Blockchain companies are building AI chatbots to help developers, yet challenges may hamper adoption.
The artificial intelligence (AI) market is becoming one of the fastest-growing industries in the world. According to market research firm Next Move Strategy Consulting, the current AI market is valued at nearly $100 billion and is projected to grow exponentially.
Given this, it comes as no surprise that chatbots using AI are also on the rise. Recent findings from Precedence Research show that the global chatbot market size reached $840 million in 2022.
AI chatbots for Web3 developers in the works
As opportunities around AI and chatbots flourish within various industries, the Web3 sector has also started to capitalize on this trend, with blockchain companies creating AI chatbots to help developers build applications faster and more efficiently.
Aanchal Malhotra, head of RippleX Research — an organization within Ripple focused on the development and growth of the XRP Ledger — told Cointelegraph that RippleX is currently working on building an AI chatbot to which developers of the XRP Ledger can pose queries:
“Rather than rambling through all of the documentation and client libraries, developers will be able to direct their questions to the AI chatbot to get instant answers. This will make the life of developers much easier as it will shorten the time for ideas to become applications.”
Skale Labs — the team behind the Skale blockchain network — is also building an AI-powered chatbot. Jack O’Holleran, co-founder and CEO of Skale Labs, told Cointelegraph that the Skale network has built-in AI and machine learning capabilities that enable developers to run pre-trained AI models within a smart contract.
“AI-driven smart contracts fire without human intervention in a very high volume manner. This allows developers to build fast and effectively,” he said.
O’Holleran shared that Skale’s AI chatbot will soon be released publicly, stating that one of the primary use cases for AI is engineering development support.
“Devs are now building with record efficiency and productivity thanks to the support of AI. One of the key areas of support is instant access to knowledge of technical and coding documentation,” he said.
Echoing this, Matthew Van Niekerk, CEO and co-founder at SettleMint — a blockchain programming tool — told Cointelegraph that AI tools are becoming essential for developers.
Van Niekerk explained that SettleMint recently added an AI Genie engineering assistant to its platform for rapid smart contract development and quality assurance testing and debugging.
“Our AI Genie is built to help organizations get their blockchain applications to production faster so that they can tap into the $3.1 trillion opportunity enabled through blockchain,” explained Van Niekerk.
Van Niekerk further pointed out that SettleMint’s AI Genie is built to support humans, not replace them. This is important to highlight, as there are looming concerns that AI-powered assistants may eventually replace human workers.
“The tool itself is positioned as an engineering assistant, not an engineer. It is built to abstract away mundane processes and complexities that prevent developers and engineers from focusing on building innovative solutions that will bring a clear return on investment for their businesses,” explained Van Niekerk.
To put this in perspective, William Baxter, chief technology officer and co-founder of tokenization platform Vertalo, told Cointelegraph his firm currently uses chatbots to summarize and present data to internal and external audiences. Baxter believes that assisted learning is one of the most promising general applications for chatbots:
“Instead of searching for topics and combing through the results or relying on a curator, a chatbot lets you consume in summary from huge volumes of information. Paired with web access and using prompts that encourage the inclusion of links to primary sources, this dramatically expands the scope of online research. When learning a new programming language, blockchain, or application, feedback from a chatbot is enormously valuable, even if not entirely correct.”
Challenges may lead to delayed implementation
Although AI-powered chatbots have the potential to help Web3 developers build better, a number of challenges may slow adoption.
For example, while O’Holleran is aware that AI-driven smart contracts may expedite technical development, he pointed out that these applications often require throughput for on-chain execution with predictable and automated spend.
“This could be problematic in a network that has high gas fees and variable fees, as the expected spend could vary dramatically and could accidentally get expensive fast,” he said.
In order to combat this, O’Holleran explained that the Skale network has on-chain fees rather than gas fees, making the total fees lower and certifiably predictable.
Lydia Mark, director of communications at Magma AI — a project building an AI chatbot that provides users with a virtual Web3 technology learning assistant — told Cointelegraph that ethical bias can also be problematic with AI chatbots.
“It becomes really easy for AI systems like Magma to inherit the biases imputed during data training, which in turn could negatively impact an entire ecosystem,” she said. To combat this, Mark shared that Magma AI uses bias detection and mitigation techniques.
