And it’s time, time, time

And it’s time, time, time

It’s time, time, time that you love

And it’s time, time, time…

– Tom Waits

POITOU, FRANCE – “So how much did you make last night?”

“We made about $15,000,” came the reply from our eldest son, a keen cryptocurrency investor.

“Bitcoin briefly pierced the $3,500 mark – an all-time high. The market cap of the entire crypto market shot up, too… with daily trading volume also rising.

“And remember, this is still a tiny market. Most people don’t own any cryptocurrencies. Most people don’t even know what cryptocurrencies are. The whole market is only one sixty-fifth the size of the entire gold market.

“There’s a lot of room to grow. Eventually, everyone will be using cryptos.”

[Editor’s Note: Catch up on Bill’s earlier conversations on cryptocurrencies here and here.]

Fools and Rascals

The rise of cryptocurrencies is our subject for this week.

According to our source, cryptos are not only the most profitable investment in the history of mammon… but also the most important innovation in the financial world since King Croesus minted the first gold coin in Lydia, in modern-day Turkey, nearly 3,000 years ago.

We have been connecting the dots. Between money and economic growth. Between real money and real resources. Between gold and cryptocurrencies. Between gold, cryptocurrencies… and time.

Today, we stand back… and our mouth drops open as we behold a bigger picture – a breathtaking tableau worthy of Bruegel or perhaps Bosch.

Yes, there are the sinners and the saints… the fools and the rascals… the blessed and the damned. All there.

The scene brought to light by the latest connecting of dots answers the No. 1 economic question of our time: What went wrong with the 21st century?

The simple answer: Economists backed a truck over it.

Flaming Dud

To bring readers fully up to speed, the 21st century has been a flaming dud. In practically every way.

Despite more new technology than ever… more PhDs… more researchers… more patents… more earnest strivers than ever before sweating to move things ahead…

…and despite more “stimulus” from the Fed ($3.6 trillion) than ever in history…

…U.S. GDP growth rates are only half of those of the last century. And household incomes, after you factor in inflation, are flat.

In fact, by some calculations – using non-fiddled measures of inflation – growth has been negative for the whole 21st century. Meanwhile, there are more people tending bar or waiting tables… and fewer people with full-time breadwinner jobs. And productivity and personal savings rates have collapsed.

And those are only the measurable trends.

Political and social developments have been similarly dud-ish – including the longest, losingest war in U.S. history… the biggest government deficits… the most vulgar public life… the least personal freedom… and, in our hometown, Baltimore, a record murder rate.

What went wrong?

Herewith, a hypothesis. It suggests three “causes,” all three linked by a single shared element: time.

Elastic Measure

First, we no longer have real money.

We have been operating with the feds’ fake dollars since 1971, when President Nixon finally took the U.S. off the gold standard.

These fake dollars have no connection to time. They are unlimited in supply, unrestrained by available resources, and unhinged from the real world.

Like an elastic tape measure, they give you no way to honestly or accurately measure value.

So mistakes, misallocation of resources, and claptrap projects waste time and resources.

Some examples:

On Main Street, malls got overbuilt… as retailers expanded with cheap credit to sell products to consumers who couldn’t afford them.

On Wall Street, private equity hustlers and corporate insiders borrowed heavily at ultra-low rates… paid themselves huge fees and bonuses… and left their businesses to go broke (Sears… Payless).

In Washington, the Deep State used fake money to transfer real wealth to itself, its clients, and its cronies (defense contractors, Big Pharma, insurers… even private prison operators).

The federal government is now looking at average deficits of $1 trillion a year over the next 10 years – which would have been impossible to fund with real money.

Second, we have too much debt. The consequence of having an almost infinite amount of “money” to lend… at derisory low rates… is that you end up with a lot more debt.

Consumer, business, and government debt… even stock market margin debt… are at or near record highs.

Debt is a burden that the past imposes on the future. As the weight increases, it becomes harder and harder to move forward. (In their book This Time Is Different, Harvard professors Rogoff and Reinhart showed that as debt increases, growth declines.)

Third, we waste too much time.

Internet revolutionaries had scarcely found their pitchforks when… in these very pages… we wondered whether the innovation would turn out to be a great boon to the economy or just a time waster like TV.

Now, 20 years into the Internet Era – with all its POTUS tweets and Facebook whistles – we can see it is a bust. At least for economic growth.

The average Joe now spends 5.6 hours a day consuming digital media. (That’s in addition to the five hours he spends watching TV!)

Is he learning how to increase productivity? Is he sharpening his masonry skills? Is he studying ancient Greek or brushing up on his calculus?

