20th August 2024 > > Global fiat liquidity.

tl;dr

Global fiat liquidity is on the up, to the benefit of all hard assets, but especially the riskier ones.

Market Snap

Market Wrap

Despite breaching $61k to the upside, the short base in BTC has hardly been reduced at all, which is fine by me. A rapid and sharp short squeeze higher may be just what we need to challenge this tight trading range.

Curious Cryptos’ Commentary – Global fiat liquidity

QE is just one of the means that politicians use to increase fiat liquidity, though it is one of the most visible. It isn’t quite the measure of last resort, though the fact that it is widely telegraphed by central banks at the direction of their political masters means that stuff has to have got pretty bad to justify using it. Meanwhile, there are plenty of other tricks and tools that are available. The Bank Term Funding Program was one. The European Financial Stability Facility was another, which continues under a different guise to allow for (illegal) debt monetisation for the periphery, in the absence of which the Euro would no longer exist. And of course, once the German taxpayer finds out the truth about the profligacy of their government ever since the GFC as expressed in the positive Target 2 balance at the Bundesbank (i.e. Germany is paying for most of the other countries in the Eurozone), the political quake will be seismic.

Regardless of who wins the US election in November, there will be no desire to address the fiscal incontinence which has driven US on-balance sheet debt to $32 TRILLION and off-balance debt to many multiples of that number. Once the election is out of the way, additional dollar liquidity will be added in size, driving up the price of all hard assets relative to fiat. This is not progressive policy. Indeed, it is the exact opposite, but the politicians and central bankers won’t admit to that.

But there is more. The global liquidity cycle is only just at the beginning of a huge ramp-up:

Francesco makes an argument about gold prices, which recently topped $2,500 for the first time ever, and that historically a new ATH for gold has been an indicator of incoming exuberance in stock markets and, yes you guessed it, crypto markets. Just for fun, here is his conclusion:

Go on, Francesco!ction other than up from here?