Yet, one of the biggest challenges associated with AI chatbots is data privacy and security. Van Niekerk explained that companies building or using AI assistants need to consider internal business policies and government regulations pertaining to privacy.
“Large enterprises may have restrictions on the use of generative AI technologies due to risks of breaches in data privacy. SettleMint’s AI Genie is intentionally built as an optional tool within the platform so that enterprises only opt in when and if needed,” he said.
Challenges aside, Van Niekerk stated that, overall, AI chatbots are helping ensure that Web3 is more inclusive and accessible to a wide range of developers.
“Knowledge and expertise is now there to instantly support new devs entering the space. Web2 devs can speed up their Web3 learning and skill curve by order of magnitude thanks to AI developer support technology,” he remarked.ethereum blockchain xrp
When Complex Systems Collide
When Complex Systems Collide
Authored by James Rickards via DailyReckoning.com,
At some point, systems flip from being complicated, which…
At some point, systems flip from being complicated, which is a challenge to manage, to being complex. Complexity is more than a challenge because it opens the door to all kinds of unexpected crashes and events.
Their behavior cannot be reduced to their component parts. It’s as if they take on a life of their own.
Complexity theory has four main pillars.
The first is the diversity of actors.
You’ve got to account for all of the actors in the marketplace.
When you consider the size of global markets, that number is obviously vast.
The second pillar is interconnectedness.
Today’s world is massively interconnected through the internet, through social media and other forms of communications technology.
The third pillar of complexity theory is interaction.
Markets interact on a massive scale.
Trillions of dollars of financial transactions occur every single day.
The fourth pillar, and this is the hardest for people to understand, is adaptive behavior.
Adaptive behavior just means that your behavior affects my behavior and my behavior affects yours. That in turn affects someone else’s behavior, and so on.
If you look out the window and see people bundled up in heavy jackets, for example, you’re probably not going to go out in a T-shirt. Applied to capital markets, adaptive behavior is sometimes called herding.
Assume you have a room with 100 people. If two people suddenly sprinted out of the room, most of the others probably wouldn’t make much of it. But if half the people in the room suddenly ran outside, the other half will probably do the same thing.
They might not know why the first 50 people left, but the second half will just assume something major has happened. That could be a fire or a bomb threat or something along these lines.
The key is to determine the tipping point that compels people to act. Two people fleeing isn’t enough. 50 certainly is. But, maybe 20 people leaving could trigger the panic. Or maybe the number is 30, or 40. You just can’t be sure. But the point is, 20 people out of 100 could trigger a chain reaction.
And that’s how easily a total collapse of the capital markets can be triggered.
Understanding the four main pillars of complexity gives you a window into the inner workings of markets in a way the Fed’s antiquated equilibrium models can’t. They let you see the world with better eyes.
People assume that if you had perfect knowledge of the economy, which nobody does, that you could conceivably plan an economy. You’d have all the information you needed to determine what should be produced and in what number.
But complexity theory says that even if you had that perfect knowledge, you still couldn’t predict financial and economic events. They can come seemingly out of nowhere.
For example, it was bright and sunny one day out in the eastern Atlantic in 2005. Then it suddenly got cloudy. The winds began to pick up. Then a hurricane formed. That hurricane went on to wipe out New Orleans a short time later.
I’m talking about Hurricane Katrina. You never could have predicted New Orleans would be struck on that bright sunny day. You could look back and track it afterwards. It would seem rational in hindsight. But on that sunny day in the eastern Atlantic, there was simply no way of predicting that New Orleans was going to be devastated.
Any number of variables could have diverted the storm at some point along the way. And they cannot be known in advance, no matter how much information you have initially.
Another example is the Fukushima nuclear incident in Japan a few years back. You had a number of complex systems coming together at once to produce a disaster.
An underwater earthquake triggered a tsunami that just happened to wash up on a nuclear power plant. Each one of these are highly complex systems — plate tectonics, hydrodynamics and the nuclear plant itself.
There was no way traditional models could have predicted when or where the tectonic plates were going to slip. Therefore, they couldn’t tell you where the tsunami was heading.
And the same applies to financial panics. They seem to come out of nowhere. Traditional forecasting models have no way of detecting them. But complexity theory allows for them.
