Bitcoin Eases as Shanghai Rises with Yields Historically Inverting – Trustnodes

The biggest crypto even fell below $40,000 briefly as some were amused by the livestream of a South Korean trader who had his $250,000 long bet liquidated.

Ouch, is only secondary to what on earth did he expect from livestreaming that when stop hunters roam the seas.

But $40,000 is kind of holding with the Shanghai stock index gaining about 1.5% today ostensibly because China is starting to ease their restrictions.

That may be a sideshow however as investors there are looking more at an ‘historic’ inversion of yield.

The ten year US treasury note has risen above 2.8% for the first time in three years, while China’s yields are trying to keep up, but at one point were lower.

US yields are trying to return to a more normal level, while Chinese yields have this downwards trajectory.

Why does it matter? Well, in a very simplistic reading this means US is growing faster than China. There’s a ‘liquidity crunch’ the Chinese might say in US, but only because there are now so many good investments that the market wants higher returns for ‘safe’ investments like gov bonds.

With the US market so becoming more attractive, funds will be taken out of China and they will go to America. That will strengthen the dollar while weakening the yuan, growing USA’s GDP in dollar terms while lowering China’s.

That’s the opening, because inflation in US due to historic growth will lead to even higher interest rates, while China is facing considerable economic headwinds that are forcing them to lower interest rates to basically print.

Higher interest rates on the surface may be bad according to some analysts, but that’s probably not the case when they’re coming up from pretty much zero.

As the monetary system has two heads – the Fed which deals with corps and govs and commercial banks that deal with the public – there’s a tension between the two in as far as zero interest rates are fine for gov because it means Fed printing, but interest rates up to 2% should be fine for the public because it means commercial banks ‘printing.’

With non existent interest rates commercial banks can’t make much profits from loans, and so they play it very safe, lending to only the rich and over-solvent.

As interest rates rise, banks stand to profit more from loaning, and so they lower their standards and loan more, a loan being a literal printing of money out of completely nothing.

As this new money goes directly to the public, then there’s more to spend and so there should be more growth. Which translates to, perhaps counterintuitively, that we’re entering a new era of loosening rather than tightening where the public is concerned, as long as interest rates do not go much beyond 2% as thereafter they start entering usury territory and that’s punishing.

This isn’t quite what the textbook says, but as we see above China had interest rates at 4.5% while growing at 7%. US had interest rates at zero while also growing at pretty much zero outside of the tech sector.

The return of inflation therefore, counterintuitively, is good news at least for the middle and upper middle that have money to move, because it means growth.

The only time it didn’t was in the 80s during stagflation, but inflation then was caused due to coming out of the gold standard, due to a technicality so to speak.

Inflation currently is being caused by unseen levels of growth in as much as a century.

The best illustration of our thesis is probably Britain which is once again above $3 trillion for the first time in nearly a decade.

Germany’s GDP has reached a new all time high above $4 trillion, with USA too crossing $22 trillion.

The stagnating EU in the past 15 years of no inflation now also seems to be sharply up with it perhaps finally getting out of that straight line.

Considering the size of the growth, the opening up last year is probably only part of the interpretation because all of these economies are bigger than 2019.

That may be because they have been shocked out of low inflation, and now we’re getting inflation yes, but we’re also getting stupendous amounts of growth.

And it is that growth that has primarily increased oil prices, which were rising even before Russia’s idiocity, with oil suppliers failing to adapt at the appropriate rate, in part maybe because OPEC is led by some Nigerian politician called Mohammad Barkindo.

This guy, Mahmud or whatever his name is, had the temerity to threaten Europe, warning that barring Russian oil could create one of the “worst ever” supply shock.

Russia is suddenly Saudi Arabia now as KGB’s Putin pushes all the right emotional controlling buttons with this puppet, the Secretary General of OPEC, probably not even aware of how transparently he comes across to the new generation.

Maybe Turkey can deal with them though. Ask them if they want some drones, to buy of course.

Because worse is probably coming in Ukraine and oil being cutting off is probably just a matter of time as it may become impossible to continue that trade relation with a very real danger here that the young simply rise to force that cutting off as we are seeing in Britain.

And although some might speculate that economically this won’t be good, it may actually be exactly what the economy needs if minds are sufficiently focused for money to be poured on energy innovation, both directly in renewables with tons of hydro places in Europe not in action, and indirectly in speeding up in the rolling out of electric cars infrastructure and now electric planes too which are coming to market.

And that’s another reason why inflation is ‘good,’ though some might laugh and ridicule. Because both in Europe and America, we need to invest and bigly in the new technofied economy, while also not directly raising taxes in a way that chokes off the very investment that is needed, or cutting spending when in these industro-tech aspects, a substantial increase is probably better.

Managed inflation can also deal with that mountain of debt, and if it comes with growth, then finally we can get out of stagnation.

Where bitcoin is concerned, it’s probably more about what stocks are thinking and here at Trustnodes we think they might be thinking something interesting.

Unlike the current mantra of getting out of risk on innovative companies, in the past few days we’ve seen these stocks holding the line. Big stocks, like Apple and Google et al were falling, while things like AI were not quite moving.

That may be because these big stocks did nothing during winter, while the ‘little’ innovative stocks were rekt, down 70% to even -90%.

So now maybe these big stocks fall a bit while the innovative ones rise? Or the big ones chill out as well while the innovative ones rise more.

Time will tell, but the re-adjustment has a lot of opportunities and one of them might be that Euro-Merica becomes the engine of growth as it was two decades ago.

China has kind of reached its limits, while both Europe and America in the past two decades have been distracted with matters that have thankfully ended, and so both can turn their attention to tapping the opportunities to techno-industrialize so as to begin a new era of proper growth.