight, and if it’s too tight, you get deflation.
Deflation, for a government, is worse than inflation. You need just enough inflation to debase debts and ‘steal’ from the populace (domestic and international), whilst starving off deflation. Deflation in the US now would result in the wealth of the nation being popped and America losing its hegemony.
As I remarked from the beaches of Africa, the dollar was toxic as it was losing value. In a deflationary world, the dollar would rise, and governments in servitude to the need for dollars would be forced to change the system. Therefore, the US wouldn’t be able to export its inflation (as mentioned above) based on demand, because nations wouldn’t be able to obtain said dollars. Wars would then pop up, and the US would lose its hegemony — it’s a consumer market that, without China, can’t even fight a war.
On the other hand, deflation would be good for the youth, i.e it would wipe out the asset ‘optical’ value for the wealthy asset holders, allowing the youth a bite of the apple, but at great national cost.
Trump, since entering office, has been pushing the $DXY down and oil down. But now there’s an issue: the market (financial conditions) has loosened, and this takes approximately nine months to impact the business cycle (ISM). We’re now entering a ‘deflationary’ scare — hence his commentary — whilst also pushing the Fed to lower rates, as well as provide QE.
Deflation is worse than inflation. Inflation results in political upheaval, whereas deflation leads to systemic societal and government collapse — i.e., the wealth of the nation is lost, and the cost of servicing debt rises due to declining asset valuations to tax, or insufficient GDP growth to refinance into.
On the other hand, China is devaluing its debt against gold, whilst trying to retain a range in dollars for its currency so exports continue, but in doing so its debt is effectively destroyed.
Chart above is China Government Debt/Gold, Chart below is Chinese Gold Imports, and below that CNYUSD with the ideal range.
Which has driven up demand for gold — which likely has some way to run (a couple of hundred dollars). But over the long run, due to the US need to debase and the Debt/Gold ratio, prices of $10,000–$15,000–$25,000 per ounce aren’t out of the question (over the decades to come).
And as gold runs, silver generally runs after — and much more ferociously (in both directions). Thankfully, as I’m rid of ours now — purchased a decade and a half ago to ‘show capability to support a family’ at a traditional Asian marriage.
I was happy and fortunate to be relieved for Silver is a widow maker in my view, silver is driven by a few areas, industrial, military (check how much silver goes into each missile) and strategic reserves (US) — then add in speculation… can it go optically higher, sure, but for me this is pure speculation currently thus I advise liquidating that — and not being left with something that can sit there for a decade or more — underperforming currency debasement by a wide margin.
Which brings me to the market(s). Depending on who you listen to, Henrik Zeberg is in the deflation camp, Raoul Pal is in the debasement camp, and I’m in the “Let’s get out, pay any debt, and buy a farm” camp. The reality is there are so many spinning plates — from domestic (US) to offshore (carry trades, Eurodollar, etc.) — that at some point they will lose control.
Trump is saying “deflation is worse than inflation”; he’s correct. He has Bessent saying this in his ear. But they are powerless as long as the Fed doesn’t play ball, leading toward a catastrophe that will ultimately result in even more debasement (the liquidity hose) due to being late — yet again. Others believe we’re going to collapse into a deflationary spiral because the Fed is late and the business cycle is entering a recession.
Arguably, we’ve already been in that recession. And if there’s one asset that sniffs out the economic situation, it’s Bitcoin — for it is a barometer not just of the economy, but also of macroeconomic liquidity conditions — hence its relative flatness since 2022 (regardless of price appreciation).
But as you can see, that’s entering a bottoming zone, above which it will either spring up and then roll over for a final bottom, or break out.
Likewise below, versus gold, it either follows a similar path (taking gold to ~$4,700 an ounce?), or it breaks out in the near term.
In the following chart you have Total Global Liquidity.
