Today is a great day for modern monetary theory – MMT. The US House of Representatives approved another stimulus package after a protocolary debate and another round of virtue signaling on the floor. But for MMT detractors it might be more interesting to understand that $1.9 trillion Dollar stimulus in Bitcoin terms.
Let Us Start With Some Basic Numbers
Before we get into why hodlers and people who are still standing on the sidelines should care, it is important to understand the numbers. The following facts will help you understand where the economy is going:
- As of October 2020, the year over year money supply increased by 37%
- Public debt to GDP ratio in the US is currently around 107% – that is before the $1.9 trillion stimulus hits the market
- From the last stimulus bill, there is still $1 trillion USD that has not been appropriated – allocated
- That figure jumps to about 125% if you consider other sources
- GDP in the us is about $21.43 trillion USD and it is still the biggest economy in the world – this puts the debt into proportion
- The US economy grew at an average of 2.06% year over year from 2015 until 2019
- Debt is clearly outpacing average GDP growth rates and even the most optimistic GDP growth projections
Understanding a $1.9 Trillion Dollar Stimulus in Bitcoin
Bitcoin proponents have been warning about this for years. Even Satoshi highlighted the perils of MMT with a message on the Genesis block. So, why should hodlers and those who are looking into BTC care about more money printing?
Simple: That money will have to go somewhere, and recent events tell us that it is unlikely to go overwhelmingly towards consumer goods. Besides that, only a fraction of the stimulus is going into the pocket of the average consumer. Understanding this $1.9 trillion Dollar stimulus in Bitcoin entails:
- Figuring out what $1.9 trillion Dollars in Bitcoin looks like: BTC’s market cap times two!
- Remembering that during the pandemic, many put their $1,200 USD stimulus cheque into Bitcoin
- Internalizing that institutional investment is only starting with MicroStrategy and Tesla leading the charge
$1.9 Trillion Dollar Stimulus in Bitcoin: The Numbers
Now consider the following:
- As of 2017, there were 143 million taxpayers in the US
- Assume there are 150 million taxpayers today
- The stimulus should put a total of $12,670.00 USD in the economy per taxpayer according to our assumptions
- Considering a total population of 328 million, the stimulus amounts to $5,792.00 USD per capita
- People are going to get a $1,400.00 USD cheque – which is the amount per capita that should hit retail markets immediately
- The rest of the funds will go to special interest groups, presumably – or else, where would they go?
- Deeper debt for funds that will mostly stay out of retail markets, at least in the short term
Everyone knows how this looks like. The Fed prints more money to buy US government bonds so that the average joe can get a measly 24% – at most – of whatever the government injects into the market. Inflation at the consumer’s level will probably remain low initially, but asset prices should keep on rising!
Wall Street Bets Effect
If there is an inflationary move via MMT, and you only get about 24% of the money that is printed, whatever you have saved is under attack. Since most of the stimulus funds will go towards making other assets more expensive, there is only one way to protect yourself: invest that $1,400 USD.
We might see a portion of that money going into “stonks” or the assets that Wall Street Bets – WSB – has been propping up. But that means playing the game of those institutional investors that will somehow get the greater part of the stimulus package – through all kinds of government contracts. That is a losing game.
Bitcoin looks more attractive for the retail investor. It is an asset that is not as beholden to special interest groups as the other assets out there. The bonus is that some institutions like Tesla and MicroStrategy – which hold or are expected to get government contracts – are buying Bitcoin.
It seems that the leaders behind these companies are seeing the benefit in hedging themselves from institutional group think, despite being an integral part of that landscape. Maybe, instead of taking the guardians of the institutionalized status quo on through a WSB play with that stimulus cheque, you are better off if you follow the corporations that are joining the disruptors.
Either way, inflation is coming and if you keep your assets in a US Dollar environment, your assets might decline in value, in real terms. We saw a glimpse of that inflation panic even among the guardians of the status quo yesterday when bond yields went up because bond investors started pulling their money out of the market.
Stimulus Accelerates the Inevitable
The stimulus will only accelerate the inevitable. It does not matter how much the Fed tells you that inflation will remain low. Despite their MMT orthodoxy, you can only count on that assessment in the short term. Money will work itself through the system and into retail.
All the indicators are showing inflation will come, sooner or later. In fact, it is already happening. Groceries are becoming more expensive and the prices for other goods are also rising.
Therefore, you should consider putting your part of that $1.9 trillion Dollar stimulus in Bitcoin. For those of you who are not in the US, keep on stacking those Sats. Not only can that $1.9 trillion Dollar stimulus in Bitcoin, take us past the moon, but your own government might be printing more money than you are aware of!
*Note: This article is not meant to be financial advice of any kind. It is an opinion piece. Remember to always do your own research.