I make the point that a snowflake can cause an avalanche. But of course not every snowflake does. Most snowflakes fall harmlessly, except that they make the ultimate avalanche worse because they’re building up the snowpack. And when one of them hits the wrong way, it could spin out of control.
The way to think about it is that the triggering snowflake might not look much different from the harmless snowflake that preceded it. It’s just that it hit the system at the wrong time, at the wrong place.
Only the exact time and the specific snowflake that starts the avalanche remain to be seen. This kind of systemic analysis is the primary tool I use to keep investors ahead of the catastrophe curve.
The system is getting more and more unstable, and it might not take that much to trigger the avalanche.
To switch metaphors, it’s like the straw that breaks the camel’s back. You can’t tell in advance which straw will trigger the collapse. It only becomes obvious afterwards. But that doesn’t mean you can’t have a good idea when the threat can no longer be ignored.
Let’s say I’ve got a 35-pound block of enriched uranium sitting in front of me that’s shaped like a big cube. That’s a complex system. There’s a lot going on behind the scenes. At the subatomic level, neutrons are firing off. But it’s not dangerous. You’d actually have to eat it to get sick.
But, now, I take the same 35 pounds, I shape part of it into a sphere, I take the rest of it and shape it into a bat. I put it in the tube, and I fire it together with high explosives, I kill 300,000 people. I just engineered an atomic bomb. It’s the same uranium, but under different conditions.
The point is, the same basic conditions arrayed in a different way, what physicists call self-organized criticality, can go critical, blow up, and destroy the world or destroy the financial system.
That dynamic, which is the way the world works, is not understood by central bankers. They don’t understand complexity theory. They do not see the critical state dynamics going on behind the scenes because they’re using obsolete equilibrium models.
In complexity theory and complex dynamics, you can go into the critical state. What look like unconnected distant events are actually indications and warnings of something much more dangerous to come.
So what happens when complex dynamic systems crash into each other? We’re seeing that right now.
We’re seeing two complex systems colliding into each other, the complex system of markets combined with the complex system of epidemiology.
The coronavirus spread was a complex dynamic system. It encompassed virology, meteorology, migratory patterns, mass psychology, etc. Markets are highly complex, dynamic systems.
Financial professionals will use the word “contagion” to describe a financial panic. But that’s not just a metaphor. The same complexity that applies to disease epidemics also apply to financial markets. They follow the same principles. And they came together to create a panic that traditional modeling could not foresee.
The time scale of global financial contagion is not necessarily limited to days or weeks. These panics can play out over months and years.
Just don’t expect the Fed to warn you.
Evidence And Insights About Gold’s Long-Term Uptrend
Evidence And Insights About Gold’s Long-Term Uptrend
By Jesse Colombo of BullionStar
For the past few years, gold has been treading water…
By Jesse Colombo of BullionStar
For the past few years, gold has been treading water with no clear direction and causing even the most die-hard gold bugs to scratch their heads in confusion regarding the yellow metal’s next major move. Though gold surged during the most acute phase of the 2020 COVID-19 pandemic due to the unprecedented tsunami of liquidity from global central banks, it has since bounced around between $1,600 to $2,100. In this piece, I will show that gold is still in a confirmed long-term uptrend despite the choppy action of the past few years. I will also show several factors that should create a tailwind for gold in the next decade and beyond.
The Technical Backdrop
It’s helpful to take a step back and look at the big picture when the short-term picture is unclear. Gold’s monthly chart going back to the year 2000 shows that the metal is in a confirmed uptrend according to the most basic, widely accepted tenets of technical analysis. For starters, gold has been consistently making higher highs and higher lows over the past quarter-century. In addition, gold has been climbing up a long-term uptrend line that formed in the early-2000s. From a technical perspective, gold will remain in a confirmed long-term uptrend as long as it stays above that uptrend line — after all, a trend in motion tends to remain in motion.
If you look at gold’s price action of the past five years, you can see that there is a strong resistance zone overhead from $2,000 to $2,100. Gold has attempted to break above that resistance zone several times since 2020 to no avail. If gold can finally close decisively above its $2,000 to $2,100 resistance zone, that would indicate that another phase of the bull market has likely begun.
