In what was an already bad week for the UK economy, overnight, things went from bad to worse.
After a questionable government budget of tax cuts, the pound sterling went into free fall against the US dollar. That, in turn, caused a rout in the bond market that has then delivered even bigger losses in market-to-market derivatives — because the value of the pound relative to the dollar is so low.
In other words, it was a massive feedback loop of crushing falls across some big markets.
As a result, some UK pension funds have apparently been brought to the brink.
Take this excerpt from a recent article on UK pension funds via Risk.net:
‘Simeon Willis, chief investment officer of consultancy XPS Pensions Group, says he knows of three different fund managers running pooled pension portfolios that have requested emergency capital from clients to keep positions open.’
Apparently, some of these funds are being hit with £100 million margin calls!
In other words, it is an absolute sh*tshow in the UK right now. And the biggest losers may be the poor pensioners who were relying on these funds to properly manage their money.
Fortunately for them, the Bank of England (BoE) has decided to intervene.
But with few options available to them, they may end up doing more harm than good…
Whatever it takes
In order to ‘save’ the UK bond market and prop up the pound, the BoE is going back to quantitative easing or QE. They are planning to start purchasing UK bonds once again in order to stop the rot.
They state that this return to QE will only be ‘temporary’. But at the same time, they claim that the bond purchases will be ‘carried out on whatever scale is necessary’ to calm markets.
To understand how crazy this is, you need to consider what has been happening up to this moment.
For starters, UK inflation is worse than in the US or Australia. To combat this, the BoE has been raising interest rates just like the RBA and the Fed. They have actively been trying to curb spending to stop prices from rising out of control.
Now, though, in order to save these pension funds, they’re going to inject more money into the system! The exact kind of policies that instigated the inflation they’ve been trying to fight up to this point.
It is just pure insanity.
This is the UK’s ‘too big to fail’ moment. I just can’t help but wonder if it could actually be the final nail in the coffin instead…
QE is a hard habit to kick for any economy, and with the BoE simultaneously pushing and pulling on markets, one has to wonder if they’ll be able to actually stick to this ‘temporary’ time frame.
Global investors clearly aren’t convinced.
Gold, oil, and US stocks all climbed higher on the back of the BoE move. That suggests that traders may be reading this as the beginning of a return for QE worldwide. Or it may just be a bull-trap bounce before things get really ugly.
No one really knows what’s in store next.
But what I can tell you is that now is the time to start taking a serious look at bitcoin.
The million-dollar moment
The reality is, while bitcoin is itself in the midst of a down cycle, it was designed for these moments. The creator of bitcoin, Satoshi Nakamoto, opened the crypto floodgates following the ‘09 collapse.
Bitcoin has always been working towards the goal of becoming a legitimate alternative to fiat currencies. And the biggest advantage it has is the constant debasement and destruction that central bankers insist on pursuing for dollars, pounds, and more.
The difference now is that most people know what bitcoin is and what it can do. That’s why there was a huge spike in UK bitcoin buying this week. See for yourself:
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| Source: Finbold/Coinshares |
Regular people can see the damage central bankers are doing to their money.
They are the ones that feel the brunt of this economic pain brought upon them by the likes of the BoE.
Bitcoin, as confusing as it can be for some, is the best antidote we have for the insanity we’re seeing. It is the one thing — the one asset — that can give everyday people a chance to make it through real market carnage.
And that is why, by the end of the decade, one bitcoin could be worth one million US dollars!
Obviously, that’s a bold claim to make, but it is one that is looking more and more plausible by the day. When my colleague, Ryan Dinse, first told me about this idea, I, too, was sceptical.
Not now, though.
As he showed me, the timeline is already laid out before us. It is simply a matter of when bitcoin will reach the milestones required, not if.
But I won’t steal Ryan’s thunder.
Instead, I’d urge you to pay close attention to our updates in the coming days and weeks. Because as Ryan himself is going to explain, the road to US$1 million bitcoin is clear.
All you need to ask yourself is, are you ready to capitalise on it?
Regards,
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Ryan Clarkson-Ledward,
Editor, Money Morning
Ryan is also co-editor of Exponential Stock Investor, a stock tipping newsletter that hunts down promising small-cap stocks. For information on how to subscribe and see what Ryan’s telling subscribers right now, click here.