This is rolling down. It usually goes to around −2 standard deviations. Even if the Fed pumps liquidity in now — and other states do as well — it won’t have an impact for months unless they literally buy markets directly (i.e., equities, private debt, etc.). Otherwise, it follows the traditional route (government debt, MBS), which allows those markets to receive a flush of liquidity. That liquidity then enables hypothecation via “deep, liquid” markets and gradually flows into the system — a process that typically takes 9–12 months.
Thus, the US is using alternative methods.
Trump Accounts (direct stimulation): giving eligible children born between X and Y $1,000 of S&P 500 exposure (with claims of $1,000 growing to $600,000 by retirement, assuming ~10.3% per year).
Trump Tariff Rebates (direct stimulation)
Up-to 2,000$ per tax payer providing a direct stimulus cheque.
Trump Troops Bonus
Each Trooper will receive $1,776 before Christmas
What you are seeing is not only populace politics (buying his base), but flooding the market where he can with stimmies — because there is a real threat of deflation from a two-pronged direction.
The economy is dire; the ‘peasants’ need cash to service their existence. That props up businesses, which generates GDP, which generates taxes, which in turn enables, in part, the rollover of debt — some $9 trillion in the coming year. This is direct, as it’s the firehose, whilst he’s waiting for the tanker (the Fed) to come under his control: lowering rates (freeing up liquidity) and increasing QE (indirect liquidity injections).
Is it enough? Perhaps. But it’s certainly inflationary. We like monetary inflation…
We do not like variable inflation. Variable inflation has no monetary hedge — i.e., the cost of living rises and assets decline. With monetary inflation, assets rise and the variable component is controllable. He is doing both.
First variable inflation (direct stimulation into the consumers hands)
Second monetary inflation (debases currency, provides liquidity, supports hypothecation)
Which brings me back to BTC as the canary in the coal mine. This chart shows that, regardless of the lack of a blow-off top, the market peaked in 2024 — even though prices have risen.
This is because of various forms of indirect QE, which we call “Treasury QE”. It’s enough to keep assets elevated as long as risk isn’t rising in the rehypothecation process (which it has), but not enough for a full-blown market run.
However, as shown below, parabolic support is rising. Bitcoin is underperforming gold (but showing signs of bottoming). It’s also underperforming global liquidity (total global liquidity), the momentum of which is rising; when that momentum turns up from declining, BTC normally goes on a tear.
The Power Law Decay is approaching a bottoming.
My thoughts are it’s going to do this — $150,000 max. This is my gut. My systems say $180,000. My gut is usually right: it was right in May 2019, Feb 2021, June–October 2022, March 2023, Dec 2024, and unfortunately for me — October 2025.
I think the system(s), though factoring in the macro, are not factoring in the damage — or rather the rhetoric and damage — of Trump’s management of the US economy and the global economy. I recognize he tried to starve it of oxygen (liquidity) to stop the market exploding higher and then collapsing into a full-blown recession during the mid-terms. But by doing so, he’s destroyed a lot of capital that could or would have been deployed, whilst creating havoc globally.
I believe the markets will rise into early 2026. I believe that, with all these stimmies, inflation will occur, and at the same time the US will be freeing up Fed QE, which will create more liquidity and cause markets to explode. But during the inflationary scare, and at a time when so much debt is rolling over, I suspect oxygen (liquidity) will be suffocated from the room.
So I’d say use BTC as your positioning barometer, and hedge — at least partially — over the course of this run into something that will almost certainly be eaten by inflation (cash/bonds), but will at least provide some liquidity during a volatile period. I’d also suggest holding that cash in reserve, or rather not in the banking system unless it’s secured — being considerate of bail-in laws — as Trump is trying to steer super-tankers on a path that is fraught with wild storms.
I close this (hopefully until the new year — markets dependent — hopefully my final post will be within Q1 as the markets come to a reasonable position that we feel confident to alleviate ourselves of ever looking at a financial chart, or data again, concentrating instead on seeds and vines…
Until then — happy holidays.