(Of course, I need to point out that gold and silver’s price discovery process has been corrupted and distorted by the explosion of “paper” or synthetic gold and silver products including futures, options, swaps, and exchange traded funds that are not fully backed by actual physical gold and silver.
Over the past couple of decades, the amount of outstanding synthetic gold and silver has ballooned relative to the amount of physical gold and silver in existence, which has suppressed physical precious metals prices. In a genuine and fair market, physical gold and silver prices would be much higher than they currently are. You can learn more about this issue here and here.)
The Role of Paper Money Debasement
There are numerous factors that drive the price of gold, but dilution of fiat or “paper" currencies is one of the most glaring. For the past five decades, all of the world’s major currencies have been downgraded to mere “paper" currencies that are unbacked by gold, which has predictably resulted in an explosion of the global money supply and the ensuing erosion of those currencies’ purchasing power.
To put it in layman’s terms, a rising money supply harms the value of currencies and results in inflation or higher living costs. When the cost of housing, groceries, car insurance, healthcare, and college education all rise together, look no further than the debasement of paper money. When currencies were backed by gold, it was impossible to dilute them the way that paper currencies are diluted because every currency unit was required to have a certain amount of gold backing it up and it’s impossible to print or conjure gold out of thin air. For that same reason, people clamor to the safety of gold when paper money is being diluted to oblivion.
The chart below shows the United States M2 money supply, which is a measure of all notes and coins that are in circulation, checking accounts, travelers’ checks, savings deposits, time deposits under $100,000, and shares in retail money market mutual funds. The U.S. M2 money supply has more than quadrupled since the early-2000s, which was a major factor behind gold’s long-term uptrend that began at that time.
Though paper money is typically diluted as a function of time, this process accelerated dramatically after the Global Financial Crisis of 2007 – 2008 due to widespread government bailouts, fiscal and monetary stimulus, and quantitative easing (QE), which can be thought of as digital money printing for the purpose of propping up the economy and boosting the financial markets.
The 2020 COVID-19 pandemic resulted in an even more reckless printfest that caused nearly every measure of money supply in practically every country to go vertical in just a few months as central banks — including the U.S. Federal Reserve — desperately tried to prop up their economies and financial markets during the pandemic lockdowns with trillions upon trillions of dollars worth of stimulus.
The chart below shows how gold follows the M2 money supply higher over time:
The next chart shows the ratio of gold’s price to the M2 money supply, which is helpful for seeing if gold is keeping up with money supply growth, outpacing it, or lagging it. If gold’s price greatly outpaces money supply growth (the red zone in the chart below), there is a heightened chance of a strong correction. If gold’s price lags money supply growth (the green zone in the chart below), however, there is a good chance that gold will soon experience of period of strength. Since the mid-2010s, gold has slightly lagged M2 money supply growth, which could set it up for a period of strength due to the other factors discussed in this piece.
The U.S. Dollar’s Declining Purchasing Power
As discussed earlier, a rising money supply erodes the purchasing power of paper currencies over time. The Noble Prize-winning economist Milton Friedman described this process succinctly: “Inflation is always and everywhere a monetary phenomenon…" Since the year 2000, the U.S. dollar has lost nearly half of its purchasing power largely due to reckless monetary experiments conducted by the U.S. Federal Reserve, which is supposed to be a good steward of America’s currency but has proven to be the exact opposite.
Unfortunately, the U.S. dollar’s debasement since the year 2000 wasn’t a fluke — it was just a continuation of the trend that started almost immediately after the Federal Reserve was founded in 1913. Since then, the American currency has lost a jaw-dropping 97% of its purchasing power with no end in sight. As long as the U.S. dollar remains an unbacked fiat currency, it is going to keep losing purchasing power as a function of time.
The U.S. National Debt
America’s surging national debt has been another driver of gold’s bull market since the early-2000s. A combination of costly wars in Afghanistan and Iraq, bailouts and stimulus programs during the Global Financial Crisis of 2007 – 2008, and stimulus programs during the 2020 COVID-19 pandemic caused the U.S. national debt to explode sixfold from $5.77 trillion in 2000 to $34.3 trillion in 2024.
