A Nightmare Scenario

Cryptos untether, Bankman gets Fried, the Swedes win The Covid Games and plenty more...

(Source: Getty Images)

Bill Bonner, reckoning today from Youghal, Ireland...

Gizmodo reports:  

Tether Sinks Below $1 in Nightmare Scenario for Bitcoin’s Future

The cryptocurrency market continued to hemorrhage money Thursday, with the most popular coins down double-digit percentages over the past 24 hours. And absolutely no one knows when things will bottom out, with many people worried the entire market of fake digital money could go to zero as the stablecoin Tether officially traded below $1 for the first time ever early Thursday. 

Bitcoin, the most popular cryptocurrency in the world, is down 11.2% over the past day, currently sitting at $27,959—roughly 58% lower than its all-time high of $69,000 in mid-November. Ethereum has struggled even worse in the past 24 hours, down 19.9% to a price of $1,930.

Cryptos may or may not be the future of money. But we saw yesterday that when the money goes, everything goes. As the feds diddled the dollar… it was hard to know what anything was really worth. 

But now, like soldiers leaving a ruined city, the Fed is in retreat. And Mr. Market discovers atrocities.  

One of the leading meme stocks, for example, was AMC… a well-known chain of movie theaters. It was trading at $10 a year ago. Now, it’s back to $10, after blasting up to nearly $60 in June of last year.

GameStop, another meme favorite, went above $300 back in January 2021. It’s now in the ‘80s. And if symmetry rules as we think it does, the company will be back under $5 soon.

They that did ride most high do lie most low…

Bankman… Fried?

Crypto billionaire Sam Bankman-Fried has seen his wealth cut in half… so far. 

Riding high in the saddle too was Cathy Wood’s Ark fund. It’s down about 75% from its high. And poor Ms. Wood; a press photo shows her hair has gone gray.

Atrocities are punished in the private sector. That’s what bear markets are for.

In the public sector, they are more often rewarded.  

Yes, today we continue our tour of the Incompetents Hall of Fame. There’s Ben Bernanke and Janet Yellen, of course. And generals David Petraeus, Stanley McChrystal and Mark Milley. And of course – Bush, Obama, Trump and Biden.  

Any one of these men might be fine in private life. Bush owned a baseball team.  Obama might have made a perfectly good high-school history teacher. Trump… a fast-and-loose real estate developer. And Biden? The man is an able hack and could fit into any organization that needs one.   

Instead, they were placed in charge of public policy… telling other people what to do… and each one made a disaster out of it. Why? 

We’re just connecting the dots here.

How come Americans are getting poorer? How come GDP is falling?

How come public policies seem designed to fail? How come public officials act like morons?  

What will the Fed do when the going really gets tough?

Today, let’s look at another arm of the ruling clique… the medical/pharmaceutical/health bureaucracy complex.

The Covid Games

In March 2020, it was obvious that a new plague was upon us. And there were two alternatives for how to deal with it.

The first was not to make a federal case of it, but just let ‘the people’ decide. This ‘bottom up’ approach was taken by many poor countries…and by Sweden.

The Swedes were quickly labeled “anti-science;” Sweden was practically considered an outlaw state.

The other approach – top down  – was favored by the ruling caste of almost all other developed countries. It involved lockdowns, masking, vaccines, and social distancing. ‘The science,’ they said, required it. The idea was to stop the virus… to keep it from circulating so it couldn’t infect people.

Which approach worked better?  

On the available evidence, the Swedes were right… our health officials turned out to be as incompetent at stopping the Covid 19 as our Fed was at preventing inflation. The Week reports:     

Sweden has one of Europe’s lowest Covid-19 death rates despite shunning most lockdown restrictions, new data released by the World Health Organization (WHO) suggests.  

Stockholm chose not to implement a full national lockdown during the pandemic, instead relying on “voluntary changes to behaviour”, said The Telegraph. The decision meant the nation was “deemed almost to be a rogue state” as other countries introduced wide-ranging restrictions to stem the spread of the virus. 

But according to the WHO figures, Sweden had an excess death rate of 56 per 100,000 – well below the global average of 96. By comparison, between 2020 and 2021, the UK’s excess death rate was 109, Spain’s was 111, and Germany’s was 116. 

At the beginning of the pandemic, Sweden’s public health officials argued that it would “take years” to see which approaches to combating Covid-19 would be most effective, The Telegraph reported, arguing it would be better to avoid “untested measures”. 

They also took into consideration the “collateral damage” of lockdown, such as “the missed cancer diagnoses, the cancelled hospital appointments, and the lost education”, the paper said. And the decision “appears to have been vindicated”.

The Swedes’ approach was called the “light touch.” It meant leaving doctors and patients alone, letting them make their own decisions. But the majority of the world’s governments – advised by their health apparatchiks and pharmaceutical industries – chose the heavy touch.

Collateral Damage

Dear readers will recognize the ‘heavy touch;’ it was the path taken by the incompetents. The Bush administration, for example, after the Twin Towers attack of 9/11/01. Rather than allow the police and the judicial system to track down the perps, and bring them to justice at minimal cost and little disruption, the Bush team invaded Iraq, which had nothing to do with the Twin Towers disaster.  

The ‘heavy touch’ was also the route chosen by the Fed. In the mortgage finance crisis of ’08-’09, it did not stand back and let people work out their own financial problems. In an honest economy, speculators who had made bad bets would have lost money… CEOs would have given up their bonuses… corporations would have gone bust.

Instead, the Fed bashed in the door like a team of ATF agents on a midnight raid. They dictated interest rates (below zero, inflation adjusted)… funded the federal government’s ghastly ‘rescue’ plans… and rewarded reckless risk taking.

Learning nothing from this episode, they repeated it in 2020-21… but on an even greater scale, with $4 trillion in money-printing in just 18 months, a new record. 

And now, we are suffering the ‘collateral damage.’

Sweden tried to take into account the “collateral damage” done by Covid-fighting policies. But no one has yet tried to plumb the depths of hurt caused by the combination of heavy handed policies in both health and finance.  

On Monday, we will take a stab at it.

Regards,

Bill Bonner

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