Thread by Coinbits | DCA into bitcoin

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We are heading down a slippery and dangerous slope:

Governments worldwide have unmanageable debt & rising rates make matters worse.
While the future is uncertain, there aren't many possible outcomes.

Why & How Governments Fail Financially
(and how #Bitcoin fixes this)
🧵
1/14
2/
There are 2 main ways governments can financially fail.

1. lose ability to meet obligations to repay debt

2. fails to reassure the public that the value of its currency can still be trusted, leading to hyperinflation.

6 countries have never (yet) defaulted on their debt--
3/
Those countries: NZ, AUS, CAN, Thailand, Denmark and the US. For now.
Both causes involve loss of trust.

When a government loses trust through incompetence, corruption, or as a result of a war loss, chaos typically ensues.
Currently:
War✅
Incompetence ✅
Corruption ✅
😬
4/
First let's review the debt default route:

if a government takes on excessive borrowing and cannot repay its creditors, it may cut spending and raise taxes, but if that's not enough, a default is the likely outcome.
5/
So what can a gov't do to avoid defaulting on its debt?
Fire up their money printers!
This helps gov'ts save face and meet their obligations, short-term, but weakens trust in the currency over the long-term.
This sets up the path to hyperinflation which works like this:
6/
A gov't that cannot raise taxes to pay for its spending and cannot raise funds by selling its debt (see our bonds thread below), has no alternative but to monetize its own debt by buying it... with newly created money.

Where are we now?
😬

7/
The hyperinflation mechanism:
1. debt unmanageable.
2. money printing
3. Prices rise, as goods can't be produced faster than the new money units can.
4. money printing & hand-outs to combat rising prices
5. More price rises
6. 🔁
7. Hyperinflation

Weimar Marks after WWI:
8/
While Weimar Germany is the poster child for hyperinflation, it's hardly the only example.

The chart below from @WTF_1971 shows the number of hyperinflationary episodes since the creation of the Fed, and how the steps of hyperinflations took off since full fiat in 1971
9/
Example of how bad this can get: Hungarian pengo at the height of that hyperinflation in July 1946 went to $1 USD = 460 septillion.

That is 460,000,000,000,000,000,000,000,000

here is a 1,000,000,000,000,000 pengo bill from 1946.
10/
The alternative to this would be to simply not meet your financial obligations by printing money: debt default.
A govt can find its debt spiraling out of control as interest payments rise faster than it can raise taxes as @jameslavish explains here:

11/
Those lending to gov'ts (ie bonds) will charge more if they think the risk of default (h/t @FossGregfoss) is high, to compensate for the risk.
As lenders lose confidence and demand more in interest, the debt becomes more difficult to control.

Argentina as a case study:
12/
In either case (hyperinflation or debt default) public trust is irreparably damaged.
In both cases turbulent times ensue.
In both cases there is a higher demand for order; as it usually coincides with a 4th turning (h/t @Bquittem):

13/
#Bitcoin fixes this.
It is both

The cure:
Bitcoin eliminates the root cause of these issues: central planning of the money supply.

and the shield:
in these circumstances, hard assets that have no counter-party risk are the best wealth protectors. Bitcoin is the best of both
14/End

We hope you've enjoyed this thread!
If you learned something new or enjoyed reading this, help us spread the education by sharing this nested tweet with others, and give us a follow!


PS— for more on the “debt default” route, check out this master class in a thread by the one and only @1MarkMoss

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