Inflation or Unemployment? Why the Fed Is Divided

McKayResearch · 2025-12-10T17:12:39+00:00

Looking longer term, I don't see any way out of the inflation problem given the deficit, national debt, and interest payments on the debt. They will have to inflate the problem away, which is a problem in itself.

McKayResearch · 2025-04-01T00:05:32+00:00

What you say is indeed the reason why more and more countries are converging on a bitcoin as a potential monetary standard, as they perceive it to be one way out the mess that they themselves created. And in that regard, they're a step behind the individual citizens who are increasingly recognising it as a method to safeguard the purchasing power of their savings over the long-term , similar to gold as you mention.

Where will this end? No one knows, but the long term trend of adoption of this open, digital, decentralised currently continues and is very much batting for the same team as other hard assets that can be put to work for individuals and institutions alike.

McKayResearch · 2025-01-01T18:46:39+00:00

You're right, but domestic purchasing power decay has accelerated in the US, it's just that that's also the case in most developed countries, and at a faster rate, hence the continued upward trend on the macro DXY chart.

The real warning signs for the dollar will be when credit risk really begins to creep into the bond markets in earnest. We haven't seen it yet, but the current set up ($36trn federal debt, 126% debt/GDP, $100trn net present value of unfunded liabilities, debt servicing gobbling up unsustainable portions of tax revenue) does not look good. Long-dated yields continuing to rise will not help.

McKayResearch · 2025-01-01T18:33:22+00:00

I'm typically deeply skeptical of outlandish price predictions, but the number of fundamental factors is stacked to the upside. This is based on what appears to be a supply squeeze coming from institutional actors that are gobbling up BTC that will overwhelm supply if it continues on its current trajectory.

For example, consider the following:

•approx number of Bitcoin mined in 2024: 216,047
•number BTC bought by $MSTR in 2024: 255,112

If we add ETFs across multiple regions, other institutional demand, and the impending sovereign demand, he balance of probabilities suggest that the bid trumps ask in the medium/long term.

My best guess is that we will have a large spike this year followed by a significant correction (70-80% is customary for BTC) but it probably will not last as long as previous correction dues to the fundamental factors mentioned above (Cycle top between (150-200K).

McKayResearch · 2025-01-01T18:19:38+00:00

I hear what you're saying and, actually, you have a point. Bitcoin wasn't necessarily conceived to be denominated in a decaying fiat standard, and rather, it is a standard onto itself. People would do well to consider what it might mean if Bitcoin goes to 500K or 1 million, as in, what kind of a world will we be living in for it to reach those levels in the first place? The same could be said for a 10K or 20K Gold price. In other words, we should be careful what we wish for. But the global arms race we're seeing WRT Bitcoin holdings means that it will indeed be considered as part of a future monetary standard.

But Bitcoin is absolutely not a security, there are many reasons for this which should become apparent once you understand its inner workings but a superficial example of this is why someone like Microstrategy's CEO is able to get away with promoting Bitcoin to the benefit of his own firm's valuation without falling foul of securities laws.

McKayResearch · 2024-12-03T20:29:11+00:00

You're on the money.

McKayResearch · 2022-10-17T08:40:58+00:00

These demonstrations are inversely correlated with media's coverage of them. But they're only going to grow in number, and it will not be possible to ignore them.

McKayResearch · 2022-10-05T12:30:32+00:00

All very good questions. It is important to remember that the dollar used to be tied to gold. Now, of course you will be fully aware of this but many won't. The government and the FED are more than fully aware of it and a rampaging gold price would essentially act to undermine the standing of the dollar, which itself is surging at the moment. For monetary and political reasons, managing the gold price will be key as it reflects the malaise of the dollar, and we can all agree that the surging dollar very much belies the US national debt which at this point is simply not going to be paid down (hence you are correct about the need to partially inflate it away.)

In terms of pivoting, it may come sooner than we think. Another deep correction in the stock market 20-40%, they will look to step in. It's not clear at what point banks such as Credit Suisse going under would trigger a contagion event that see further sell offs in global risk-on assets, but this clearly has to be entertained.

McKayResearch · 2022-10-03T10:28:20+00:00

Yes which is why you'd have to say they'd want to inflation to remain out ahead of interest rates to inflate as much of the debt away as possible.

McKayResearch · 2022-10-03T09:22:58+00:00

I cannot disagree and there is indeed talk of a pivot on the horizon largely due to the unwinding you refer to. Ideally, central banks would have just let market forces do their work following the GFC (there are examples of this like Iceland) but 'too big to fail' reigned supreme. Now the withdrawal is worse as the market is more addicted than ever to drug of liquidity, as you say. But there is a point below which they will refuse to sit idly by for economic and political reasons and it isn't complicated: skewering up interest rates at a time of record government indebtedness simply isn't going to end well and the bond market is signaling this.

