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Nic and Joe, in the podcast this morning you asked for ideas on things to read. I suggest you listen to this podcast interview of Luke Gromen: https://www.grant-williams.com/podcast/0028-luke-gromen/. Essentially, he argues that:

-- China has arranged with major oil producing countries to purchase oil in yuan. Nobody wants to hold yuan, but these countries get rid of the yuan by buying products from China. Then, to the extent they have yuan left over, China settles the difference in physical gold. 20% of oil transactions in 2023 were in yuan. China has been buying gold to enable it to settle these transactions.

-- Demand for gold has also increased because countries around the world are buying it as an alternative to holding US Treasuries. This is because the US has weaponized the dollar against Russia; as you know, the US actually simply took billions of dollars in US banks that were Russia's. In addition, countries around the world see the US deficit continuing to balloon and they are concerned about the dollar continuing to lose value, and eventually about a dollar currency crisis.

-- In 2014, foreign central banks bought 55% of US Treasuries. Since then foreign banks, in aggregate, have bought no US Treasuries; indeed, the balance of Treasuries held by foreign central banks actually declined slightly over that period! As a result, since 2014 the Treasury had to find other buyers so the government changed regulations to require banks, money market funds, and pension funds to own Treasuries. Without these law changes, the demand for Treasuries would have cratered absent much higher interest rates to tempt purchasers. The US has now, as far as Luke Gromen can tell, run out of entities it can force to buy Treasuries.

-- Yet the US budget deficit continues apace at about 8% of GDP per year. Someone has to buy the Treasuries the Treasury issues to fund these government expenditures. The interest on the US' total debt now is so high that if the interest rate were to climb materially, the interest on the debt would exceed US tax receipts (which it almost does now). So the Fed can't let the interest rate climb substantially. This means that the Fed will buy any Treasuries needed to fund the government deficits.

-- The bottom line is that a US currency crisis started 10 years ago and is coming to a head within a few months to two or three years. In a currency crisis, we will have inflation of the dollar, climbing commodity prices, etc., and the dollar will tend to fall against other currencies, but especially against gold and bitcoin. Gromen is invested in gold and bitcoin and suggested that gold could be $2,500 by October and bitcoin $90,000. He wasn't making a prediction, he was just saying this would be consistent with his scenario, as an illustration.

I found Gromen's analysis really convincing. I bet you'll find it interesting too.

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Thank you for your note! We find Gromen and Alden analysis incredibly helpful over the past couple years. We are also still very wary of this inverted yield curve persisting for years now. Keep reading along and please keep your suggestions coming. Hopefully you can point us to more recent episodes of Luke's that you found helpful.

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Nice analysis and interesting time for BTC...let's see if 50k holds..

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