The bounce

What if something worse had happened? Would bitcoin rise or fall? Let us for a moment imagine the worst and some war broke out involving major world powers; does bitcoin go up or down?

Wars are terrible for bonds and generally not that good for most equities. The surreptitious inflationary creep is also much worse during turbulent times. Historically, people have chosen gold at such moments. 

Bonds are supposed to be the safe haven asset of the world, particularly American ones. Increasingly though everyone knows that is not true, although it is rarely said out loud. There is a very strong case that bitcoin is a terrific hedge for turbulent times; it is bomb proof, government tamper proof and it can cross borders with you in your head if you need it to.

The real power of bitcoin has not been put to the test yet, but one day it will be. Saturday was another bad day for America, bitcoin rose supposedly because of the increased likelihood of a Trump victory but maybe it was more than that. If it wasn’t, one day it will be. 

Rather more surprisingly, this week Larry Fink hit the wires again saying exactly the same thing; bitcoin is not an optimistic investment, but rather a defensive one. If you have doubts about the monetary system or your government or the level of debt perhaps it’s for you.

The overwhelming majority of investors believe bitcoin to be some YOLO FOMO type investment that maybe you can make some money out of when times are good. That is still the predominant view; it could not be more wrong though. I believe it is true of the sector generally, just not of bitcoin. Digital cats are not going to save you but one day bitcoin might.

JD Vance

Have you heard of him? I had not, but now that he is Trump’s Vice Presidential nominee he is worth a closer look.

From our perspective he is one of the very few pro-bitcoin members of Congress. In total there are only seven sitting members who have disclosed any financial interest in bitcoin. 

As I mentioned before I am somewhat torn now between the very pro-bitcoin stance from one side of politics in America and the near silence on the other. Better in fact for us that the whole thing was not the political hot potato it is becoming, but I guess we can only play the cards we are dealt. 

“Our tech sector used to be defined by innovative upstarts and is now dominated by boring monopolists… The crypto community has stood in stark contrast to this shift. It is one of the few sectors of our economy where conservatives and other free thinkers can operate without pressure from the social justice mob.”

As well as his speeches he also took on Gary Gensler at the SEC remarking that he was the “worst person” to regulate the industry because he overly politicises securities regulation. It’s hard to disagree, Gensler has made a total mess of things, his term ends in 2026 and if it turns out that Vance becomes Vice President we can be near certain that Gary won’t be getting another dance. 

We know almost nothing of this guy though, interested to see how he progresses through the rest of the election campaign. The fact of the matter is that we now have a genuine bitcoiner on a Presidential ticket. Save for El Salvador I’m not aware of many other countries around the world where a major candidate has expressed a view and so we appear to have jumped directly from one of the smallest nations on earth which until 3 years ago none of us could find on a map, directly to the USA. It’s remarkable. 

Quite how bitcoin continues to dribble around at $60kish I do not know.

Where are our robots?

One country that must be delighted with the political drama in the West is China. To say it’s the second largest economy in the world and the most important trading partner for Australia, we hear almost nothing about them. If we do hear something, it’s likely negative. Real estate collapse, stock market collapse, etc.

For them the opportunity is simple, just get on with it and it would seem they are. This data, now 18 months old, is rather telling. There is a massive automation of their industrial capability ongoing. Much of that is being driven by their population dynamics (which are awful). They are now starting to lack people and are employing robots instead. There is a very strong correlation in this chart between population issues and automation; notably Japan, South Korea and Italy are all high up the list with equally terrible birth rates. 

Robotic installation is essentially the replacement of repetitive physical work tasks. It is overwhelmingly good for people because it saves them from tedious jobs on the production line. The massive investment China is making will compound and compound, GDP per capita will continue to rise.

The addition of machines is massively accretive to GDP. We know this from the industrial revolution and we now see the robotic revolution. For most processes it works so much better if you take the people out of it. Think deeply about what you are doing, understand it, break it down and replace the people with code or machines.

On the face of it, this is “bad for people” because they lose their jobs. The truth is this has never happened however much tech we invent. The jobs simply change and they overwhelmingly get better and more interesting. Thinking about the jobs our parents and grandparents did, we know this to be true, but everyone conveniently ignores the fact when faced with learning a new skill.