Even more concerning is the fact that the U.S. Congressional Budget Office expects the federal debt held by the public as a percentage of GDP to surge from just below 100% currently to approximately 170% over the next couple decades:
Since the 2020 pandemic, America’s exploding national debt combined with rising interest rates have caused annual interest payments to double to nearly $1 trillion:
Now costing U.S. taxpayers a mind-boggling $1 trillion per year, federal interest payments are set to exceed both the cost of defense and Medicare this year for the first time ever:
Over the past few years, U.S. federal interest payments as a percentage of GDP have increased at the sharpest rate in at least seventy years:
As a country’s national debt burden increases, the probability of a fiscal, economic, and currency crisis increases, which was what gold has been pricing in over the past quarter century. America’s surging debts — both public and private — are ultimately setting the stage for the destruction of the U.S. dollar, which will be sacrificed by the Federal Reserve and U.S. federal government as they run the printing presses on overdrive in a desperate attempt to pay for the spiraling cost of interest, Medicare, Social Security, welfare benefits, inevitable future bailouts and fiscal stimulus programs, and all other government spending. Throughout history, every paper currency has succumbed to the same fate as governments prove unable to resist the temptation of the printing press
To summarize, gold began a powerful uptrend in the early-2000s and it is still in that same uptrend despite the choppy price action of the past few years. The factors that originally drove gold’s uptrend are still in effect and, in many cases, are accelerating. Over the next decade and beyond, we are going to see a staggering increase in debt and the money supply, which will result in terrible inflation and, ultimately, hyperinflation. Though this piece focused primarily on the U.S. monetary and fiscal situation, make no mistake — practically every major economy is in the same boat and has its own version of the charts and data shown here.
Though the paper money supply will increase exponentially in the years ahead, the supply of physical precious metals like gold and silver will remain relatively constant in comparison, which is a recipe for much higher gold and silver prices. I personally favor physical gold and silver bullion over all other investments (including gold ETFs and mining shares) in these unprecedented times.
What’s Next When Policy Makers Can No Longer Hide Their Sins?
What’s Next When Policy Makers Can No Longer Hide Their Sins?
Authored by Matthew Piepenburg via VonGreyerz.gold,
It’s almost comical to…
It’s almost comical to watch policy makers of all stripes and country codes caught in a corner yet pretending we don’t notice.
Children In Charge
I’m reminded of the kid with his hand in the cookie jar while pretending his parents can’t see him—denying his guilt despite the crumbs falling from his face.
Again: It’s almost comical.
But there’s really nothing funny at all about major economies crawling into recession (Germany, Japan, UK, China) or denying recession (USA) while our mental midgets from DC to the EU play with bonds, inflation currency and war like kindergarteners with gas and matches.
Can’t Hide the Debt Cookie Crumbs
Speaking of kids caught with crumbs on their face while denying responsibility, it seems that even our central bankers can’t keep hiding the facts of now “unsustainable debt” (Powell) with clever lies, such as they had tried to do in the past:
In short, the days of hiding bad math behind empty words are now coming to an end, as most recently evidenced by another comical treasury market auction (below).
Keep It Simple: Debt & Bonds
As we’ve repeated ad nauseum, “the bond market is the thing,” and its survival, like a diesel V8 engine, lives and dies on liquidity/grease—i.e. dollars.
After trillions in outright grotesque QE grease following the bond crisis of 2020 and a hidden TBTF bank bailout (disguised as pandemic relief), the combined efforts of the Fed and Treasury Dept (i.e., the yin and yang of Powell and Yellen) to provide backdoor liquidity to this thirsty market are both tragic and remarkable.
Despite Powell’s headline tightening since 2022, the level of direct Fed liquidity is still tens of billions per month, and the hundreds of billions provisionally drawn from the reverse repo markets, the Treasury General Account (TGA), the Bank Term Funding Program (BTFP) are just QE by another pathway.
In addition to these tricks, tack on Yellen’s desperate attempt to issue trillions from the short end of the yield curve to take supply (and price) pressure off the sacred U.S. 10-Year, we can trace more examples of open desperation and backdoor liquidity by another name.
But at some point, all these liquidity tricks (as well as liquidity) run dry.