Nah… he’s on a porno site. Or a political rant on Twitter. Or a Facebook blabfest.

And precious time goes by.

Ultimate Constraint

Fake money causes people to waste time and money.

And central bank policies discourage savings by lowering interest rates… even pushing them into negative territory. Instead of saving them for the future… resources are consumed today.

These mistakes accumulate as debt… which then forces people to spend more time servicing the mistakes of the past.

Meanwhile, the internet gives people a new way to waste time. At home. At work. On the high plains. Or in the lowlife back alleys. People spend their precious time on idle distractions and entertainments.

That leaves fewer people doing the real work that progress requires – saving, investing, and working for the future.

Time is always the ultimate constraint. You can substitute one resource for another. You can switch from oil to solar… or copper to aluminum. But there’s no swapping out time.

There’s nothing like it. Get on the wrong side of time, and you are out of luck.

Regards,

Signature

Bill

 

Market Insight: Gold Dwarfs the Crypto Market


BY CHRIS LOWE, EDITOR AT LARGE, Bonner & partners


bill bonner

As Bill mentioned above, the gold market still dwarfs the cryptocurrency market…

Today’s chart compares the total value of all the gold ever mined with the total value of all bitcoins in existence… and the total value of all cryptocurrencies in existence.

As you can see from today’s chart, the total market cap is $120 billion for all cryptocurrencies… and just $54 billion for all bitcoins.

At today’s price of $1,280 an ounce, all the gold ever mined – 190,000 tons – is worth $7.8 trillion.

That’s 65 times higher than the value of all cryptocurrencies in existence and 145 times higher than the value of all bitcoins in existence.

If the bitcoin market cap reaches just 10% of the value of all the above-ground gold, each bitcoin would be worth $37,000.

Chris Lowe

P.S. My colleague Teeka Tiwari spent much of last year on the road learning everything he could about how to profit from the rise of cryptocurrencies. And what he discovered is remarkable.

Teeka’s team recently identified a digital currency that costs a fraction of bitcoin… with even more upside. It’s being tested by banks and even blue-chip companies such as Microsoft. Learn all about Teeka’s favorite “ground floor” alternative to bitcoin, and how you can buy it, right here.

Featured Reads

ICOs Are Heating Up
Initial coin offerings (ICOs) allow entrepreneurs to raise money by issuing virtual currencies that act like “shares” in a company. And these alternatives to initial public offerings (IPOs) are growing… fast.

North Korea Is Making the Markets Nervous
Increased tension between North Korea and the United States, as well as President Donald Trump’s threat of “fire and fury,” is making investors nervous… especially in Asia.

$3 Trillion Stolen by 2020
The financial damage done by cybercriminals is expected to triple in the next five years. Colleague and technology expert Jeff Brown shows how serious the threat is… and how it could reignite a beaten-down industry.

Mailbag

In today’s mailbag, Bill’s recent conversation with his son on cryptocurrencies has gotten readers thinking…

Thank you for your letter about cryptocurrencies. I too have had my doubts about being involved with bitcoin and other cryptos. The reasoning behind cryptocurrencies I can understand and agree with. There needs to be a way to break the stranglehold of the present financial system to a new paradigm.

No, I don’t understand the workings of blockchain. And I’m hesitant about the rapidly rising value of cryptocurrencies. It’s somewhat unnerving. I ask myself, “Is it too good to be true?” I don’t have an answer, but I was reassured that, in your usual openness, you were trying to figure it out too. For me, that is reassuring.

– Jan M.

Why not give your son a shot at explaining cryptocurrencies to us? I’m in your camp when it comes to these cryptos. But he seems to have gotten you thinking… I’ll even pay him to get him started!

– Jim C.

Ask your son about this: Many of us believe that the dollar will one day have zero value and that gold will go to the moon; if we’re right at least about the direction, how will bitcoin measure up?

All the conversations I’ve heard from “libertarian nerds” joyfully brag about its value in dollars, and give examples which to my mind show how far the dollar has fallen, and sound remarkably like discussions of the value of tulip bulbs.

Imagine that something happens to the dollar and it rapidly loses value or that something happens that prevents you from converting bitcoin to dollars. Will anyone want bitcoin then?

– Sandra K.

In Case You Missed It…

Tomorrow at 8 p.m. ET, colleagues Doug Casey and Casey Report editor E.B. Tucker will share details on what they’re calling the biggest breakthrough in Casey Research’s 40-year history… a system to identify tiny stocks with the potential to pay out 700%, 800%, even 900%.

To help you prepare, E.B. just released a brand-new video on what may be the most important concept you could learn as an investor. Watch it by registering for E.B.’s free training seminar right here.