My question is only this. Where are Australia’s robots? Why are people still going miles underground to mine minerals every day in dangerous, hot conditions? Surely machines could probably do it at much lower cost much more efficiently 24/7. The best we appear to have done is self driving trucks on mine sites and a few drones out prospecting. Australia is geographically massive relative to its population, it is ripe for robotics and were it not for the stupidity of the regulations in this country it would be overwhelmingly the richest country on earth. It wouldn’t be close, it shouldn’t be close. Politicians only get away with it because people do not compare what could be only to what they see and have seen.

Removing people from processes is overwhelmingly good in most cases. It removes bias, danger, boredom, corruption and adding to the nation’s capital stock makes the country wealthier. It’s not a case of doing less will make you wealthier, but rather the application of capital to whatever it is you are doing certainly will, individually and as a country.

I might also add that the removal of people from the process of money creation would overwhelmingly be a good thing. It has been done. 

Production will be automated; software creation will be automated (and largely has been), money will be automated too. Why? Because the best process wins, the other process cannot compete and you see that proven everywhere.

China is charging ahead. Behind the Western veil of “China is bad” they are taking the opportunity that we should be taking. Personally I think employ as many robots as you can (use AI); leverage your brain and buy some bitcoin.

….and it’s gone

Surely the greatest South Park scene. In this case though, I refer to the German Government’s bitcoin holdings which are also completely gone. 50,000 bitcoin, around $3 billion worth sold in a week.

Aside from anything else this was not a very subtle sale and I would have thought a better managed process could have netted Germany hundreds of millions more. Still, as I said last week, Bitcoin trades 24/7, you can sell and buy as much or as little as you want whenever you want and that holds for governments, companies and individuals. It’s unlike anything else where most of the time you need to wait for ‘markets to open’.

Just at the very moment the German government address hit zero, micro-donations from bitcoiners all around the world started flooding in. As some of you will know, it is possible to embed messages in bitcoin transactions, as we can see below one bitcoiner donated $1.87 to Germany while reminding them “HFSP German Government”. Which stands for: Have Fun Staying Poor.

Overall micro bitcoin donations to Germany have now exceeded $317, which will go a small way to replacing the $3 billion they did not need to sell last week. Had they waited a mere week they would have made at least another quarter of a billion dollars.

Euro-Trash

You might remember Thierry Breton as being the EU Diplomat who was “the first ever to regulate AI”. In fact, Thierry managed to kill Artificial Intelligence in Europe altogether. Another industry that could have generated wealth for Europeans was destroyed before it began.

This week things took a rather different turn. The EU stepped up its attacks on American tech companies requiring them (at least according to Elon Musk) to secretly sensor European speech. Thierry was on the front foot claiming his “preliminary view” was that Twitter (X) deceives users and infringes the European Digital Services Act.

Elon responded rather aggressively to the EU allegations going on to add that he looked forward to the upcoming court battle.

European courts are not American courts though. The EU wants a scalp in American tech, of all the fights they could pick this was probably the best one because can Europe live without Twitter? Yes it can. Can it live without Facebook, Google, or Microsoft? No. That would be a massive vote loser and simply too risky. 

Breton’s message is that if they win they will “require significant changes” but what we are talking about is a different tech stack. Euro-Twitter. The cost of operating such a thing would be enormous and Europe is increasingly not that significant a market when compared to the rest of the world. We aren’t far now from a major tech company simply turning its back on Europe altogether.

Elon Musk’s personal wealth exceeds the GDP of over half the countries in the EU. At $260bn it is equivalent to that of Portugal and exceeds that of Greece, Hungary, Luxembourg and many of the smaller European nations. While one should not compare “income” to “wealth” the point is this is not a battle with an ordinary citizen. In most cases the endless resources of the state can simply grind someone into submission. Not this time though.

Perhaps most surprising in all of this is that the American government allows what now look like outright attacks on its tech companies to continue, yet stands by and does nothing. 

The very obvious solution will come and it will be likely this: 

“Hey guys, instead of attacking our tech companies, how about you defend your own borders? We are tired of doing it for you, and tired of paying for it.”