Rain on your wedding day.
If you believe in old wives’ tales, clouds spitting down on your “I do” is a favorable sign of fertility, cleansing, and unity for a new marriage.
Now, I’m wondering if there is a cryptocurrency equivalent: Pain on launch date equals good fortune.
To wit, I present…El Salvador.
I’m sure you know the news: The tiny Central American nation recently adopted bitcoin as legal tender, to the great guffaws of the small-minded.
One reason for the guffawing: The day the project launched—just as the Salvadoran government bought 400 bitcoin worth roughly $20 million—bitcoin fell out of bed, losing more than 10% of its value.
Rain on your wedding day…
As you likely know, I believe crypto is going to fundamentally alter the financial life you and I know as normal.
Banking, investing, insurance, real estate, even money itself…all of them will change as crypto and blockchain technology overrun almost every facet of daily consumer and corporate life. It’s going to be the most profound financial transformation in centuries.
And El Salvador—for all the jokes and laughing and finger pointing that it’s experiencing right now—is going to be remembered as a pioneer.
Frankly, I expect El Salvador to emerge as a far wealthier nation as bitcoin increases per-capita savings, which will then flow into all the avenues that help a country and her people thrive.
In fact, other countries are already looking to follow El Salvador’s lead.
Panama is reportedly considering adopting bitcoin as legal tender. Venezuela and Paraguay, too. Mexico is likely to soon consider the idea.
There’s talk that Argentina, Brazil, and Nicaragua are thinking about this. And Malta, where I was on a recent research trip, could very well pursue bitcoin-as-legal-tender, too, as that Lilliputian island nation emerges as a tech haven in the Mediterranean. (It’s already home to a burgeoning i-gaming industry and Hong Kong’s Crypto.com exchange was recently licensed as Malta’s first Electronic Money Institution.)
Dismissing all that with the wave of a hand and an eye-roll is easy. Lots of onlookers are doing it.
That’s a mistake.
It’s like when the Grand Ole Opry told Elvis Presley that he should go back to driving trucks.
Or when a Kansas City newspaper told Walt Disney he had no imagination.
El Salvador, and any nation that follows in its footsteps, is at the vanguard of the new, truly global financial system that will emerge over the remainder of this decade.
Some are freaking out about this…like say, the U.S. Securities and Exchange Commission and certain members of Congress.
They’re petrified the U.S. dollar will lose much of its relevance. They’re petrified the U.S. banking system as we know it—a stultified, expensive industry—will be consigned to history.
I mean, they’re not necessarily wrong to fear that.
El Salvador’s move is just the first step in what will—100% assured—be a wider adoption of crypto as legal tender all over the world.
Such trends always start small and draw ridicule from the ill-informed.
But then suddenly they’re not small…and they start to change the world.
Already, there are estimates that if overseas Salvadorans start using bitcoin rather than companies like Western Union and MoneyGram to remit money back home, those companies will lose out on $400 million in fee income annually.
That’s $400 million from just one teensy-weensy country. Imagine if other countries follow suit?
The financial landscape shifts. The $400 million doesn’t end up in corporate pocketbooks. It ends up in the hands of local consumers, who can spend the money growing their local economy.
And then there’s this: the risks to the global, financial system from way, way—way!—too much Western debt.
Uncle Sam now owes $30 trillion, or 126% the size of the entire economy. Throw in all the unfunded liabilities, and the number is up to $156 trillion—nearly 7X the size of the economy.
Look more broadly around the West and it’s a similar story. The U.K.’s external debt-to-GDP ratio is 325%; France, 259%; Italy, 156%; Germany, 176%; Canada, 139%; Australia, 161%.
I won’t go through the whole list. Just know that Belgium, Greece, Ireland, the Netherlands, Portugal, Spain, and Sweden are all up there too.
If a domino topples anywhere in the system…where does it end?
The U.S./European subprime-mortgage crisis that caused the global financial crisis…that was barely over $1 trillion, says the International Monetary Fund.
Imagine the impact of tens of trillions of dollars.
Currencies could collapse. Stock and bond markets globally would certainly collapse. So too would faith in fiat currencies.
In the 2007 mortgage crisis, people didn’t have an alternative to fiat currencies like the dollar and the euro and so on. Now they do.
People the world over will gravitate toward bitcoin and other crypto.
To me, then, crypto such as bitcoin is as much an insurance policy as it is an investment in the future.
The West, including the U.S., cannot keep piling on more and more and more and more debt. At a certain height, every house of cards collapses from its own weight. I can’t say what amount of debt that is.
But that level does exist.
And when we reach it…
I will be very happy I own bitcoin.
And the people of El Salvador will be happy they own some, too.