And when this “grease” runs out, that is when the bond engine stalls and the global financial system, led by a broke(n) U.S.A, starts its slow stall to the side of the proverbial road as the engine hisses, coughs and then dies.
Stated otherwise, the kids in DC are running out of cookies and jars (i.e., liquidity), and their lies and excuses are getting harder to hide.
Don’t believe it? Just look at the unloved US bond market.
A Very Telling & Embarrassing Treasury Auction
Having issued too many IOU’s (T-Bills) from the short end of the yield curve, Yellen’s Treasury Dept recently tried to auction off some IOUs from the longer end, namely the US 20Y UST.
Folks: It was embarrassing.
Foreign bidders for Uncle Sam’s 20-Year bond dropped to under 60% (they were 74% of the bidders in November).
This means that primary dealers (i.e., big banks) were forced to fill the gap by purchasing almost 22% of Uncle Sam’s increasingly unloved bar-tab of 20Y IOUs…
In simple speak, this is an open sign that the bond market is cracking. In fact, however, it has been cracking for a while…
Memories are short, as many have already forgotten the extreme dysfunction on the short end of the curve in Q1 of 2023 (not to mention the bank failures that followed, and with more to come, as warned…).
A similar disfunction is now openly obvious on the long-end of the bond curve, at least for those paying attention.
When bonds are unloved, their prices begin to fall, and their yields, which move inversely to price, start to rise, which means their interest rates rise too—adding more pressure (and cost) on Uncle Sam’s ability to repay the same.
Fiscal Dominance—More Than Just a Term of Art
This moment of interest expense “uh-oh” for DC is what the St. Louis Fed described in June of last year as “Fiscal Dominance,” namely that point where rising rates (and debt costs) get so high (i.e., dysfunctional), that the only option (and source) for more “greasy liquidity” (i.e., USDs) to support those ugly bonds is with money “clicked” out of thin air.
In short: More QE to the moon is inevitable, not debatable.
This QE inevitability is inherently inflationary, and this by the way, is the end-game for the Dis-United States, even if we experience a dis-inflationary recession somewhere in the middle of this tragic playing field.
Dollar Debasement—Right Before Our Eyes
Needless to say, such fake liquidity in the from an increasingly weaponized (and hence unloved) USD, places even more negative pressure on a DXY, which at the time of the aforementioned (and embarrassing) auction, was at 104, down from its 110+ levels of Q3 2022…
In the last four years of increasing bond dysfunction in the wake of drying liquidity, DC has shown five times in a row that it will come quickly and aggressively to the rescue to provide more fake grease (again, from the TGA, the BTFP, the repo markets etc.) to “save” the bond market at the expense of the currency.
Soon, we’ll just see plain ol’ QE, which will debase the USD even more, regardless of its “relative strength” to other equally, if not more, debased global currencies.
For now, of course, the markets are expecting Powell’s promised rate cuts to become actual rate cuts.
As a result, these markets are just giddy in anticipation and have recently hit all-time-highs on Powell words rather than Fed actions.
These already dangerously bloated markets will rise even further whenever the Fed has no choice but to hit the QE red button at the Eccles Building.
Tread Carefully You Top-Chasers
For those few, very few, who know how to trade nose-bleed tops without getting burned when net-incomes/margins trend south, the speculation and momentum trade juices are flowing.
But as I recently warned with evidence rather than hyperbole, today’s S&P, which is little more than a glorified tech ETF lead by 5 names, is the most dangerous bubble I’ve ever seen, traded or studied.
That Clever Pet Rock
Gold, meanwhile, will clearly get, and is already getting, the last laugh as stock bubbles inflate and bond markets scream for more debased USD grease.
The recent 20Y bond auction, above, with its foretelling of rising yields, should have been a massive headwind for that “yield-less pet rock.”
But as I argued from Vancouver in January, gold is breaking away from the standard correlations to rate, currency and inflation/deflation indicators.
For the simple reason that the overall system is now so openly broken, cracked, and dis-trusted that gold’s historically trusted (as well as speculator-ignored) role as a provider of real value (and 52-week highs) in world of diluted yet inflated currencies and bubble assets is becoming more obvious.
Again, this easily explains why central banks are stacking (and TRUSTING) this pet rock and dumping Uncle Sam’s IOUs at record levels.
