Welcome to your Weekly Digest…my breakdown of the stories we’re thinking about and talking about in the Global Intelligence world.
First up this week, Elon Musk is at it again.
It seems that the world’s richest internet troll can’t go more than a day or two without throwing his celebrity-billionaire weight around in the cryptocurrency space.
Last weekend, it was his cringe-worthy appearance on Saturday Night Live, during which he dissed Dogecoin, a crypto he had previously promoted to the moon. This caused the price of Doge to plummet—just as I told you it would in last week’s digest (which you can read here).
Then in the middle of the week, he turned his attention to bitcoin…announcing that his electric-car company, Tesla, would stop accepting the world’s leading crypto as payment for vehicles. The reason he gave: environmental concerns. In the aftermath, bitcoin similarly experienced a drop-off.
Here’s my take on this week of Elon-influenced crypto turbulence.
First, his whole idea that Tesla doesn’t want to be part of the supposed environmental impact of bitcoin mining is wildly disingenuous.
Sure, bitcoin is created, or mined, by computers competing to solve complex math problems, and that requires a large amount of electricity. And of course, some of that power is generated by fossil fuels like coal, particularly in China where mining is popular.
But there’s a flipside to this story. A lot of bitcoin (and other crypto) mining is also done in Nordic countries, which generate a lot of electricity from renewables like hydro and thermal energy. Indeed, analysts who track this stuff note that 76% of bitcoin is mined using renewable energy.
Moreover, it’s important we keep this energy use in perspective.
According to the Cambridge Centre for Alternative Finance, the total amount of power used for bitcoin mining every year is equal to about one-and-a-half years’ worth of wasted energy in the U.S. from devices left plugged in to outlets. So there’s that.
Plus, wasn’t Tesla aware of how bitcoin was created when it invested $1.5 billion in the crypto this year? Of course it was. But that didn’t seem to matter to the company when it made over $100 million in profit from selling part of its bitcoin holdings in the first quarter of 2021.
Nor does this new policy mean that Tesla is selling its vast reserves of bitcoin. Tesla is very much holding on to the crypto because it knows there’s money to be made down the line.
And let’s not forget Tesla’s dirty little greenhouse-gas secret: All the lithium and rare-earth mining necessary to produce Tesla’s huge batteries.
My guess is that Tesla made this announcement because it was getting heat from some environmentalists who just need a bone to pick to stay relevant, so the company made this token gesture…probably because no one was using bitcoin to buy its cars anyway.
I mean, why would you use an appreciating asset like bitcoin to buy a depreciating car when you can just use another depreciating asset, the dollar, which is being eroded by inflation and Uncle Sam’s vast money-printing?
My advice: Take advantage of the dip to add bitcoin to your portfolio. That’s what I’m doing.
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Speaking of inflation…ouch!
The Producer Price Index rose a massive 6.2% for the 12 months ending in April. That’s the largest increase since the Bureau of Labor Statistics starting tracking this data in 2010.
The PPI is different from the Consumer Price Index in that it measures the prices paid to producers, rather than the prices you and I pay at our local Piggly Wiggly.
However, such a large increase in the PPI still has big implications for us.
During the pandemic, producers were largely absorbing price increases. Now, as we begin to exit the pandemic, producers have become emboldened to pass them on to you and me. This means you can expect to see these PPI increases show up in your grocery cart very soon.
That’s the problem with inflation—it’s like a boulder rolling down a hill. Once it gets going, it’s very, very hard to stop.
That’s why I’d advise you to check out my stock recommendations in our Global Intelligence Portfolio. They’ll help you protect your purchasing power, and even profit, from the high-inflation environment ahead.
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Trouble is brewing in the Middle Kingdom…
I’ve previously mentioned in this column that in 2004, I adopted my daughter from China. Like many Western parents, I was able to adopt a wonderful little girl there because of the country’s former one-child policy, which imposed harsh penalties on couples who had more than one kid.
Well, now the consequences of this brutal population-control program are coming home to roost.
China recently released its latest census data and the numbers make for bleak reading for policymakers. The proportion of people 60 or older in China is now 18.7%, up from 13.3% a decade before, while the number of births in China dropped 18% in a year to their lowest level since 1961.
This is, in short, a disastrous situation. Any country needs young people—and lots of them—to be economically viable because older, retired people tend to generate little income and require expensive healthcare. This is doubly true in China, which still relies primarily on lots of young, cheap laborers for its economic success.
China’s communist rulers have known this problem was coming down the line for some time and have been trying to tackle it. The one-child policy was replaced with a two-child policy in 2016 and the government has launched numerous promotional campaigns to encourage young couples to have more children. But these efforts have had little success.
As in much of the rest of the world, young professionals in China don’t have the time, resources, or inclination to have multiple children. In China, lack of free time is a particularly significant factor.
The country’s grueling 9-9-6 working culture (9 a.m. to 9 p.m., six days a week), most common in the tech sector, hardly gives employees time to sleep, let alone start families.
Here’s the bottom line: China is still a country on the rise, but don’t believe all the hype about it, either.
The U.S. mainstream media tends to treat China like an unstoppable economic juggernaut, probably because that’s the way their Chinese sponsors like it, but the country will have to overcome massive demographic and social challenges to catch up with the U.S., never mind overtake it.
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Finally, some good news.
After a slow start, vaccination programs in Europe are ramping up and travel is beginning to resume.
Recently, my adopted homeland, the Czech Republic, signed an agreement that will allow citizens and residents of seven countries in the center of Europe to cross each other’s borders, so long as they have vaccination certificates…a positive sign that life is returning to normality.
And this week, I was finally able to register for my COVID vaccination. I’m still waiting for my appointment, but in my head, I’m already making plans…like spending a month researching and exploring the Albanian Riviera (yep, that’s a thing) this summer, and spending 10 days in Malta.
If a move to Europe is on your agenda, and you’d like to learn about the best, easiest ways to make it happen, then I invite you to join me and International Living’s other experts at the upcoming, online Best of Europe Private Screening.
I’m taking part to share my insights on key aspects of relocating to Europe such as how and where to get the best visa for you, how to organize your finances, and so on. I hope to see you there.
That brings me to the conclusion of this edition of the Weekly Digest. If you have any feedback or questions, please feel free to send me an email any time at jopdyke@globalintelligenceletter.com. I’d love to hear from you.
I hope you enjoy the rest of your Sunday!
