June 3, 2020

The Future of Bitcoin with Travis Kling on The Pomp Podcast with Anthony Pompliano

Check out this Episode and Show Notes

Key Takeaways

• The U.S. will hold China responsible for the Coronavirus epidemic and demand a full account of the facts
• The Coronavirus is the Great Accelerator: in the next ten years the Euro will be extinct and the US digital  dollar will become reality
• Trump ran on a Make America Great Again platform – the Coronavirus will accelerate his policies
• The stock market has become more of a representation of central bank actions
• De-globalization will help with inflation because the U.S. now understands the hazards of having critical supply chains offshore
• “The older fund managers still think Bitcoin is magic internet money for drug dealers to buy drugs on the internet” – Travis Kling
• The US dollar being the world currency is a “pain in China’s ass”
• This generation could shift the world reserve currency from the U.S. dollar to non-sovereign currency, (Bitcoin) governed by open-source computer software
• Prediction: Disposable personal income for 2020 will be up 0.5% from 2019 thanks to stimulus dollars

Intro

Travis Kling (@Travis_Kling) is the Founder and Chief Investment Officer at Ikigai Asset Management, a crypto hedge fund

Host: Anthony Pompliano (@APomliano)

Coronavirus = “The Great Accelerator”

• The Coronavirus is the Great Accelerator: it accelerated trends already on the way
  • E.g) Working from home
• The economic fallout caused by the virus also exposed shams like the over-valuation of companies
• It exacerbated the dollar shortage already in place before the virus hit, especially in the capital markets
  • One of the reasons why the Fed acted quickly and with so much money in 45 days was to solve a liquidity crunch
• “We crossed the Rubicon so rapidly that things previously thought unacceptable, were now okay” – Travis Kling

The U.S. Dollar’s Role in the Macroeconomic World

• The U.S. Dollar is the world reserve currency
• Countries around the world transact in the U.S. dollar because it’s stable
• The dollar shortage has been going on for at least one year
• In March when the crisis hit, countries around world couldn’t get enough U.S. dollars
• The $ 7trillion (total) stimulus released in March/April dwarfed the $2 trillion spent during the 2008-2009 financial crisis and the dollar index (DIXIE) didn’t change – that’s how short the world was of US dollars
  • Dixie – dollar index, dollar weighted against a basket of currencies
• Prediction from Goldman Sachs: Disposable personal income for 2020 will be up 0.5% from 2019, possibly because of massive amounts of stimulus
• The way to urge recovery, is to weaken the dollar by flooding the market with currency

The Stock Market’s Performance Reflects Increased Liquidity from the Central Bank

• The stock market has become more of a representation of central bank actions
• It’s hard to walk back the stimulus, some people are making more money being unemployed than working their regular jobs

How Much Political Posturing Plays into Policy?

• “It’s disappointing how political the response has become. I’d hope we could have done better” – Travis Kling
• The fighting over the stimulus is just posturing – the choice is between an unbelievable amount of money to a really unbelievable amount of money

Deglobalization Will Help Promote Inflation

• The US government is searching for an inflation rate of 2% – so they’ll keep doing more in terms of monetary and fiscal stimulus
• The Coronavirus is a deflationary event
• Other deflationary factors:
  • An elderly population
  • Oil price pullback
• Unprofitable companies pose a problem because the market allows them to issue debt for businesses that don’t generate cash flow – it’s like throwing capital into a hole that isn’t producing GDP
• Deglobalization will help with inflation because the U.S. now understands the hazards of moving critical supply chains offshore like pharmaceuticals, PPE, microchips
• It will take $300 billion to bring back supply chain from China AND in the process create more jobs in the U.S.- it will help inflation and fight communism
• With the 2008 financial crisis, inflation never observed
• “Right now, everybody’s in worst shape then we are, the Euro and the Yen”-Travis Kling

Geopolitical Impact of the Coronavirus

• Trump ran on a Make America Great Again platform – the Coronavirus will accelerate his policies
• Many of Trump’s policies appear to be driven by Steve Bannon who understands the geopolitical landscape but who Travis believes is “hawkish”
• The U.S. will hold China responsible for the Coronavirus epidemic and demand complete disclosure of facts
  • Intelligence agencies are all over it already
• Conservatives view the Chinese government as a bad actor
• “The US is about to put the screws to China in a bunch of different ways – then we’ll see how strong their economy is” -Travis Kling
• It is unlikely that conflict will emerge between the U.S. and China. Experts say China does not have an interest in a physical war
• Some think China itself might be on the verge of a breakup

Currency Comes Down to Trust

• The transition of world reserve currency happens in times of upheaval
  • Last time was after WWI when the British pound was wrecked
• Between wars, both the pound and dollar were used
• After WWII, the U.S. dollar became the world reserve currency standard

A Post-U.S. Dollar as World Reserver Currency World

• “This generation could go to non-sovereign currency, governed by open-source computer software” – Travis Kling
• Other countries may get tired with US-China economic battles
• But the U.S. government says it has infinite money

The Generation Gap and Bitcoin

• The older generation thinks the younger generation shouldn’t complain about their government
• But people want transparency – in the last 90 days new investors are looking into Bitcoin and the crypto community
• In uncertain times, investors can do four things:
  • Hold gold
  • Hold dollars –  but it can devalue in the long term
  • Hold land
  • Hold Bitcoin
• The same parties that drive gold and real estate will drive Bitcoin
• If the S&P goes up, Bitcoin will benefit
• Anti-fragility is a key part of Bitcoin
• Bitcoin was down 50% on black Thursday but the magnitude of the bounce-back was just as impressive led mostly by U.S. retail buyers
• Look at monetary systems, it is a belief system, and no group believes its currency more than Bitcoiners” – Anthony Pompliano

Expect Greater Institutional Adoption of Bitcoin

• Big fund managers own bitcoin personally but don’t have it in their institutional portfolio
• But that’s starting to change – doubters are aging out of the job over time: “The seventy- year-olds still think this is magic internet money for drug dealers to buy drugs on the internet” – Travis Kling

Predictions

• As we move through the 2020s, we can expect huge changes
  • The Euro will be extinct
  • Africa will be home to the largest potential growth in the next ten years
  • The digital dollar is coming
• “The internet is going to break the Fed because it is dependent upon 50% of Americans not understanding how monetary policy works. People will say this is a rigged system”
• A year from now, there will be all-time highs and accumulation will be happening in Bitcoin
• Helpful Data Point: How much leverage is in the bitcoin price discovery process, and how much in longs and shorts

Pomp Podcast : bitcoin, china, coronavirus, crypto, deglobalization, economy, show notes, stimulus
Notes By EWerbitsky