That is, the world’s central banks (and leaders) see a US Humpty Dumpty about to fall off a wall, and when it does, gold will do far more to protect investors and sovereigns than bad IOUs and bubble assets measured in paper “money.”
Not surprisingly, the 0.5% of global financial assets allocated to gold are and will be rewarded not because they are just “contrarian for contrarian’s sake,” but because this remarkably small/informed minority are wise enough to think ahead rather just follow the sell-side sirens (and the crowd).
Which Needle Will Pop the Red Debt Ballon?
For now, and in the surreal backdrop of spiking markets and a Main Street on its knees and waiting for the “wealth effect” of a feudalistic rather that capitalistic financial system, all we can do is stare at the greatest debt bubble in history and guestimate which needle will “pop” it…
Will it be spiking rates colliding with the white swan of unprecedented global debt? A derivative market implosion? A geopolitical black swan? Another war? A collapsing Japan? China? America? A fractured/fragile EU? An immigration-lead fracturing of social order?
With so many needles pointed at a now historically unfathomable (and mathematically unpayable) red debt balloon, the actual needle that pricks us is rarely the one we see coming…
A Bank Needle?
As in 2008, the next crisis may come from where most crises are born, namely behind the glass doors of our stupid (and system-protected) banks…
The commercial real estate (CRE) crisis, of which I warned as far back as 2020, is anything but a minor matter.
The CRE losses on non-performing loans (NPLs) now exceeds the loss reserves at many of the largest US banks (Citi, Goldman, Wells, Morgan Stanley, JP Morgan etc.)
The Fed’s Real Mandate
Ironically, however, I don’t worry about these silly banks, because their Rich Uncle Fed’s real mandate is not inflation and employment, but making sure the foregoing banks, from which the Fed was un-naturally spawned, do not fail.
Bank regulators, who are just former bank executives, will meet FOMC and Treasury “experts” in DC and paste-together more back-room extend and pretend programs (which is how all failed banks deal with their failing loans and leadership) to provide the bigger boys with needed “grease” (i.e., liquidity) to stay alive (via forced yet subsidized UST, MBS and syndicated CRE/ABS purchases) as the Fed, once again, decides between saving the banking system or the currency.
Needless to stay, the suspense is hardly killing any of us who know how DC and Wall Street work.
In other words, expect more mouse-clicked trillions to save Uncle Fed’s spoiled banking nephews in a NYC which has slowly become not only a den of thieves, but a half-way house for millions of illegals which we like to call “asylum seekers” …
Ah, the American Dream, ah, the city that never sleeps…and the nightmare that never ends for every inflation-braced Main Street from Sea to Shining Sea.
Big Trouble in Little China
Of course, the US is not alone with yet another real estate cancer. China’s CRE crisis is arguably and mathematically worse.
But is that any real consolation to those facing an increasingly debased Greenback and unloved UST?
Are we supposed to be happy that our currency and bonds, though awful, are still better (for now, at least) than China’s?
Well, if our Dollar and IOU are so relatively special, why are the yields on our 10Y UST spiking 200 basis points above the CGB (Chinese Government Bond) yields?
Well, unlike the US, China is not pretending to be above total control over its markets and people, a trend which will come to the West once its childish leaders are forced into a debt corner.
History’s Sad Pattern
As I’ve warned for years, the syllogism from debt-crisis to market-crisis to currency and inflation crisis, followed by social unrest and then increased centralization from the extreme left or right is a pattern as old as history itself.
China has no shame about overt capital controls or state-owned banking.
But are our Fed-supported TBTF banks any less “centralized” just because their CEO’s get paid like capitalists despite being bailed out like state-sponsored entities?
We have had Wall Street socialism for years, but have put a nice “free market” lipstick on what is in essence just an “insider” pig.
Based on the trends above, and the pattern just described, the slow-drip toward more currency debasement, inflation and centralized (and capital) controls (think CBDC) in the wake of social unrest (from truckers and tractors fighting their “lords” from NYC to Berlin) is not only here and now, but the tragic road ahead.
This pattern of centralization, sadly, is just history and math. The cycles will play out. And gold, though no cure-all for all the overt and covert sins of our failed leadership, will at least be a cure for our failed currency.
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