I have written many times how I believe that when historians look back upon our time in history, they will likely think that we were the most gullible generation of all time. Personally, I believe that the phrase “those who fail to learn history are doomed to repeat it” is quite appropriate for a huge majority of people- not only here in the USA but across the world.
If we look at history, it is full of examples of people chasing stories and bidding prices up higher than anyone could imagine. One of the first examples I am aware of was the Tulip Bulb mania in the Dutch Republic in the 1630s.
According to Wikipedia, at the height of the mania a single tulip bulb sold for 10 TIMES the annual income of a skilled artisan. In those days, a skilled artisan earned 150-350 florins per year. There was a trade recorded in 1635 of 40 Tulip bulbs for 100,000 Florins. Putting that into perspective- if a skilled worker today makes $100,000.00 per year that tulip bulb would sell for $1 MILLION.
This action took place because there was a futures market where the Dutch described it as “windhandel” or wind trade because it was a trade where no tulip bulbs actually changed hands. It was a paper contract that drove prices ever higher. During the peak in the winter of 1636-1637 many contracts changed hands multiple times with no Tulip bulbs delivered. In February 1637 prices collapsed and those contracts were never delivered on. This is an example of a derivative (forward contract) determining the price of a real asset. The same scheme is used today to trick the algorithms into thinking there is FAR more gold and silver available than actually exists- therefore suppressing the price rather than driving it higher. Of course, when demand collapsed so did the price- and the bubble.
It is more than likely that the INVERSE of the collapse of this mania will take place when the suppression schemes run out of the physical metals and the reality of supply and demand takes over. I believe that this will be historic also.
In the book Mackay’s Madness of Crowds, he listed a basket of goods that could be had for one single bulb of Viceroy … valued in florin
Item Value
Two Lasts of Wheat 448 florin
Four Lasts of Rye 558 florin
Four Fat Oxen 480 florin
Eight Fat Swine 240 Florin
Twelve fat sheep 120 florin
Two Hogshead of Wine 70 florin
Four tuns of beer 32 florin * A tun at this time was 2050 pounds
Two Tuns of Butter 192 florin
1000 pounds of cheese 120 florin
A complete bed 100 florin
A suit of clothes 80 florin
A silver drinking cup 60 florin
Total 2500 florin.
As I see it, by the time the bubble burst you would have had more VALUE with the four tuns of beer than with that tulip bulb- but at least there was something of VALUE at the end. Price is what you pay, VALUE is what you get- Warren Buffett.
I believe we are seeing a similar mania today in cryptos- mainly in Bitcoin. Many say it is a private way to make payments. I believe that the blockchain is indeed secure, but to buy, sell and hold you need a wallet which has been shown to be less secure than promoted.
I attended an investment conference with a firm that is EXTREMELY bullish on Bitcoin in particular and when I asked for their reasoning, they gave me examples of being able to make payments and transfer “money” in the event of sanctions, etc. They also touted its “privacy”
I can buy that you could transfer that asset- maybe- if those in charge allow, but I believe that there is only a small percentage of the population that will ever accept Bitcoin or other cryptos as payment. WHY? Because the volatility in the space- because of all the excess speculation leads to massive gyrations in price so that you cannot really be sure what you are getting paid from day to day.
In addition, I still have to ask if the payment system is so “private” why are people sitting in jail until they give up their security keys. I have to believe if trading, buying, and selling really was private those doing illegal trades and transactions would not be getting caught.
I wrote an article years ago with stories I read in the Financial Times about people sitting in prison for illegal trading of Bitcoin. If it is so private how did anyone find out? Another story I remember was about a fellow who watched his wallet being drained in front of his eyes and there was no way to stop it.
I also firmly believe that Bitcoin was launched for two main reasons.
#1 To get everyone aware and comfortable with crypto and e-coins to usher in the new world of control with Central Bank Digital Currencies and the tokenization of EVERYTHING. My best guess- and that is all this is- is that they will allow banks to manage the price far higher. At some point they will collapse the price causing major panic. The central bank will ride to the rescue with the mantra of- If there was a central authority managing the price this will not happen again. Of course, when it happens again it will be too late for any of us.
#2 Until the new system is unveiled the US dollar has to appear to be strong. If Bitcoin were not around the price of gold would be multiples higher. This would give us a real look at the collapse of our purchasing power. A lot of crypto buyers buy because of the fiat monetary system. If cryptos were not around a LARGE portion of that buying would be of physical assets like gold, silver and commodities. Nothing happens by accident.
Another reason those bullish on Bitcoin in particular is that there is a limited supply. That may be true but there is an UNLIMTED supply of new coins like XRP, Dogecoin, Ethereum, even fartcoin, etc.
When the smoke clears, I still have to ask what UTILITY and what VALUE do any of these coins have? All I see is a speculation that someone will come along and pay more than you did. I hope it works out for you- I really do- but let’s hope that AI does not break down our power grid because then- do cryptos even exist?
Who wound up better off in the end- the guy with Tulip bulbs or the guy who had the hard assets that he could either sell or consume? Who will wind up better this time? The guy with hard assets or the guy with a mathematical equation?
This is a question that many SHOULD be asking but most are too busy chasing the latest stories that will likely lead to a boom and then a bust that is easy to see coming but not so easy to time.
It appears that the central banks have made their choice, and it is not their own product- fiat currencies or mathematical equations. It is hard assets and mainly GOLD which they have been buying in record amounts for the last 5 years.
If central banks sell their own product to buy gold what does that tell you?
Be Prepared!
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