Peanut butter and jelly.
Laurel and Hardy.
Tom and Jerry.
Bonnie and Clyde.
We all know them as famous pairs. One without the other seems sacrilegious.
To these iconic pairs I will now add “bitcoin and gold” … but not for the reason you might think.
Yes, bitcoin is digital gold, as you’ve read here many times. But today’s dispatch isn’t about that.
In fact, today’s dispatch really isn’t about bitcoin, per se.
It’s about gold.
Bitcoin in today’s context is just the sidekick—Robin to gold’s Batman, to note another famous pair.
See, lots of media coverage over the last week or two has focused on bitcoin setting another all-time high north of $73,000. A shock to those who claimed crypto was dead only a year ago; an inevitability to those of us who know the truth.
Largely lost in the bitcoin narrative, however, is the fact that gold, too, has set a new all-time high, closing a few days ago near $2,200 per ounce.
If you’re a seasoned reader of Field Notes or Global Intelligence, you’ll probably know my position on gold: It is not an investment.
It’s lifestyle insurance.
And everyone should have some gold in their portfolio to protect against the inevitability of higher inflation and the very strong likelihood that America and the Western world run headlong into a currency/debt crisis. (Personally, I have a lof of gold in my portfolio. As I’ve noted from time to time, gold in various forms is about 20% of my overall nest egg, so I’m a big believer in the power of gold to protect wealth.)
Which is why I’ve been recommending gold since it was $1,000 per ounce.
But even that’s not the real message of today’s dispatch…
The real message is that gold and bitcoin have both set new all-time highs at the same time.
That’s not a coincidence.
Both are inflation/debt-crisis plays, just from different perspectives.
A debt/currency crisis has been brewing in America since 2001, when Uncle Sam’s reliance on debt began to explode thanks to various wars and bailouts.
Since then, gold never slipped below $1,000 per ounce, regardless of interest rates. And I say that because gold, if you believe in textbook logic, should have plunged when interest rates raced higher in recent years at the fastest pace in four decades.
And yet gold maintained its resilience.
There’s a blunt and clear message in that: A crisis lurks. A crisis that will hit the US dollar and America’s capacity to repay mountainous debts. Most likely, we’ll see some kind of currency reset or a stealth devaluation of the dollar that will help America reduce the pain of its extreme reliance on borrowing.
Gold will rally so strongly and so fast that the move higher will seem like a financial blitzkrieg.
And then there’s the message bitcoin is sending us: Inflation ain’t done with us yet!
The mainstream media will tell you that bitcoin is not an inflation hedge. Their rationale is this: “Look—bitcoin fell as inflation spiked and interest rates took off.”
Very true.
But that is a 20th century way of analyzing a 21st century asset.
Bitcoin is instantaneous price discovery. No other asset offers that. Even the dollar doesn’t trade on weekends. But there’s bitcoin, trading 24/7/365, uninterrupted.
As such, bitcoin reacts in the moment and—at a speed magnitudes faster than stocks, bonds, gold, or the dollar—looks ahead to predict where we’re going.
In May 2020, for instance, US inflation registered a measly 0.1% and everyone (but me) was saying inflation was “transitory.” I was telling you in the very early months of 2020 that inflation was far from transitory, and that we’d very likely see a monthly inflation reading approaching 10%.
Bitcoin at the time was just $9,000. But it was right then that the world’s premier crypto began an epic run to more than $69,000 by November 2021. That epic run began nine months before inflation was suddenly not transitory and began shooting higher.
That was bitcoin telling the world, “Inflation is coming!”
By June 2022, inflation peaked at 9.1% (pretty close to my 10% call) and began falling.
Bitcoin, however, had already peaked seven months earlier. The media crowed: “See! Bitcoin is not an inflation hedge. It’s falling amid high inflation.”
That was wrong, myopic, and dated analysis.
Bitcoin was correctly saying to those who listened that, “OK—for now, the Federal Reserve is going to win this battle against inflation, so I can take a rest and reset.”
In short: Bitcoin showed that it’s an early indicator of where inflation is headed, either up or down.
Which means that right now, bitcoin is telling the world that Inflation, Part 2 is on the way.
The most recent inflation reading in February registered a 3.2% increase in consumer prices. My bet: Fall/winter 2024 will see inflation readings higher than we have today, probably north of 5%.
And that jibes with what I’ve been saying for many a month now: That the inflation cycle we’re now in is very reminiscent of the inflationary ebb and flow that marked the1960s before real inflation surged out of control in the 1970s.
Bitcoin is sending that same message.
Gold, meanwhile, is sending a complimentary message that all is not quiet on the eastern front, meaning D.C. faces a “Come to Jesus” moment because of America’s runaway debt situation.
Gold and bitcoin putting up record highs within days of each other sends us an even bigger message: “Buy both of us if you want to survive the reckoning to come.”
More on this soon. Because, as inflation rekindles, the Fed is going to find itself in an untenable situation: Raise rates again and destroy consumers, businesses, Uncle Sam, and the economy (all of which are perched atop extreme levels of debt)… or keep rates low and throw fuel on the fire of moral hazard that already warps the American financial system.
Or, just load up on gold and bitcoin, and a case of Orville Redenbacher popcorn. Then, watch bemusedly as the D.C. circus flails amid the crisis to come.