- Coffee & Crypto Daily
- ☕️ Is the US Dollar in Trouble? 💵 🔥
☕️ Is the US Dollar in Trouble? 💵 🔥
Amidst bailouts, inflation, and debt, the US dollar isn't looking great... 😅
The U.S. dollar. It’s had a pretty fantastic run since its creation in 1792. 🇺🇸
It’s been in rap videos, it’s been thrown all over night clubs, and it’s funded some of the world’s most interesting and, uh, thought-provoking wars.
But even the brightest stars will one day fade into anonymity. Is the US dollar in serious trouble? Is this the beginning of the end for the greenest, meanest currency to roll across the globe?
Keep reading, it’s time to check the pulse on the US dollar.
☕️ Loans Were Not Silvergate’s Problem 🏦 📉
Silvergate claimed that the major contributing factor to its failure was that the bank had to repay a $4.3 billion loan from the Federal Home Loan Bank of San Francisco.
But the FHLB has now publicly stated that it was not pushing Silvergate to pay back the loan.
“FHLBank San Francisco did not request or compel Silvergate Bank to prepay its outstanding advances,” said an official spokesperson for FHLB.
“Silvergate made their determination to prepay their outstanding advances based on their own assessment of their position.”
This reveal makes Silvergate… a liar? The bank insisted that it was these loans that created the instability that led to the bank run which crashed Silvergate.
If scrambling to repay loans wasn’t the reason that Silvergate failed, we’re going with our two best backup guesses. Brain parasites or an ancient curse.
☕️ The Rise of the Robots 🤖 🚀
The launch of GPT-4, the latest update for ChatGPT, has created another uptick in AI tokens.
This rally is prompting some to believe that the AI tokens are following a market trend similar to Memecoins like Doge.
And that’s, admittedly, not a good thing.
This means that the AI boom in crypto may be really only based on hype and publicity rather than more substantive reasons, like utility and infrastructure.
“The current wave of investments in AI crypto is likely driven more by speculation than by fundamentals,” said Zhong Yang, Head of Research at Coingecko, a subsidiary of Gecko Labs which provides fundamental analysis of the crypto market.
“Beyond the initial hype, investors and builders should focus on meaningful use cases that combine AI and blockchain.”
Though honestly, we’d rather have our AI behave like Doge than for Doge to suddenly start taking over random menial jobs.
☕️ Coinbase Exec Calls Out SEC ☎️ 🤬
Paul Grewal, Coinbase’s Chief Legal Officer, went on the “gm” podcast to air his latest grievances with the SEC.
Grewal feels that, “we are losing a little bit of the script here in the United States when it comes to crypto and crypto regulation.”
“It’s a pretty broken system,” said Grewal, to force exchanges like Coinbase to look to media interviews and hints that "suggest that all assets are securities.”
Grewal’s sentiments are shared by many in crypto, including the editorial team at Coffee & Crypto, who are forced to check multiple news sources to figure out what the SEC really means.
Since their creation in 2004, podcasts have been one of the best places to call people out. You feel brave calling them out, but also safe because nobody’s listening.
Spilling the Beans
Is the Dollar in Trouble?
Like every red-blooded product of the American public school system, we believe in American exceptionalism.
We believe that we’re the best… until suddenly we aren’t.
And no, we’re not talking about a divisive political system, for-profit healthcare, or our less than stunning literacy rates.
We’re talking about the U.S. Dollar. The Dollar may be in trouble. Big trouble.
To establish a better sense of context for our current situation, we need to consider our financial colleague across the pond, the Euro.
For most of 2022, the Euro went down about 8% compared to the US dollar, but the tables turned sometime around September in 2022. Since then, the Euro is up 10% against the dollar.
As of today, one Euro is worth $1.06, in September of 2022, one Euro was worth $0.96, so that must mean things are going pretty well over in Europe, right? Only… that’s not true.
Europe is currently undergoing a pretty intense economic crisis.
The war between Ukraine and Russia has taken a heavy toll on the region. Both in the cost of support for Ukraine and being deprived of Russian-backed energy solutions.
That coupled with rising interest rates and a global recession have created a dire financial situation for the Eurozone.
But not all financial crises are created equal. The U.S., even without being mere kilometers away from a ground war, is having a pretty rough time.
Inflation is bad in the US, but it’s far from the worst. The American economy actually has a sort of, “middle of the road” inflation. We’re faring better than the UK and Germany, and nowhere close to Lebanon and Venezuela, the countries with the worst inflation.
What we do have, that no other country even comes close to, is staggering national debt.
As of 2023, the United States has a national debt of around $30.1 trillion dollars. A debt that costs $307 billion a year just to maintain.
The country that even comes closest to American debt levels is Japan, at just under $10 trillion. Ironically, Japan is also the country that the United States owes most of its national debt to, at just above 14%.
And you may be thinking, why not just print more American dollars to get out of this debt?
Well, that would just exacerbate the problem. More dollars in circulation just means a higher rate of inflation and further devalues the U.S. dollar.
It’s a tricky situation and instability is the name of the game.
For all of the critics of cryptocurrencies such as Bitcoin, the fixed rate and halving life cycle completely skirt the pitfalls of government backed currency, and of centralized debt.
You’re not going to read any articles about trillions of dollars in crypto debt.
That’s what we mean when we say, “decentralized,” that your finances are in no way tied to the international movements and policies of a global superpower.
The US dollar is in a precipitous position, poised to hit its lowest point in thirteen years.
And when that happens, stock market analysts are going to say what they always say. They’re going to advise investors to move their funds to these assets:
Gold and precious metals.
Foreign stocks and currency.
And those may be a safe bet in the short term, but those investors are overlooking an incredibly obvious alternative to fiat currencies like the dollar: crypto.
They’re not going to recommend it because they don’t understand it and they’re wary of a new kind of finance that threatens the status quo.
In truth, all of those people shilling Gold and Crypto lovers genuinely believe the same thing: the US dollar is only worth as much as people’s faith in the US government: what if that goes away?
We’ve enjoyed living under US dominance for most of our lives: but it’s hard to ignore that costs of living are skyrocketing and the dollar is not.
In the past 20 years, the median monthly rent for Americans doubled. That means if you left $20,000 in a checking account in 2000, your buying power was effectively cut in half.
In short, there’s real risk in holding US dollars in a way most Americans don’t fully grasp.
Meanwhile, as we all regretfully know… if we’d only bought Bitcoin back when it was first released… well, let’s just say we wouldn’t be writing a newsletter.
Meme of the Day
Inflation can be fun! See:
The US Dollar rn:
— Coffee & Crypto Daily (@GetCoffeeCrypto)
Mar 16, 2023
Crypto 101: FED Rate Hikes: You’re going to hear this term thrown around a lot in both finance and politics, particularly in the days to come. In short, it's the increase of interest rates for everyone.
The FED (Federal Reserve) attempts to slow down the amount of American dollars circulating in the economy by driving up interest rates to make it more expensive to spend.
This rate hike usually trickle down to the consumer. It raises rates on loans, mortgages, credit cards, and products.
It’s a delicate, economic balancing act and has nothing to do with the fun kind of hikes that involve sunsets and granola.
The Last Sip
It’s now come out that trying to repay FHLB’s loans wasn’t the reason that Silvergate failed. Here are some more potential reasons for the bank’s collapse:
Goats, which notoriously will eat anything, rampaged through Silvergate’s offices and ate all of their paper money.
Silvergate was actually one of those John-Wick-style criminal banks and all of the assassins and mafiosos moved their holdings into offshore accounts.
Coffee & Crypto Team
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DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.