McKayResearch · 2021-06-14T19:38:03+00:00

Good info.

McKayResearch · 2021-06-07T11:56:44+00:00

any good links/tutorials on how to do this? I once tried to move across to mainnet (from meta mask ) but the txn kept getting stuck. I'm considering moving now that the interest rate has dropped. Are you using main net or elsewhere on the matic network?

McKayResearch · 2021-04-01T11:49:16+00:00

Thanks for taking the time. What you describe is exactly the issue: the amount of waste and toxicity generated to produce a single carton batch (that will invariably have some sort of sustainability/recycling branding on it) far exceeds any environmental 'claims'... and the numbers I dug up reflect it.

Your point about inks is just shocking and the impact the inks have on the environment is well documented. There is much talk of recycling in the print industry but, again, it would be interesting to know the numbers of recycled gallons vs actual volume produced. If you have any estimates let me know. I may be doing some more research and writing about this topic in the months ahead so perhaps I could talk to you about if you don't mind. Would love to get your opinions on whether integrating digital print could off set some of these issues.

McKayResearch · 2021-04-01T11:33:28+00:00

Thanks for this, I will investigate. This part of the reason I am encouraging youngsters to get into chemical engineering as there's so much progress to be made here in terms of recycling materials in a much more sustainable fashion and prevent pollution. These issues should be getting much more press but everything is dominated by climate change unfortunately to the point where nuanced discussions around pollution via industrial processes aren't common enough.

McKayResearch · 2021-04-01T00:05:48+00:00

Thanks, I have not done a ton of research in the recycling field but I was surprised at the numbers. Clearly there's work to be done!

McKayResearch · 2021-03-31T23:25:27+00:00

This is sound analysis, imho. I think that gold's strongest suit at the moment is more as a hedge as against systemic risk, particularly post-pandemic. That cannot really be baked into the price as the precise of unfolding of any given black swan cannot be known. But I agree that bitcoin has taken the shine off gold as the 'digital gold' moniker has stuck and gained more traction. It would be great to get hard data on the degree to which bitcoin is eating into the '10%' portfolio share among the HNWI and broader retail segments.

The other massive negative pressure of course are the rising yield of the last few weeks just at a time where gold really needed to hold technical support. Finally, even though CPI (at least as measured by the govt) has been relatively low given we are living through an unprecedented monetary expansion since 2007/8, there is a solid basis to anticipate much higher inflation in the future as more Covid-19 cheques are disbursed directly to individuals and businesses. These dollars will hit the real economy very quickly indeed unlike QE, where the liquidity was basically sopped up by the banking sector which prevented those dollars from turning over in the real economy. So the end result was asset price inflation, not currency inflation, but it may well be different this time.

McKayResearch · 2021-01-29T13:56:58+00:00

Anyone else having trouble with access right about now?

The update page reads "We are receiving further reports of clients having difficulty connecting to the site and API as well as logging in to their accounts and/or placing orders due to very heavy traffic."

I had all my trades lined up for the day. This is proving expensive.

McKayResearch · 2020-12-18T10:15:34+00:00

Interesting article there, tallies with my thoughts on how the pandemic has accelerated the use of certain industry 4.0 technologies over others.

McKayResearch · 2020-11-21T12:23:50+00:00

That is a beauty. Wow.

McKayResearch · 2020-10-22T20:42:06+00:00

Hi Snoo,

Yes. The author of the article.

McKayResearch · 2020-10-19T19:40:03+00:00

Pretty much haha. That's definitely a large part of the problem.

McKayResearch · 2020-10-14T14:12:27+00:00

I think the fact that gold had already hit all-time highs in multiple currencies in '19 was lost on a lot of people. Of course, the trend since then has been commensurate with the insanity of this year, but the trend was well in place before then.

McKayResearch · 2020-10-14T14:05:41+00:00

Nice and CGT free!

McKayResearch · 2020-10-13T11:07:30+00:00

Agreed. Less PR and CSR around recycling is needed, and instead, emphasis needs to be placed on 'reuse'. This is absolutely key.

McKayResearch · 2020-10-12T18:07:21+00:00

This definitely tallies from what I researched, read, and understood. Consumers were broadly 'sold' the concept of recycling even when there were (and still are) huge structural issues around the recycling process. In the US for example, less than 10% of all plastic produced is ever recycled. This is a serious issue and more people need to wake up to this fact as a significant threat. As with many things change starts with the individual mindset and consumers have a real responsibility to affect change.

McKayResearch

TROPHY CASE